Many parents want to assist their kids with property purchases. Recent property booms, cost of living increases and rising interest rates have intensified the pressure on young adults pursuing homeownership in Australia. Here are practical strategies parents can use to help without jeopardising their own finances.
1. Gifting children a housing deposit
Gifting a deposit is common but carries risks. Parents must have sufficient cash available, and without written agreements there’s no guarantee gifted funds are protected – a particular concern where a child’s relationship breaks down. Gifting can also affect pension entitlements (Services Australia allows $30,000 in gifting over five financial years for those on the age pension). Lenders also apply ‘genuine savings’ rules, typically requiring funds to be held for at least three months before use.
2. Acting as a guarantor
Parents with property assets but limited cash can guarantee their children’s mortgage. This makes the parent responsible for repayment if the child defaults, so seek legal or financial advice first – ideally with the child present for transparency.
3. Buying a property together
Co-purchasing lets parents gain part-ownership and potentially expand their investment portfolio. But joint ownership creates Capital Gains Tax liabilities, particularly when transferring ownership later, and retirees face complications with asset and income testing for government benefits.
Protecting your wealth while helping
Getting your children ahead shouldn’t compromise your own finances. Two key approaches help: implement wealth protection (life, TPD, trauma and income protection insurance), and get professional advice to navigate superannuation, liquid assets, government benefits, tax, estate planning and retirement goals. pmwPlus combines mortgage, accounting and financial planning expertise to help parents support their children while understanding the complex finance and entitlements landscape.