Ask Paul: Will my daughter lose her DSP if we help her buy a home?

Hi Paul,

I have a disabled adult daughter on the disability support pension (DSP).

We applied for a home loan for her to give her some independence.

My daughter was approved for a small mortgage plus she has a good amount of savings and we were also approved to add money to our mortgage and we were going to gift her this money even though this would put my husband and I in a lot more debt and I am in my 50s and he is 60.

But it meant a lot to help our daughter and we were willing to do this.

After successfully applying and having paid for the strata report of a property, the bank at the last minute said we have to sign a "gift letter" saying we were giving her this money.

We were trying to avoid this as we were worried about "gift tax" and mainly how it would affect my daughter's pension and could gifting her money be deemed as earning from Centrelink? My husband and I aren't well off, and we are just trying to house our disabled daughter.

We cancelled the home loan due to this gift letter and my daughter is devastated as we built her hopes up, found a place and then cancelled.

I feel putting gifting into writing as a letter could be problematic due to the rule about gifting only $10,000 a year etc. How on earth do parents help adult children with disabilities without affecting their pension? - Kaz

Hang on Kaz, I think we may have a bit of confusion here. A genuine gift, as the Tax Office says "does not require you to pay any Australian taxes". Nor is a genuine gift taxable for the recipient.

You are referring to the deprivation rule in regard to the $10,000 a year you mention. But I don't think you are getting a pension. If so, a gift to your daughter does not give you any tax issues.

Importantly, the impact on her pension is based on what she does with the money. If she were to invest it, it would be tested under the income and asset test and it would impact her pension.

But my understanding is her savings and your gift are to allow her to buy a home, with a small mortgage.

Your own home is not an asset for pension purposes. I can only go on the information provided, so it is really important you discuss this with Centrelink, now the Department of Human Services (DHH). Sure, all this will be really different if you are getting a pension. But as a working couple of your age, that does not seem likely.

There may be more going on here, or facts I do not know. Make sure you check by seeking advice from DHH, or a professional advisor.

But from what you tell me, I reckon there is no issue in your making a gift to your daughter. A gift put towards her family home should not be an issue. A family home is an exempt asset.

You are being incredibly loving and generous in the support you wish to give to your daughter. I do hope it all works out.

Ask Paul: Where are they now?

Has your question appeared in Ask Paul over the years? We want to hear from you! If Paul Clitheroe has published an answer to your question, email [email protected] to let us know how your situation turned out. We will publish a selection of these in the new year.

Get stories like this in our newsletters.