EDITOR: For some reason the most popular questions asked in the comments of my Australian Personal Tax FAQ are in relation to gifts and whether or not they are taxable. As I am not knowledgeable about this area I asked my accountant friend Andrew from Aussie Tax Time to provide some general guidance on the subject.
GUEST ARTICLE: Hi my name is Andrew, please note that my guest article is intended to give some guidance to the question Are Gifts Taxable? It isn’t personal financial advice and I don’t get into the full legal arguments.
In Australia, as an individual, we are generally taxed by the Australian Taxation Office on income that we receive from providing services i.e. working.
We can also be taxed for our investments such as interest earned in a bank account or Dividends received because we own some shares, these are classed as income. We may also be subject to Capital Gains Tax (CGT). This is a tax on increases in investment Assets such as shares or property.
As a general rule if the Gift is not covered in the above situation then it will not be subject to income tax.
The ATO NEXUS
So what is the test? So there is a great word called NEXUS that the ATO like to use for many things. It means is there a direct link between the gift and the employment (i.e. working) or in the case of the property the gift and the income stream of rent.
In terms of the employment If you get a gift of a car from your employer then the ATO will probably consider there is a sufficient NEXUS between you receiving the gift and your Job.
If your Dad gives you a car for your Birthday then you can be pretty sure it will not be taxable.
You also need to be careful of making a gift payment continuously where it has the perception of Income.
For example you rent your mothers investment house and pay below market rent and then gift her money every month this may be construed as a payment in lieu of rent and hence takes on the feel of Income and will be taxed accordingly.
ATO Cases Related to Gifts
Have a look at these cases to get an idea of the legal background:
Are Gifts Taxable – Case Studies
Here are some examples: all of them assume there is no NEXUS between the gift and employment
- We inherited some money and want to give it to our Son. – No Gift Tax on the gift to the Son
- My Mum gave her sister $139k is their gift tax – No Gift Tax to sister
- Parents giving money from Overseas to buy House – No Gift Tax although there may be rules about bringing in large sums of money to the country
- I won some money and want to give my mate enough to buy a house – Good friend, what is your email….Just Joking – No Gift Tax
- I wish to sell my home and buy a house for each son – No gift Tax and generally if the house was your main residence you probably will not be liable for CGT.
- My daughter has been renting from me for and now I want to sell it to them and give her a portion of the rent she has been paying – Good question and a little complex. OK she has been paying you rent, this is taxable to you. You want to sell the house to them; if you bought this after September 1985 generally you will have to pay CGT. Giving her back some money as a gift – No Gift Tax.
This guest technology review has been written by my friend Andrew from Aussie Tax Time. A CPA Accountant and an associate member of the institute of Company Secretaries (Sydney), with over 18 years experience in a commercial corporate environment, 15 of which were in CFO and/or Board Secretary Positions. Andrew also has more than 20 years experience in public practice accounting services.
Aussie Tax Time is a new CPA practice that provides advice for small businesses and people starting new businesses in relation to company structures, tax obligations and business planning. For more information contact them by email, Facebook or Twitter.
If you’re a blogger or an expert about a topic I cover on this blog I encourage you to contact me and I’ll consider publishing your guest article here including generous attribution and back links back to your website as thanks for your contribution
{ 8 comments… read them below or add one }
Hi,
Firstly, thanks for a great article – very helpfull indeed.
Just a quick question – I live in Australia, but my brother who lives in Europe is selling his business & wants to help out his other family members by donating some money to us. He is planning to send approx AUD$ 50k to me in Australia which I would love to use to pay something off my mortgage, but I just want to double check that the money is not taxable here before he sends it?
From what you said in your article, I assume its not taxable here, but any advice would be really helpful.
Thanks
Dave
I wish to gift my son $200,000 to help him buy a house. It is just a gift. I wish to show him from some authentic source that there is no gift duty payable in Australia.
Is there a limit on how much you can give at any one time?
I read that if you give more than 30k over 5 years you may get lower pension.
if i dont receive a pension do i need to worry about this? Does centerlink keep a record of money you have given and when it’s time to get your pension they penalize you for it?
eg. if i am 25 and give 50k away. when i reach 65 will my pension be less because i have given 50k away 40 years ago?
Dear All,
Thanks for the last lot of Questions.
1. Dave S- I cannot give you specific advise as I need to know your full situation. The article deals with general stuff not specifically linked to anyone. Look at some of the tax cases for futher clarification or if you are in Sydney you can come and see me.
2. Dave – Thanks for the question. An Authentic source would be the Australian TaxOffice http://www.ato.gov.au . You can also buy a book or look in a library for a book called the Australian Master Tax Guide, there is a section in their in relation to Gifts.
3. Chung – You are talking about several issues here. I cannot comment on your pension. The article and questions relate around the fact as to whether you are giving a gift or receivng a gift and whether or not it attracts income tax. I think there are rules around giving away money that may affect centrelink benefits. You would be best contacting the centrelink offices for further clarification?
Kind Reagrds
Andrew Jeffers
CEO
Aussie Tax Time
aj@aussietaxtime.com
my mother wants to give us 100k ..if we use this to buy an investment property do we pay gift tax..cheers pete
I want to buy into my dads property,basically I want to buy in to pay off his mortgage. I want to buy halk of a 80 acre property, but subdivding it is proving difficult. is it possible to buy the property of him whole, then give him a gift of half the property?
its a hard one i know,
cheers
dan
Hi i was hoping to build a house on the back property of my partners parents house. They are pensioners and i was told that this would be considered a gift and any gift worth more then 10000 dollars gets a gift tax, but more importantly they would like to know how it would affect there pension as its there only income, does the property affect there assets in the eyes of centrelink?
I have the feeling that this article was written by an American. Americans tend to use a certain verb in a place, and Australian English uses another verb.
VERB: bring