We want to help our son buy a house. Should it be a gift or a loan?

2 hours ago 3

Opinion

October 29, 2025 — 5.01am

My wife and I downsized recently and topped up our super. We do not get any government assistance and survive on our allocated pension from our super. We have decided to help our son and his wife buy their first home and were wondering if we would have to pay “gift” tax? If so, should we draw up a loan agreement to avoid this cost?

There is no gift tax in Australia. The big decision for you is whether this is to be a gift or a loan. There is no easy answer because some people prefer to make it a gift and leave it at that.

Deciding how to pass money on to your kids can be tough, and it might be worth getting legal advice.

My wife and I have long believed that “a gift given is a gift given”, and money given to children should be on a non-recourse basis. As far as we are concerned, the grief that would be caused all round by a divorce would be so horrendous that fighting about ways to claw back financial assistance that may have been given years ago is a bridge too far.

There is no “one size fits all” strategy here, but if you do intend to make a loan, it should be documented. A simple agreement that includes clauses such as the loan being repayable on demand – and specifically in the event the recipients separate – and whether the loan is interest-free or interest-bearing at a certain rate, is the minimum needed.

You should also consider securing the loan, for example by registering a mortgage, and/or making it a condition that the recipients enter into a binding financial agreement that will bind a Family Court if things get nasty down the track.

While divorce is the most common risk to consider, it may also be worthwhile having a documented loan if any of your children are in a profession where their assets could be at risk if they were to be sued. Depending on the size of the loan, you may be well advised to take legal advice.

It’s been my experience that a good share portfolio will usually outperform a mediocre property.

I am a single 56-year-old female. I earn $110,000 a year and my superannuation is $452,000. I have a $232,000 mortgage at 5.29 per cent, repaying $910 a fortnight (minimum $1768 per month). I have $100,000 in my offset account, which saved me $494 in interest last month. For the year ending June 30, I paid $7649 in interest.

Should I invest the $100,000 elsewhere, knowing my mortgage interest would rise, and I’d pay tax on the investment earnings? My income varies between $110,000 and $130,000. If I did invest those funds, what return would I need to beat the savings I gain from the offset?

I think a clever use of superannuation would be your best strategy. Your employer should be contributing $13,200 a year to your superannuation, which leaves room for you to make an additional $16,800 a year as a tax-deductible contribution.

The contribution tax on this would be 15 per cent, which is much lower than the 30 per cent you would pay if that money were taken as part of your salary. Furthermore, your superannuation fund should be earning a much higher return than the net amount you are effectively receiving on your savings by using the offset account.

Given your superannuation is under the $500,000 limit for catch-up contributions, I would take advice about using these to potentially double the amount you are making each year as a tax-deductible contribution

My wife and I are 52 and 51 respectively and are fortunate to be mortgage-free. I have $405,000 in super and my wife $260,000. I work full-time in a well-paid job and my wife works part-time six to eight hours a week.

We have an investment property in my name, which I originally lived in between 2007 and 2012 – a unit worth $600,000 with a $215,000 mortgage in inner-city Melbourne. However, overdevelopment and increased taxes have seen capital growth decline, with further decline likely given government policies and plans for more development, meaning the outlook for capital gain is low.

Should I sell the property now, pay the capital gains tax and invest the proceeds into equities — putting some into super as concessional catch-up contributions, some as non-concessional contributions, and/or some in an investment portfolio in my wife’s (low marginal tax) name – or should I wait until retirement and use the downsizer contribution, given that capital gains from property are likely to be substantially lower than from equities over the next 15 to 17 years?

It’s been my experience that a good share portfolio will usually outperform a mediocre property. You have plenty of room in your superannuation balances to make contributions, and many years left to do so.

Therefore, I would keep the downsizer contribution for the future, when you might find your super fund is too large to accept further contributions if you haven’t already maximised them.

My aunt recently passed away and left my brother and me some money in her will. Sadly, my brother has since passed away, so the will states that his share goes to me. I would like to give my brother’s widow his 50 per cent share, which amounts to $150,000. I’ve been told this could affect me negatively when I reach pension age at 67. I’m currently 62.

Money given away within five years of the pension application date will be treated as an assessable asset and subject to deeming. You could make a gift of $130,000 as soon as possible, combined with a loan for $20,000, and then forgive $10,000 of that loan each year for the next two financial years.

This would make a total of $30,000 that will be exempt. The remaining $120,000 would then be counted by Services Australia for five years from the date of the gift, which may not be a long time if you apply for the pension at age 67.

Noel Whittaker is author of Retirement Made Simple and other books on personal finance. Questions to: [email protected]

Advice given in this article is general in nature and is 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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