If you can afford to help out younger family members, gifting can provide assistance for them to get into the property market, pay for their education, cover their wedding expenses or travel the world.

Before gifting a significant amount, it's important to understand how gifting will affect you financially - including the impact on your Age Pension and other social security benefits you receive.

What is gifting?

The Department of Human Services describes gifting as giving away assets or transferring them for less than their market value. This can include:

  • Transferring units in a trust or company and not receiving full market value for them
  • Selling or transferring a property for less than market value
  • Buying a car for someone as a present
  • Not requiring repayment for a sum of money

How much can you give?

Australia doesn't have a gift tax, however if you're receiving a social security benefit from the government, there are some rules about how much you can gift to someone before it could affect payments you receive.

For social security means test purposes, individuals and couples (combined) can give up to $10,000 in cash gifts and assets each financial year. This amount is also limited to $30,000 over five consecutive financial years.

Gifting within these limits may lead to your social security benefit increasing. You must tell Centrelink that you've made a gift within 14 days of making it.

If you happen to gift any more than this amount, Centrelink will treat the excess as a 'deprived asset'. This means that when Centrelink assesses whether you're eligible for the pension and determines the amount you'll receive, this 'deprived asset' is still counted as an asset under the assets test and is subject to deeming under the income test, for five years. This could mean you're entitled to a lower social security benefit.

You can find out more about the rules around gifting on the Department of Human Services website.

Things to think about

Your grandchildren generally won't need to pay tax on the money that you gift them. However, if they decide to invest the money, they will need to pay tax on part or all of the income their investment may earn.

Two other things to consider are how gifting will affect your financial future and how much you can afford to gift.

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Things you should know

This article contains general advice only. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial planner before making any financial decision based on this information. This document has been prepared by Commonwealth Financial Planning Limited ABN 65 003 900 169, AFSL 231139, (Commonwealth Financial Planning) a wholly-owned, but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. Commonwealth Financial Planners are representatives of Commonwealth Financial Planning. 

Information in this article is based on current regulatory requirements and laws. While care has been taken in the preparation of this document, no liability is accepted by Commonwealth Financial Planning, Commonwealth Financial Planning related entities, agents and employees for any loss arising from reliance on this document. Taxation considerations are general and based on present taxation laws. You should seek independent, professional tax advice before making any decision based on this information. Commonwealth Bank is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.

Before you make a decision about your combining your super if you multiple accounts, you should compare the costs, fees, risks and benefits of each super fund. It makes sense to consider whether you can replace any insurance cover you may lose when you bring your accounts together, as well as any costs for withdrawing from other super funds and any investment or tax implications.