
What you need to know about gifting money to your kids
On this page:
- Why consider gifting money to your kids?
- What is classified as a ‘gift’, according to the Australian Taxation Office?
- Is there a limit to the amount of money I can gift?
- What happens if I go over the gifting limit?
- Can gifting money to my children improve my pension payments?
- Will my child have to pay tax on gifts?

Gifting money to your children or grandchildren can be a great thing to do, but the act of giving may be a bit tricker than you think – especially if you're on the Age Pension, or you receive other income support from Centrelink.
So before you open your cheque book, here are a few things you’ll want to know, including gift limits, tax implications, and the potential affect on your pension. Let's break down the most commonly asked questions about gifting money to your kids.
Why consider gifting money to your kids?
There are a number of reasons why you might consider gifting money to your children or grandchildren. One of the most common is to provide them with financial assistance, especially if they’re working towards a goal like saving for a home loan deposit or buying a new car. Maybe you're even trying to teach the younger ones the importance lesson of saving.
In Australia, cash gifts usually carry no tax implications (with some important exceptions), no matter how much you're giving. This is usually the case whether you bestow gifts to immediate family to friends, charities, or religious organisations.
You may also consider gifting money if you’d like to diminish an asset before you reach retirement. By doing this, you may potentially increase your government pension payments and improve other benefits you may receive or are entitled to receive, but this will vary based on your circumstances. Always consult a tax professional on what may work best for you.
What is classified as a ‘gift’, according to the Australian Taxation Office?
Gifts can come in different forms. However, a gift in the finance world generally is defined as handing over an asset with the expectation of either getting less than its market value or nothing in return.
In particular, the Australian Taxation Office stipulates that cash gifts must be genuine gifts, in that you don't expect to receive anything back and they don't relate to the recipients money-making activities. So giving money to your child to do your laundry when they own a laundromat? A little suspect to the ATO.
According to Services Australia, some examples of gifts are:
- Gifting money for the purposes of a loan like a home loan.
- Selling or transferring an asset that is now less than its original value, such as a car or property.
- Depositing money into a trust fund that neither you or your partner can control.
- Paying tuition fees for your grandchildren.
Under these definitions, there are a few situations which wouldn't qualify as 'gifting money', such as the transfer of funds between a couple or the act of paying off a loan.

Is there a limit to the amount of money I can gift?
Generally speaking, no. However, if you are receiving the Age Pension or other benefits from the government, there is a limit to the amount you can gift your children.
Whether you’re a single person or a couple, the permitted amount is $10,000 in cash and assets over one financial year or $30,000 in cash and assets over five financial years. This is commonly known as the $10k and $30k rule or a ‘gifting free area’.
Do I have to tell Centrelink?
If you are planning on gifting money in the near future and you're receiving Centrelink payments, you’ll need to let Centrelink know within 14 days of when the money transfer happened.
What happens if I go over the gifting limit?
When you gift money to your children, the amount you give is classified as your ‘allowable disposable income’. Any amount that exceeds the gifting limit is then recorded as a ‘deprived asset’ or 'diminished asset', which according to the Australian government means you have parted with an asset for less than its value.
Every five years, Centrelink assess gifts you make to determine whether you have reduced your available assets or exceeded the gifting limit.
If you have gone over the allowable gifting limit, Centrelink will do two things:
- They’ll include the amount in your asset test – this is a test that decides whether you qualify for the Age Pension and determines the rate it will be paid at.
- They’ll also apply deeming and include the amount in your asset test – deeming is a set of rules Centrelink uses to work out your income based on the financial assets you own.
One potential downfall of deeming is that these rules assume the rate of income your assets earn, regardless of whether they do or don’t meet that assumption.
So if Centrelink believes you may be earning an income on your gifts, it may negatively impact your future payments.
Can gifting money to my children improve my pension payments?
While gifting can negatively impact your payments, it also has the potential to improve your payments, so long as you stick within the gifting limit.
Like we mentioned earlier, gifting can be a way to reduce your assets and earn a slightly higher Age Pension. For instance, according to First State Super, if you decided to gift the maximum $10,000 in a single year and are within the gifting free area, you could increase your pension payments by $780 in a year.
Will my child have to pay tax on gifts?
The short answer? No. However, just like everything, it depends.
According to the ATO, monetary gifts ‘given out of love’ by relatives do not make up part of their assessable income and therefore does not have to be declared. However, if the money is stored in a savings account which earns interest, the interest will need to 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.
Regardless of whether you’re about to hand over a large sum of money, having a top notch savings account to maximise your returns is essential. You can get started by checking out some of the great options below, or compare more than 200 savings accounts using our savings account comparison tool.
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