Do cash gifts count as income?

Australian notes beside a pink wrapped present with a gold bow.
Photo by Ekaterina Shevchenko.

It is a truth universally acknowledged that we would prefer cash, please. Those gifts are the best!

But does the money you’ve been generously given (or given away yourself) count as income? Do you have to declare cash gifts when filing your taxes?

Let’s unwrap. 

RELATED: What you need to know about gifting money to your kids

NOTE: You should always consult a tax professional for advice on what should be reported for tax purposes. 

What counts as a gift?

Two presents with sushi and banana wrapping paper.
Photo by Edgar Soto.

A common word, but important to clarify. Generally speaking, the Australian Tax Office (ATO) defines a gift as a transfer of money 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 actually quite a generous definition, and can cover a wide variety of presents. Examples include giving money to your children to help pay for college or as a birthday pressie.

Do gifts of money count as taxable income?

Dolla dolla bills, y'all. Australian money notes. And a calculator.

In short? No. According to the Australian Tax Office, monetary gifts 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 come tax time – regardless of the amount.

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

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

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

Additionally, if the money earns any interest in an Australian bank account, you’ll need to report the interest in your tax return (since that’s considered assessable income).

It’s worth noting as well that the rules are different if you’re giving someone assets instead of cash. For example, if you give someone a house, 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 these 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).

White envelopes on a white background, with a sprig of eucalyptus.
Photo by Joanna Kosinska.

When you think about it, giving cash gifts could be a pretty big tax loophole, especially if you’re already receiving government benefits. But the crafty ATO are one step ahead of us. If they believe you’re earning income on the gift, it may negatively impact your future Centrelink payments.

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.

The allowable gift limits 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).
  • These limits apply to either a single person or a couple acting as a legal entity, for both giving and receiving.

So long as the gift meets the gift limits and other requirements, it falls within ‘allowable disposable income’. 

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 range from selling your car to 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 guides ahead of tax season.

Try our income tax calculator, or read up on whether you have to repay HECS debt while working overseas.

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