A YourLifeChoices reader wants to know if he can financially help a son who struggling to pay his mortgage.
Q. Ivan
My son and daughter-in-law recently bought a house after years of saving, but have been hit hard by interest rates. I think they are going to be okay in the long term, but it’s hard seeing them go without after saving so hard to reach their dream. I’m retired and don’t spend much, and would like to help them out. What’s the best course of action? I get a part Age Pension. Can I give money to them outright or should I offer an interest-free loan?
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A. Without more information about Ivan’s financial position, we’re unable to offer a suggestion either way, but we can weigh in with some pros and cons based on the rules.
As Ivan receives a part Age Pension, there are some rules about how much money he can give away.
In reality, Ivan can give away as much money as he likes, but it may affect his Age Pension payments.
According to Services Australia, you can give away $10,000 in one financial year without it affecting payments or $30,000 over five financial years, including no more than $10,000 in one financial year.
These rules apply for five years from the date you first make your gift and your payments can change if you get the gift back.
However, anyone considering giving money to friends or family should think it over carefully.
Circumstances change. If you’re retired, you have limited ability to replace that capital and we’re living longer. You may need that money in the future.
Ivan can lend money without it changing his payments, but he will need to show Centrelink the paperwork involved.
Once again, any plan to hand over money should be thought out carefully and, as with any substantial loan, should be drawn up legally to protect both sides of the transaction.
Have you ever given a family member money? Did you gift it or lend it? Why not share your experience in the comments section below?
Also read: Can I apply for the Carer Allowance?
Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.