Gifting money to your loved ones is a great way to offer a helping hand, especially in times like these when we all could use a bit of extra financial support. 

But how much money can you give as a gift tax-free in Australia, and what kind of payments are considered gifts?

Keep on reading to find out all the details.

Are Cash Gifts Taxable in Australia? 

No, gifts and inheritance are not taxable since they are not considered reportable income. In other words, there is no tax-free gift limit in Australia, and you can gift as much as you want as long as: 

  • The transfer of money was made voluntarily,The money was transferred for personal reasons;The giver doesn’t expect anything in return and has no material benefit from the transfer.

If these criteria are not met, the recipient or donor of the gift could be liable for capital gains tax. For instance, if either party earns income from the gift, that amount is taxable. 

Gifting money could also have implications for those who claim government benefits, such as the income and assets tests for Parenting Payments or the Age Pension.  

Do I have to pay tax on a gift from my parents in Australia?

No, your parents can gift cash to you, provided the money comes from their own funds, and they don’t expect anything in return. Even if your parents are spending their golden years in another country and send you money, there is still no gift tax to pay. 

However, if you put the money in a savings account and earn interest, the earnings are considered assessable income and will need to be reported in your tax return.

Is gifting assets the same as gifting money to family members?

It is important to note that different rules apply when gifting assets. 

For example, when you gift your children an asset like a house, the ATO considers it the same as selling the property, which makes you liable for CGT (even if you qualify for a CGT main residence exemption). If you want to help your children settle down in a home, consider covering the deposit rather than giving away a house—like other cash gifts, a gifted deposit for a home loan is not taxable in Australia.

When shares, cryptocurrency or other intangible assets are gifted, the new owner needs to pay capital gains tax only if they sell the assets or earn any income from them.  The donor will need to pay CGT since, according to the ATO, they are disposing of a capital asset.

How much money can a pensioner receive as a gift in Australia?

If you get the Age Pension, or other government benefits, such as Mobility Allowance or JobSeeker Payment, there are certain limits you need to adhere to when gifting money to family members. This sum is called the allowable disposal amount and shows how much one can gift before it affects their benefits. 

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The gift limits are 

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  • $10,000 for one financial year$30,000 over 5 financial years, provided that you do not go over the limit of $10,000 in a single tax year

The limits apply to both singles and couples. 

If the gift you give or receive goes over these limits, the excess amount will count towards your asset test, and you will be deemed to be earning income from the excess amount. According to deeming provisions in Australia, the government assumes you are earning a set amount of income from the excess amount (even if the asset is not generating any income). The deemed income will be included in your income test for 5 years after giving the gift. 

Here is an example: Say you donate $10,000 every year for three years, then you gift another $10,000 in the fourth year, thereby going out of the ‘gifting-free area’. The additional $10k will be considered a financial asset and deemed to be generating income. As such, it will be included in your income and asset test for five years from the date the limit was exceeded. 

You need to inform Centrelink within two weeks of giving a gift, either through myGov, the Express Plus Centrelink mobile app or the regular payment line. 

Note: Different rules apply for granny flat arrangements and Special Disability Trusts.

Can gifting improve my pension payments?

One way to reduce assets for Centrelink payments is to give them away as gifts. For instance, if you donate $10,000 a year, you could be able to increase your pension payments by an extra $780 a year. This is just a hypothetical situation, as the pension you get depends on several factors. Also, bear in mind that if Centrelink suspects that you’re using gifting as a way to reduce assets and increase your payments, it can have a negative effect on your payments in the future. 

Bottom Line

Just because there are no tax implications for the donor or the recipient of a cash gift, doesn’t mean that you should gift money easily. Always consider how the gift will impact your financial stability or your government benefits (if you are claiming any). 

1. Is there a gift tax in Australia? 

No, gifts in Australia are not taxable because they are not considered reportable income. That said, if the gift you receive or give is generating income, it will be taxed at your marginal tax rate. 

2. Is there a limit on gifting money to family?

No, you can gift as little or as much as you feel comfortable. Note that if you claim government benefits, you can gift $10,000 a year or $30,000 within five years (as long as the amount you gift each year is not over $10k). 

A one-off gift made as a lump sum is not considered reportable income and does not need to be declared. However, if you earn interest by putting the lump sum in a savings account, this will count toward your income and asset test and could reduce the payments you get from Centrelink. 

4. How often can a pensioner gift money?

You can gift money to your kids and grandkids as often as you’d like as long as you stay under the ‘$10,000 rule’ within one tax year. If you go over this amount, the excess will be included in your income and assets test and affect the pension payment you get from the government. 

5. How much money can you give as a gift tax-free in Australia to friends?

As with family, there are no tax implications when you gift or receive cash from friends. However, the gift needs to be genuine and not benefit the giver or the receipt financially. If the gift generates income, you will need to report it in your annual tax return.