A growing number of parents and grandparents are stepping in to help the next generation buy a home. But while the generosity comes from the heart, the financial and legal implications can be anything but simple – especially when family dynamics, relationships or Centrelink comes into play.
The Bank of Mum and Dad: It’s not just for the wealthy
You might think the Bank of Mum and Dad (BOMD) is only for the wealthy – but the reality is quite different. More and more everyday Australian parents are stepping in to give their kids a helping hand, especially when it comes to buying a home.
It’s not always about large sums either. For many families, it’s about doing what they can to give their children a more secure start in life.
Recent data from the Household, Income and Labour Dynamics (HILDA) survey shows a clear trend: between 2019 and 2022, about 7% of children received financial gifts from their parents – with an average gift of just over $9,000. These weren’t parents still living with their children either – they were “non-resident” parents, which would include parents whose adult children have already moved out.
While these amounts might not sound huge on their own, they point to something bigger. Parents are helping out in growing numbers – often by stretching their own finances to support the next generation.
This rise in support isn’t just about wealth. It’s about love, fairness, and the deep desire many families have to see their kids get a fair start in life.
A real-life dilemma
Peter and Lorna are in their early 80s. They receive a part Age Pension, own their home, and have modest superannuation. Their adult daughter, recently separated, is trying to buy a home of her own. Peter and Lorna want to help – they want to make sure their daughter is financially secure in her new start – but at the same time they need to know their support won’t put their own retirement at risk.
What are the options – and why do they matter?
Families can typically consider three main ways to help:
- Gifting the money outright
- Lending money with the expectation of repayment
- Owning part or all of the property jointly with their child.
Each comes with its own set of risks and consequences – especially when you’re managing your own retirement income, Age Pension, and estate plans.
Options considered and their implications
These big decisions can involve overlapping financial, tax and estate planning considerations. Getting clear on how they affect your retirement income and Age Pension is a key part of making the right choice and that’s where we come in.
1. Gifting the money outright
Peter and Lorna considered giving their daughter the money with no strings attached.
- Centrelink impact: Centrelink would treat this as a “deprived asset”, because they received nothing in return. The amount gifted would still count as an assessable asset for five years, potentially reducing their Age Pension.
- Asset protection: Once the gift is made, and invested into the property, it becomes their daughter’s personal asset, exposed to future relationship breakdowns, bankruptcy, or other financial risks.
- Estate planning: Once gifted, the money is no longer considered part of their assets, which may affect how their remaining estate is distributed among their children.
2. Lending money with a formal loan agreement
They also looked at lending their daughter the funds, backed by a legally binding loan agreement.
- Centrelink impact: Centrelink will assess the outstanding loan amount as an asset. If the loan is later forgiven, the forgiven amount would then be treated as a deprived asset from that point, for another five years.
- Asset protection: A well-drafted agreement can include triggers for repayment (e.g. property sale, new relationship) and can be backed by a caveat registered on the property title, providing security and protecting their daughter’s equity.
- Estate planning: The existence of a formal loan can be acknowledged in their wills, helping to ensure fairness in how assets are divided among all children upon their passing.
3. Joint ownership of the property
Another option they had thought about was to jointly purchase the property with their daughter.
- Centrelink impact: If Peter and Lorna do not live in the property, their share is assessed under the Centrelink asset test, which will affect their Age Pension.
- Asset protection: This provides them with a legal share in the property but raises potential capital gains tax issues. It also reduces their daughter’s independence, as all co-owners must agree on decisions about the property.
- Estate planning: On death, the transfer of their property share can involve additional legal steps and costs.
Protecting both generations: A retirement advice perspective
In our Retirement Advice Consultations, clients like Peter and Lorna come to us wanting to support their children while still feeling confident about their own financial future. We help them weigh up each option by looking at two key questions:
- How will this affect our Age Pension entitlements?
- Will we still have enough to live on comfortably – for as long as we need?
Using retirement forecasting tools, we can test different scenarios – including gifting, lending, and co-ownership – to show how each choice affects their Age Pension, the longevity of their super or other savings, and their ability to maintain a safe, sustainable level of spending throughout retirement.
What the consultation helped clarify
In Peter and Lorna’s situation, we found that all three options they were considering would have an ongoing impact under the Centrelink assets test. Whether the funds were gifted, loaned, or used to purchase a share in the property, the value involved would continue to count as an assessable asset and be deemed to earn income, reducing their Age Pension under both the income and assets tests.
Through the consultation, we were able to:
- Model how each option would affect their Age Pension, including any implications from the five-year gifting rule or deeming rates applied to a loan or financial interest.
- Forecast their retirement cashflow, showing how long their savings might last and what a safe level of annual spending would look like under each scenario.
This process helped Peter and Lorna move forward with clarity – understanding the consequences of each option, allowing them to choose the path that best balanced generosity with financial confidence.
Want to explore this further?
If you’re thinking about helping family financially – without compromising your own retirement – you may find this article by James Coyle helpful: Beware the Bank of Mum and Dad
And if you’re weighing up options like gifts, loans or co-ownership, a Retirement Advice Consultation can help you understand how these decisions might affect your Age Pension and long-term financial wellbeing.
Here are some of the key questions we can explore with you:
- If you give or lend money to your children, how will it affect your Centrelink entitlements?
- Will you still have enough to live comfortably, for as long as you need?
Things to reflect on:
- Are we clear on how Centrelink will treat the money we give, lend or invest?
- If things change down the track, will we feel confident we made the right call?
Your experience matters
Have you faced a similar situation – or are you thinking about it now?
What helped you make your decision?
Share your story or thoughts in the comments section below – your experience could help others feel more confident too.
This article is very relevant to my situation. I would dearly love to transfer some of what I have, which is not a great deal, to my two adult daughters, but it will affect my part pension.
Why on earth is the inter-generational transfer of ‘wealth’ so very difficult when it’s clearly what’s required and there are many parents willing to do this?
Hi. I’ve been following with interest the articles about the Age Pension, gifting and helping out the children. i’ve some questions that are relevant to me and surely to some others about all this.
I’m not yet 62 so not worried just yet about affecting any pension. But I recently sold the family home, gave some dollars to each of the adult children to help them get ahead. My youngest has made the decision to stay with me and has used her monies to buy a house with me. Title is joint tenancy, mortgage in both our names. No issues there.
to the questions:
When I reach 62, having made extra contributions to the mortgage and continuing until 67, will the extra payments to the joint mortgage be considered gifting?
When I reach 67 and give up working, my daughter will take over the full mortgage payments. Does that become a Granny Flat arrangement?
While we’re at it, let’s talk Bonds for grandchildren. I currently pay $800 per year into Bonds for each grandchild. If I continue those payments past 62yo, will those be considered gifting when it comes to pension time.?
Lastly, I was hoping to give the grand kids all of their bonds as cash gifts at the same time (around my early 70’s) rather than the bonds transfer directly to them. Would auto transfer of the bonds or cashing the bonds to give as funds be considered gifting also?
I don’t need an appointment but am sure the situations would be relevant to a number of us and would love to see an article about it, thanks.
We helped our son with his house purchase recently knowing it’s going to impact our retirement savings and pension. We felt it was the only to afford a house as moving away from the area was not an option. We gave $250,000, this means we lose interest income AND when I turn 67 (three years time) we will get a smaller aged pension. My wife is already on the aged pension, full amount. Once I turn 69 things will work out better as the $250k will not impact the pension (after the 5 year gifting rule). I worked out that to give him the $250 it will cost us $65,000 over the five years. We are happy about that, it’s just something you need to consider. Loaning the money generally does not work as the Bank will want to see how that loan will be paid back and include it in the liabilities.
I wonder if instead of loaning the kids money could you pay some of their other commitments thus freeing them up to save more for the deposit. E.g. pay their rent, power or phone bills or car payments/insurance/ HECS debt.
You would just be increasing your own fortnightly spending, not making a lump sum deposit to their bank account which will have to be explained to Centrelink.