What you need to know about gifting money to your kids

Gifting money to your children or grandchildren represents more than just financial assistance—it's an opportunity to provide meaningful support and lessons about money.

With rising housing costs and many other economic uncertainties in 2025, many parents and grandparents are looking for the most effective ways to help their loved ones financially.

However, gifting comes with important considerations, especially if you're receiving the Age Pension or other Centrelink benefits. Knowing the rules around gifting can help you get the most while avoiding unexpected consequences.

There are a few reasons why you might give money to your children or grandchildren:

• Buying a home: Help with the increasingly challenging task of saving for a home loan deposit in Australia's competitive property market.
• Educational support: Contribute toward university fees, vocational training, or professional development courses.
• Debt reduction: Help manage or eliminate high-interest debts.
• Emergencies: Provide a financial safety net during unexpected life challenges.
• Financial education: Create practical opportunities to teach budgeting, saving, and investment principles.
• Pre-retirement planning: Potentially increase your government pension payments by strategically reducing assets before retirement.
• Tax: Transfer wealth with minimal tax when done correctly.

The Australian Taxation Office (ATO) defines a gift as giving away an asset without expecting its market value in return. Cash gifts must be genuine - you can't expect anything back, and they shouldn't relate to the recipient's money-making activities.

Examples include:

• Giving money for a home loan deposit
• Selling an asset for less than its value
• Depositing money into a trust fund you can't control
• Paying grandchildren's tuition fees.

While we don’t impose general limits on gifting money to family members, specific rules apply if you receive government benefits:

The $10K and $30K rule (Gifting Free Area)

• You can gift up to $10,000 in cash and assets per financial year
• A maximum of $30,000 in cash and assets over a rolling five-year period

These limits apply to single people and couples combined. Exceeding these thresholds affects how Centrelink calculates your assets and income for benefit purposes.

Reporting requirements

If you receive Centrelink payments, you must:

1. Report any gifts within 14 days of the transaction
2. Provide documentation of the gift amount and recipient
3. Update your asset and income information accordingly

Centrelink tracks gifting on a rolling five-year basis to determine compliance with the gifting limits.

When you gift beyond the allowed limits:

• The excess amount remains counted in your asset test for five years
• Centrelink applies deeming rules to calculate income from this "deprived asset"
• Your pension or benefit payments may be reduced accordingly
• The impact continues for the full five-year assessment period.

Example scenario

Margaret, aged 68, gifts $20,000 to her daughter for a home deposit. Since this exceeds the annual $10,000 limit by $10,000, Centrelink continues to count that $10,000 as Margaret's asset. Using the current pension reduction rate of approximately $3 per fortnight for each $1,000 in assets over the threshold, Margaret's pension could be reduced by about $30 per fortnight ($780 annually) for up to five years.

Generally, monetary gifts from relatives don't count as assessable income and don't need to be declared. However, any interest earned on gifted money must be declared.

In any circumstance, it’s best to consult with a financial advisor or accountant first before you start gifting money to your children. These professionals can give you a more tailored answer based on your circumstances. 

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