Creative gift giving, no wrapping required

With Christmas around the corner, it’s a good time to revisit the Centrelink gifting rules to ensure ‘Santa’ doesn’t get carried away. Pride Advice’s Brett Schatto writes.

What kid doesn’t like getting cold hard cash from their grandparents for their birthday and Christmas? Whether it’s in a card, ang pow or via modern day direct deposit, most kids will gladly take cash over a book or pyjamas, however, there may be something more meaningful and enjoyable than money. 

An increasing number of Pride Advice clients, particularly grandparents, are getting creative about how they spoil their children and grandchildren.

Instead of simply gifting money, they’re treating the whole family to a holiday; children, partners and grandchildren. 

Everyone benefits. Young parents get a break which they otherwise could not afford, complete with built-in babysitting. Kids get to see and experience different places, and grandparents get to plan a trip and spend quality family time away from the busyness and distractions of everyday life. 

This approach makes giving more purposeful and memorable. In a way, it’s a gift that lasts a lifetime. 

But this trend is not confined to Pride Advice, it’s a global phenomenon. 

According to a Virgin Holidays study*, multi-generational holidays are on the rise with seven in ten UK families having embarked on a family adventure.

Recently, my colleague travelled to the Maldives with her partner where they met eight young people, all cousins, from the same family. The mob was on an all-expenses paid vacation from the United States, courtesy of grandma and grandpa.

When my colleague glanced over at the old couple lying by the pool, she could see the grin on their faces from 50 metres away.

An all-expenses paid trip to the Maldives for the entire extended family is an extreme example but fortunately the same high can be achieved by taking the family interstate, on a road trip or glamping. Ultimately, it’s not about the destination but the experience.

However, there is a caveat. 

In most cases, monetary gifts are not taxable. People can generally gift any amount of money they see fit to anyone they like. 

But for Australians who receive – or expect to soon receive – any social security benefits such as the age pension, gifting may impact their entitlements. 

Under the gifting rules, individuals and couples who receive Centrelink benefits can gift up to $10,000 per financial year without penalty, limited to $30,000 over five years. If these amounts are exceeded, the excess is assessed as a (deprived) asset and deemed a financial investment under the income test for social security purposes. (There is no gifting limit for self-funded retirees.) 

The rules are designed to stop people from giving away their money or transferring assets for under market value in order to increase their social security entitlements. 

As a financial adviser, I regularly get asked about the gifting rules by clients who want to help their adult children cover expenses like utility bills, renovations and school fees. When I probe a little, I learn that few things give them more joy than spending time with their family, especially for those who live a fair distance from their kids.

When I raise the possibility of taking their family on a holiday while staying within the gifting limits, their faces light up. 

Depending on your personal financial situation, you may want to consider gifting a holiday to your family rather than just handing over some cash. Before doing do, it is important to speak to your financial adviser to ensure you don’t over-extend yourself or exceed limits.

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* https://www.thesun.co.uk/travel/8891208/brits-holiday-parents-grandparents/