What's the best way to help my children with house deposits? Am I better off paying out lump sums, or contributing for loan payments? What are the tax implications, if any?
Let’s answer the simple question first; there are no tax implications for gifting unless you need to sell an asset first. There may be Centrelink implications if you are receiving benefits.
The question “how best to help”, is more involved. Firstly, I suggest anything you provide for a deposit be structured as an interest free loan from yourself to the kids. This way you have a claw back for family law purposes.
Providing a lump sum or regular payments is a tricky one. While a lump sum payment might be better, it means you don’t have the money generating income for you. A regular payment might be better for your cashflow and capital management. You also need to consider the fact that a bank will still need the kids to be able to service loan repayments themselves.
Importantly, our advice to all our clients is the same. You need to ensure you are financially comfortable for your life first, then help the kids. Ultimately, understanding whether you have excess capital to meet this goal should be the first step and thinking about how to provide the support is next.
By Queensland based Family Business Accredited Advisor
Dean Ireland
Director & Senior Adviser, Elston
