How gifting your grandkids money could actually increase your pension

1 hour ago 2

Opinion

December 10, 2025 — 5.01am

The festive season is a time of giving, not just the kind of wrapped gifts under the tree, but the financial ones that help children or grandchildren to buy their first car, pay for a home deposit or cover school fees. As a result, many senior Australians ask, “How much can I gift?”

The answer? As much as you want. While Centrelink has rules about how gifts are assessed, there is no limit on what you can actually give. For pension purposes, whether you’re single or a couple, the first $10,000 per financial year, with no more than $30,000 over five years, is exempt.

As the festive season rolls around, the giving of financial gifts is often a point of interest for retirees and pensioners.

Anything above is treated as a “deprived asset” for five years – meaning it’s counted as an asset and deemed to earn income just like it was in your bank account. After five years, it drops out entirely.

Here’s the crucial point that many people don’t realise: if you’re gifting from a financial asset – like money in the bank or shares – giving it away won’t hurt your pension. In fact, it could help.

If you’re receiving the full pension, gifting from your financial assets won’t affect your pension because your assessable assets and income are already below the thresholds.

If you’re receiving a part pension gifting is likely to see your pension go up slightly. If your pension is asset-tested, the first $10,000 of your gift is exempt which can increase your payment by $780 a year.

Don’t let worry override what you want to do. Work out what the rules mean for you so you can gift as much as you wish.

So what’s the catch? There is the obvious one: the capital and the income it earns are gone. If you gift more than the exempt amount, Centrelink counts the excess for five years.

If you’d kept it in your investments, it would have been counted anyway; the difference is that you’re assessed on it while it’s no longer in your hands. And if you start receiving aged care, the deprived amount will also be included in your aged care means test.

The real sting comes when people gift assets that weren’t financial assets like a car, a block of land or a holiday home. While they are counted in the assets test, they are not deemed to earn income. Gifting these assets can reduce your pension and increase your aged care costs because now income is deemed to be earned on them.

The impact is even greater if you gift an exempt asset – such as your home – because you effectively convert something that wasn’t counted at all into something that will be assessed as an asset and deemed to earn income for five years.

Many people want to “gift with a warm hand rather than a cold one”, to see the joy it brings or to provide guidance over how the funds are used – but fear a pension penalty for doing so. In reality, the fear is often far greater than the reality.

Your pension can actually go up, and your aged care fees can go down when you gift from your financial assets. Don’t let worry override what you want to do. Work out what the rules mean for you so you can gift as much as you wish.

Rachel Lane is the author of Downsizing Made Simple, a book and website aimed at demystifying downsizing.

Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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