‘It’s the ultimate regifting’: My mom gave me a house. Should I transfer it back to her to reduce capital gains?

What you need to know about gifting money to your kids

Gifting money to your children or grandchildren is more than just a financial boost – it’s a chance to support them meaningfully and teach them about managing money.

With housing costs still high and economic uncertainties continuing in 2025, many parents and grandparents are weighing the best ways to provide financial help.

But financial assistance isn’t without its rules. If you receive the Age Pension or other Centrelink benefits , understanding the regulations around gifting is essential to help your kids or grandkids without triggering unexpected consequences.

Key takeaways

• • Australia has no gift tax — cash gifts to children are not assessable income for the recipient, but any interest or investment income earned on gifted money must be declared.
• • Centrelink and Age Pension recipients can gift up to $10,000 per financial year or $30,000 over five years without affecting payments. Any excess is treated as a deprived asset and assessed for five years.
• • The ATO imposes punitive penalty tax on children's unearned investment income: only $416 per year is tax-free, with rates rising to 66% on the next $891 and 45% on anything above $1,307.
• • Gifting assets (not cash) — such as shares or property — triggers Capital Gains Tax, as the ATO treats the transfer as a disposal at market value. Keep records and valuations for at least five years.

Why consider gifting money to your kids?

There are a few reasons why you might give money to your children or grandchildren:

• Home deposit: Help with the increasingly challenging task of obtaining a home loan .
• Educational support: Contribute towards or pay school or university fees, training costs.
• Debt reduction: Help manage or eliminate high-interest debts.
• Emergencies: Provide a financial safety net during unexpected life challenges.
• Pre-retirement planning: Strategically increase pension payments by endowing assets.
• Tax reasons: Transfer wealth with minimal tax obligations – when done correctly.

Should you gift money to your kids?

What does the ATO classify as a ‘gift’?

The Australian Taxation Office (ATO) defines a gift as a voluntary transfer of money or property in which the owner does not expect anything in return, and does not materially benefit.

• Gifting money for a home loan deposit
• Paying rent or a bond for your kids housing
• Paying for your child's engagement party or wedding
• Gifting shares or investments

Is there a limit to the amount of money I can give?

While there's typically no limits on gifting money to family members, specific rules and reporting requirements apply if you receive government benefit. See below for details:

The $10K and $30K rule

• You can gift up to $10,000 in cash and assets per financial year
• A maximum of $30,000 in cash and assets over a rolling five-year period

These limits apply to singles and couples combined. Exceeding these thresholds affects how Centrelink calculates your assets and income for benefit and payment purposes.

Reporting requirements

If you receive Centrelink payments, you must:

• Report any gifts within 14 days of the transaction
• Provide documentation of the gift amount and recipient
• Update your asset and income information accordingly

Centrelink tracks gifting on a rolling five-year basis to determine compliance with gifting limits.

What happens if I go over the gifting limit?

When you gift beyond the allowed limits:

• The excess amount remains counted in your asset test for five years
• Centrelink applies deeming rules to calculate income from this "deprived asset"
• Your pension or benefit payments may be reduced accordingly
• The impact continues for the full five-year assessment period.

Example scenario

Margaret, 68, decides to gift $20,000 to her daughter to help with a house deposit.

Under Centrelink’s gifting rules, you can only give away up to $10,000 per financial year (and no more than $30,000 over five years ) without it affecting your pension. Because Margaret has exceeded the annual limit by $10,000, Centrelink continues to treat that excess amount as part of her assessable assets for the next five years.

As a result, Margaret’s Age Pension may be reduced. Based on the current asset test rules, every $1,000 over the threshold trims her payment by about $3 per fortnight. In Margaret’s case, the $10,000 excess could mean around less $30 per fortnight – or $780 a year – for up to five years.

Will my child have to pay tax on gifts?

Generally, cash gifts from relatives don't count as assessable income for the recipient and don't need to be declared. However, any interest or other investment income earned on gifted money must be declared by your child — and this is where many families run into an unexpected tax bill.

Australia does not have a gift tax, so the act of giving itself doesn't trigger a tax liability. But the ATO has strict rules about how investment income earned by children under 18 is taxed — and those rates are far higher than most parents expect.

It's always worth consulting a financial adviser or accountant before making significant gifts. The most tax-efficient structure depends on your individual circumstances and how much you plan to give.

The ATO's tax trap: investment income for children

The ATO imposes special penalty tax rates on "unearned" investment income — interest, dividends and managed fund distributions — earned by children under 18. The tax-free threshold for this type of income is just $416 per year. Beyond that, the rates jump sharply (according to the ATO):

• $0–$416: Tax-free
• $417–$1,307: 66% of the excess is taxed
• Above $1,307: The entire amount is taxed at 45% — the top marginal rate

These punitive rates apply specifically to unearned income, not wages or employment income. So a child who works a casual job pays tax like any adult, but a child with a savings account funded by a parent or grandparent's gift can face a 45% tax bill before they even turn 18.

What this means in practice

If you deposit $30,000 into a children's savings account earning 5.00% p.a., the annual interest would be around $1,500. On that amount:

• The first $416 is tax-free
• The next $891 (from $417 to $1,307) is taxed at 66% — adding $588 in tax
• The remaining $193 above $1,307 is taxed at 45% — another $87
• Total tax: around $675 on $1,500 of interest income

Compare that to an adult in a low income bracket paying 19%, and it becomes clear that a savings account in a child's name is often not the most tax-efficient structure for larger gifts.

Bank withholding rules for children's savings accounts

Financial institutions follow ATO rules on how they handle tax on children's savings interest. If your child earns less than $120 in annual interest, the bank will not withhold any tax. Between $120 and $420, no tax is withheld provided you supply the child's date of birth or Tax File Number (TFN). Above $420, the bank will withhold tax at the top rate unless a TFN is on file.

Capital Gains Tax when gifting assets

Cash gifts are generally straightforward — no gift tax, and no CGT. But if you're gifting assets rather than cash — such as shares, an investment property or managed funds — the tax picture changes significantly.

The ATO treats a gift of assets as a disposal at market value , even though no cash has changed hands. This means you as the giver may face a Capital Gains Tax bill based on the difference between the asset's cost base and its market value at the time of the gift.

What counts as an asset gift

• Shares or ETFs transferred into your child's name
• An investment property transferred to a child's ownership
• Managed fund units or other investment holdings
• Cryptocurrency

Documentation requirements

When gifting assets you must keep records for at least five years, including a formal valuation of the asset at the time of the gift, the original cost base and purchase records, and all transfer paperwork. Without these you may not be able to accurately calculate your CGT liability — or your child's cost base if they later sell the asset.

Tip: If you've held an asset for more than 12 months before gifting it, you may qualify for the 50% CGT discount, which can significantly reduce the tax on any gain. A tax adviser can help you time the gift to take advantage of this.

Children's savings accounts in 2026

If you decide to put gifted money into a savings account in your child's name, there are competitive options available in 2026. Keep the ATO's minor income tax rules in mind — keeping the annual interest below $416 avoids any penalty tax entirely, which means a balance of roughly $8,000–$9,000 at current top rates would stay in the tax-free zone.

• Great Southern Bank Youth eSaver: Up to 5.50% p.a. on balances up to $5,000, then 1.00% p.a. on amounts above that
• Commonwealth Bank Youthsaver: Up to 5.05% p.a. when at least one deposit is made and the balance grows each calendar month, on balances up to $50,000
• Westpac Bump Savings: 4.55% p.a., plus a $50 welcome bonus for new accounts

An alternative worth considering is holding gifted funds in a savings account in a parent's name as trustee for the child. The interest is effectively earmarked for the child but taxed at the parent's marginal rate — often far lower than the 45% penalty rate that applies to a child's unearned income above $1,307. Compare savings accounts to find the right fit for your family's goals.

Sources

• Australian Taxation Office — Children's savings accounts: ato.gov.au
• Australian Taxation Office — Your income if you are under 18 years old: ato.gov.au
• Services Australia — Gifting and the Age Pension: servicesaustralia.gov.au
• Services Australia — How gifting can affect your payment: servicesaustralia.gov.au
• DSS Social Security Guide — General provisions of deprivation: guides.dss.gov.au
• Finder.com.au — Kids savings accounts: finder.com.au