Ask an Adviser - I Want to Gift $50k to My Son, What Tax and Other Implications Will This Have?

Top answer provided by:

Andrew Mcpherson

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Firstly, I just have to say what a fantastic wish it is to help out your son and I’m sure it is something that many of us aspire too. And as a consequence have thought about this very question.

Looking at the tax and other implications first, there should be no consequences for your son as the gift recipient. That is, the gift would be tax free in his hands and is also unlikely to affect any other entitlements he may receive. However, it would be worth confirming if your son does receive any entitlements and the impact of such a gift to make 100% certain. A trusted adviser can help you out here.

The impact on your situation will depend on your age and the source of funds for the gift. From a tax point of view, if you are over 60 years of age and have met a condition of release (i.e. retired from a place of employment or reached aged 65), funds coming from superannuation as you have mentioned, will be tax free to you. However, if you are under 60 years of age, there may be tax consequences when withdrawing funds from Superannuation, with the amount payable being dependent on your personal circumstances. If you fit into this category it would be best to speak with a trusted adviser to work through potential solutions. If on the other hand the funds in relation to the gift come from assets held outside of superannuation, there may be capital gains tax consequences regardless of your age.

If you are receiving age pension, you should also be aware of the Centrelink gifting rules, as the gift to you son will continue to impact your assets position for 5 years. The gifting rules permit you to gift up to $10k pa (total – NOT per children or recipient) and only $30k total over a 5 year rolling period. Any gift above this amount will continue to be counted toward your assets for asset test purposed for 5 years. So in your case, if you are receiving age pension and gift your son the $50k, only $10k will be allowed as a gift and the remaining $40k will continue to be counted as your asset for a further 5 years. This is not necessarily a negative as the gift was already counted as your asset, but if the intention of the gift was to rid yourself of assets to access age pension you may want to reconsider your strategy.

While the above tax and other implications are important, you should speak with a trusted adviser to work through your personal situation and goals and objectives (both now and in retirement) to ensure you can afford the gift and not jeopardise other objectives. A trusted adviser can help you examine your current financial situation and retirement expectations to work out if making such a gift is viable and if not, what alternatives may be available.

A trusted adviser will also be able to help you work out whether a cash gift to your son is be the best use of the funds and will achieve the outcome you desire. For example, if your son is not great with money, simply giving him $50k may not result in the outcomes you had intended. He may instead decide to spend the $50k on discretionary items like holidays or a new car. In this case, to ensure your gift does provide the help you intend, it may be better to pay the money straight off his mortgage or put the money aside to help with your grand children’s education.

As I said at the start, gifting money to help out your son is a fantastic thing to do, but not if it jeopardises your other objectives and lifestyle. A trusted adviser will be able to help you consider all aspects, including any tax/financial impacts, and ensure you are fully informed when making the final decision.

While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.

Article by:

Andrew McPherson

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