Question 1

If I use some of my savings and super to help my daughter buy a house, will the money I contribute become part of her income and be taxed (again), or would it be better for me to be a part-owner of the property?

No. Gifts are not counted as taxable income in the hands of the recipient.

It’s becoming increasing common to see parents (or grandparents) help younger family members into the property market.

Issues other than tax would need to be considered, such as seeking legal advice and clarifying what effect, if any, this would have on any income support payment, such as the age pension.

This approach has some merit; helping your children out earlier in life can have an outsized benefit, as opposed to waiting to pass on funds when you die.

By that stage, they could be in their 50s or 60s (or even older), and it would have a lesser impact. The flip side is not to leave yourself short and know the risks.

There are several approaches you can take to help children in the housing market:

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1. Gift the deposit: One of the most common ways is by gifting all or part of the deposit. This reduces the amount your child needs to borrow and can help them avoid lender’s mortgage insurance (LMI).
2. Loan the deposit: As above, except lending rather than gifting. It may be best to have a formal loan agreement made to avoid any confusion. This allows for flexibility and ensures you are repaid. You can set whatever interest rate you like, including nil.
3. Go guarantor: By becoming a guarantor, you use the equity in your own home as security for your child’s loan. This allows your child to borrow a larger amount or get a better deal.
4. Co-ownership: Some parents choose to buy a property with their child, either as joint tenants or tenants in common. This means you both own a share of the property – you may decide to sell your share later, or have your child buy you out over time.
5. Living at home longer: Allowing your child to live at home rent-free or for a reduced rent can help them save more quickly for a deposit. Or, still charge them board but save it for their home deposit.
6. Financial gift matching: You can offer to match the amount your child saves. This encourages them to save while also providing significant financial support. This can also be in conjunction with the above strategy.

It’s important to consider your own financial situation as there may be more than one option available. Seek professional advice if needed.

Question 2 

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Hi Craig, I have an investment property that will pass to my children when I die. I know they will wish to sell it. Can you explain how the capital gains tax is calculated in this situation? Is the original purchase price ($200,000 in 1997) used to work out the amount of tax to be paid? Would they be entitled to the 50 per cent capital gains tax discount, and is there a timeframe in which they should sell the investment property they have inherited?

Thanks, Anne

Hi Anne,

Yes, that is correct, the Australian Tax Office would use the $200,000 purchase price as part of the cost base.

It could also include other incidental costs associated with acquiring, holding and disposing of it (such as legal fees, stamp duty and real estate agent’s commissions).

The timing and mechanics may slightly differ depending on whether the legal personal representative sells the asset before distributing the proceeds, or whether the children inherit it and then sell it. Either way, the cost base will be the same.

There are timeframes required when selling a property that was the main residence, but this does not apply to investment properties, as capital gains tax is payable regardless.

Question 3

Hi Craig, I am 75 and my wife is 68. We both receive the full aged pension. My wife will shortly receive an inheritance of about $360,000.

If we invest this money into a term deposit, we will lose the aged pension. My wife’s super account is still in accumulation mode and I have been advised that if she deposits this amount into her super account it will avoid the pension means test until she decides to start a pension from it.

Can you please advise if there is any limit on how much she can deposit into her super?

Her current balance is $170,000.

Hello,

As your wife is age pension age, all money in her super accumulation will be assessed in determining how much age pension you receive. This is regardless of whether she starts a pension with it or not.

Money in her super accumulation wouldn’t have counted against your age pension if she was under age 67 (her age pension age).

Assuming you are homeowners, you can have $1,047,500 (as of April 2025) in combined assets (excluding your home) and still receive a part-age pension.

It may well still be appropriate to contribute the funds to super in order for them to commence regular, tax-free income payment from them, but it just won’t have an immediate age pension benefit.

She can make a non-concessional (after tax) contribution of $120,000 each year or a $360,000 contribution in one go using the bring forward rules.

There are some retirement products, such as lifetime annuities and pensions, that do offer an immediate age-pension benefit. With these products only 60 per cent of the purchase price is counted.

I recommend you get advice on these products before considering them, as they can be complex.

Additionally, you should look at allocating only a portion of your super as the funds are then generally locked away.

Craig Sankey is a licensed financial adviser and head of Technical Services and Advice Enablement at Industry Fund Services.

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.