Australian families are always seeking smarter ways to transfer wealth, support children, and minimise tax exposure. In 2025, ‘gift splitting’ has emerged as a practical and increasingly popular strategy. While more familiar in the US, the concept is gaining momentum here as families look for legal, effective means of managing intergenerational transfers and staying on the right side of the ATO.

What Is Gift Splitting and Why Is It Trending in 2025?

Gift splitting generally refers to dividing a significant financial gift between two (or more) people—most often, a couple splits a gift to their children or grandchildren. In Australia, this isn’t an official tax term, but it’s a strategy that can help avoid triggering gifting limits for Centrelink or reduce exposure to potential tax liabilities.

Centrelink Rules: Gifting more than $10,000 in a single financial year or $30,000 over five years can impact Age Pension entitlements.
Family Trusts: Distributions to multiple beneficiaries can be structured to reduce individual tax burdens.
Intergenerational Wealth: With property prices soaring and the cost of living rising, more parents and grandparents are gifting early to help the next generation.

According to the latest ATO guidance (2025), while Australia doesn’t impose a direct gift tax, there are still important tax, Centrelink, and legal implications to consider when making substantial gifts.

How Gift Splitting Works in Practice

Let’s say a couple wants to give their daughter $40,000 to help with a home deposit. If one person gifts the full amount, Centrelink’s gifting rules could reduce their Age Pension. But if both parents each gift $20,000, they can potentially remain under the annual and five-year thresholds, preserving their entitlements.

Gift splitting can also be used within family trusts. Trustees may choose to distribute income to multiple beneficiaries in lower tax brackets, taking advantage of the progressive income tax system. This is particularly relevant in 2025, with the latest personal income tax cuts now in effect and bracket creep a renewed policy focus.

Example: Distributing $30,000 each to three adult children, rather than $90,000 to one, can result in significant tax savings if the recipients have minimal other income.
Documentation: To avoid disputes and satisfy the ATO, clear records of all gifts, trust resolutions, and beneficiary communications are essential.

Key Risks and 2025 Policy Considerations

While gift splitting offers flexibility, it’s not without pitfalls. The ATO continues to scrutinise family trust distributions, and the government has flagged possible reforms to trust taxation in the 2025-26 Federal Budget. Additionally, Centrelink’s rules are strictly enforced, and excessive gifting can result in asset deprivation assessments.

Tax Avoidance: The ATO’s general anti-avoidance rules (GAAR) apply if splitting is done primarily to avoid tax.
Family Law: Large gifts can complicate divorce settlements or disputes over inheritance.
Deprivation Periods: Gifts above Centrelink’s allowable limits are counted as assets for five years, affecting pension and benefit calculations.

In 2025, with rising intergenerational transfers and a tight rental market, the government is paying close attention to schemes that could undermine the integrity of the welfare and tax systems. Always ensure that gifts are genuine, well-documented, and in line with current policy settings.

Practical Tips for Australian Families

Plan major gifts in advance, especially if you’re close to Centrelink thresholds.
Split large gifts between spouses or over several years where possible.
Keep detailed records of all transactions and intentions—documentation is key.
If using a family trust, review trust deeds, resolutions, and beneficiary details annually.
Stay up to date on 2025 policy changes, particularly in trust taxation and social security rules.

Gift splitting isn’t just a tax tactic—it’s a way for families to support each other, build generational wealth, and do so within the rules. With a bit of planning and awareness of the latest regulations, Australians can make the most of this flexible strategy in 2025 and beyond.