My understanding is when I gift my friend say $50,000, this gift is not considered income in his hands and he is not required to declared it to ATO. Setting aside potential Centrelink implications, are there any other legal or compliance matters he (or I) should be aware of? Thanks.
Your understanding is generally correct — in Australia, a genuine gift is not treated as taxable income for the recipient, so your friend normally wouldn’t need to declare the $50,000 to the Australian Taxation Office as income.
That said, there are a few practical and compliance points both of you may want to keep in mind:
1. The payment must genuinely be a gift
The money should come with no expectation of repayment, services, or benefit in return. If it looks like a loan, payment for work, or investment arrangement, different tax rules could apply.
2. Documentation is helpful
It’s wise to keep simple written evidence stating that the transfer is a gift (for example, a short signed letter or bank transfer description). This can help if questions ever arise from banks or regulators.
3. Bank reporting and AML checks
Large transfers can trigger automatic reporting under Australia’s anti-money-laundering rules. This doesn’t mean there’s a problem — banks may just ask about the source or purpose of funds.
4. Future tax consequences for your friend
While receiving the gift isn’t taxable, income earned from the money later (interest, dividends, investment gains, etc.) will be taxable to your friend.
5. Centrelink and other assessments
As you already mentioned, gifting and receiving funds can affect asset and income tests under Centrelink, depending on circumstances.
6. No gift tax in Australia
Australia doesn’t have a gift or inheritance tax, so there’s generally no separate tax liability created just by making the gift.
If the amount is significant relative to either person’s finances, getting brief advice from an accountant or financial adviser is usually worthwhile — mainly to document intent properly and avoid misunderstandings later.
Hope that helps clarify things.
Your understanding is generally correct — in Australia, a genuine gift is not treated as taxable income for the recipient, so your friend normally wouldn’t need to declare the $50,000 to the Australian Taxation Office as income.
That said, there are a few practical and compliance points both of you may want to keep in mind:
1. The payment must genuinely be a gift
The money should come with no expectation of repayment, services, or benefit in return. If it looks like a loan, payment for work, or investment arrangement, different tax rules could apply.
2. Documentation is helpful
It’s wise to keep simple written evidence stating that the transfer is a gift (for example, a short signed letter or bank transfer description). This can help if questions ever arise from banks or regulators.
3. Bank reporting and AML checks
Large transfers can trigger automatic reporting under Australia’s anti-money-laundering rules. This doesn’t mean there’s a problem — banks may just ask about the source or purpose of funds.
4. Future tax consequences for your friend
While receiving the gift isn’t taxable, income earned from the money later (interest, dividends, investment gains, etc.) will be taxable to your friend.
5. Centrelink and other assessments
As you already mentioned, gifting and receiving funds can affect asset and income tests under Centrelink, depending on circumstances.
6. No gift tax in Australia
Australia doesn’t have a gift or inheritance tax, so there’s generally no separate tax liability created just by making the gift.
If the amount is significant relative to either person’s finances, getting brief advice from an accountant or financial adviser is usually worthwhile — mainly to document intent properly and avoid misunderstandings later.
Hope that helps clarify things.
Hi @nicoleismyname,
Gifts aren't considered income and don’t require you to pay any Australian tax. Have a read of this article, it will help you work out what you need to do.
22 Apr 2024 · 6 min read time
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