Do cash gifts count as taxable income? Gifting money in Australia

Key Points

• Except in limited situations, cash gifts in Australia are completely tax-free, no matter the size.
• If you're on Centrelink or a pension, cash gifts may affect your payments.
• The rules are different if gifting assets like property or shares instead of cash.

It is a truth universally acknowledged that we would prefer cash, please. A gift you can use anywhere? Actually the best. 

But does the money you’ve received as a gift (or given away yourself) count as taxable income? Do you have to declare cash gifts when filing your taxes in Australia, or let Centrelink know?

Let’s unwrap what you need to know about giving money in Australia.

Always consult a tax professional for advice on what should be reported for tax purposes. 

A common word, but important to clarify, especially if the gift is money and you're lodging your tax return. Generally speaking, the Australian Tax Office (ATO) defines a gift as a transfer of money, assets, or property that meets the following conditions:

• The transfer is voluntary.
• The giver doesn’t receive (or expect to receive) anything in return.
• The giver doesn’t materially benefit from the gift.

This is quite a generous definition and can cover a wide variety of gifts, especially financial ones. An example of gifting money according to the ATO could include everything from birthday presents to home loan deposits.

In short? No. According to the Australian Taxation Office, gifts of money from relatives and friends (even from overseas) do not count as assessable income and therefore don’t have to be declared by the giver or receiver when filing their tax returns – regardless of the amount.

There are a few caveats, however. A gift isn't taxable income so long as:

• The money is a genuine gift, and the recipient is not expected to give anything in return.
• The gift isn’t related to any of the recipient's income-producing activities.
• The gift is sourced from the giver’s own funds in their name.

For example, if your parents give you $500, but they expect you to do their dishes, and you work as a freelance dishwasher, this doesn’t count as a true gift and could be taxable by the ATO.

Additionally, you will need to report any income you earn on the money gift in your tax return. Common examples of this include any interest earned in a savings account or returns from investment shares. 

It’s also worth noting that the rules are different if you’re giving someone assets instead of cash. For instance, if you give someone a house instead of a mere housing deposit, this is considered a sale in the eyes of the ATO and thus liable to the capital gains tax (CGT). 

Similarly, intangible assets like shares or cryptocurrencies could incur CGT if you give them as a gift.

However, if you receive or inherit assets as a gift, they’re only taxable if you earn any income from them or choose to dispose of them later (in which case, you would declare it on your tax return).

When you think about it, giving cash gifts could be a pretty big tax loophole, especially if you’re already receiving government benefits through Centrelink. But fear not: the crafty ATO are one step ahead of us.

If you’re receiving a Centrelink payment such as JobSeeker, Age Pensioner, or Youth Allowance, you will need to declare any cash or monetary gifts received or given within 14 days. If the amount falls within the free allowable gift limits, it will not affect your payment. However, if it falls outside the gifting limits, it may impact your payments, especially if you're earning income on the gift such as deposit interest. 

How much money can be gifted tax free in Australia?

In Australia, the allowable gift limits for money are:

• $10,000 per financial year.
• $30,000 over a rolling period of five financial years (provided in any one particular year out of the five, the gift amount doesn’t exceed $10,000).

The gift limits apply to either a single person or a couple acting as a legal entity, for both giving and receiving money domestically or from overseas. So long as the gift meets the gift limits and other requirements, it falls within ‘allowable disposable income’ and therefore does not need to be declared to Centrelink or the ATO.

If a gift exceeds those limits, however, the excess will be assessed as a deprived asset. A deprived asset is an asset, income, or source of income that has been deliberately diminished or destroyed in value. Examples of deprived assets include selling your car or hiding income by giving it to a spouse or family member as a gift. (It goes without saying, however: don’t commit tax fraud).

Some people choose to give money within the gift limits as a way of improving their payments, though depending on your circumstances this mightn’t always work. 

For example, a pensioner gives their child $10,000 one year in order to reduce their assets and thus boost their pension income. However, Centrelink may regard the pensioner’s assets as largely unchanged in value, and therefore would neither lift (or reduce) their amount of pension. 

Additionally, if the pensioner gives more than the allowable gift limits, the excess will be asset and income tested by Centrelink for five years from the gift date, which would likely negatively affect their payments in the future.

Maybe just let a gift be a gift, eh?

Explore our family finances hub for more quick tax guides. Compare high interest savings accounts to stash your money gifts in the table below.