If you can afford to help out younger family members, gifting can provide assistance for them to perhaps get into the property market, pay for their education, cover their wedding expenses or travel the world.
So it's important to understand how gifting will affect you financially - including the effect on your Age Pension and other social security benefits you receive.
How much can you give?
It's true that 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 that their investment earns.
The other things to consider are how gifting will affect your financial future and how much you can afford to gift.
After all, when it comes to enjoying your retirement, it's important to make sure your money lasts.
A Commonwealth Financial Planner can help you work out how gifting will affect your finances.