Hi to all the highly knowledgeable accountants and tax specialists! Just a quick question - I understand there is a 10k rule for gifting per yr is it without any tax or legal implications. What I would like to know is, if and how you could gift say $100k and the implications etc Appreciate any insights. Regards, Ramos
I am not an accountant nor a tax specialist. It is my understanding that one can gift as much as one likes and there aren't any implications unless one is an Aged Pensioner or seeking to be one in the next five years. If the gift is to a registered charity, then it is tax deductible if it is more than $2
There is no $10k per year gifting rule. Even if there was there are plenty of legal implications. See Legal Tip 120: Properly Documenting Gifts https://propertychat.com.au/community/threads/legal-tip-120-properly-documenting-gifts.9542/ Legal Tip 88: Gifting to related parties Strategy https://propertychat.com.au/community/threads/legal-tip-88-gifting-to-related-parties-strategy.4770/ Legal Tip 115: The Gift and Borrow Back Strategy, Part 1 https://propertychat.com.au/community/threads/legal-tip-115-the-gift-and-borrow-back-strategy-part-1.7544/ Tax Tip 57: Gift Tax https://propertychat.com.au/community/threads/tax-tip-57-gift-tax.4771/ Tax Tip 97: What is a gift from a taxation point of view? https://propertychat.com.au/communi...is-a-gift-from-a-taxation-point-of-view.7673/ Tax Tip 134: The Gift and Borrow Back Strategy and Tax https://propertychat.com.au/communi...-gift-and-borrow-back-strategy-and-tax.11441/
Wow thanks for that! So much to take in! Yeah she would be 65 this year so would be seeking pensioner rates on bills etc they get right. She wouldn't qualify for pension id imagine as she has cash in the bank and outright owns her place. But could still qualify for the pensioner rates on bills etc id think? This would be a gift not a loan also - to her daughter - which is not to be repaid. So in doing so basically her pension is the only thing affected. I'm.sorry if you explained this but it went over my head haha
There are deeming rules under the social security act. From memory a gift of an amount over $10k is deemed to be still held by the giftor for 5 years after the gift and earning the deeming rate of return.
The term gifting is a Centrelink and Dept of Human Services rule. Amounts that are gifted still count for the assets and income tests including deeming. Gifting - Australian Government Department of Human Services There can be strategies that bypass gifting in some instances
It is not just the $10K per annum. Centrelink allows gifting of $10K per year, up to a maximum of $30K over 5 years before the age pension is affected. So if a age pensioner wants to gift EVERY year, the limit is $6K. I know of someone who was nearly caught out by thinking she could gift $10K every year. Marg
Thanks for your responses! D.T - true, thanks, but I think she may have about $1m in the bank So is there a way to do it? If she writes a cheque for 100k she will lose any potential pension benefits. If she transfers cash to the daughters account slowly slowly it will be picked up by the bank etc right even 5k , 2k deposits etc. All abit out of my area and over my head currently.
With $1M in the bank she most probably won't get any pension as well above new asset limits even for a couple. She will have to declare any gifts, even in small amounts. Lying to Centrelink is not recommended. They check data. Marg
If she gives $100k away the rules, broadly, are that the $100k is still treated as hers for 5 years. She will be deemed to be earning an amount of income from it too - about 3.25% pa. but she also has to consider what happens if she gives $100k to her daughter and the daughter dies or gets divorced.
So the $3250 say would just be added to her income for that Financial Year? And taxed appropriately. And the only issue is then if anything happens to either of them within the 5 yrs? If that's the only cost i'd imagine she would go ahead that's all
Tax is a separate issue. The gift giver won't be taxed on the money gifted. Above I was referring to the social security aspects. There are many issues no matter when something happens. If Mum gives the daughter $100,000 and the daughter dies in 10 years that money could go to her estranged husband for example. She should not rely on the above but get propper legal advice. The social security act is very complex.
She could move into a retirement village/nursing home and pay the typical $800k bond leaving her with a pittance so she can get the pension. Or as @Terry_w suggests - go on a spending spree (with the kids eg do their groceries, clothes shopping etc).
One of the mistakes and misconceptions is that savings must be spent to get a pension. Often a view based on lack of specific facts and sometimes assisted along by ill informed adult children happy to get a personal benefit at the expense of their parent. Often well intentioned but not always to the parents benefit. Seek appropriate aged care financial advice first. (Disclosure - Yes our firm offers that service and its a huge growth industry) There can be a diversity of strategies to avoid wasting savings to get a minor pension. A younger taxpayer wouldnt throw savings away to get a minor benefit and many people do foolish things chasing a few bucks from Centrelink. Once done these issues cannot be fixed so prior planning is key. Even completion of the pension application can be a minefield and incorrect applications are common.
Yeah she is just trying to help her daughter get a leg up and use the 100k as part of a house deposit. I was just curious as the best way to do it as the daughter told me her mum was going to deposit $9k increments into her account but I thought that would be good for various reasons. So now I understand she should just write her a 100k cheque and the repercussions are that it stays on her assets for 5yrs. So only pension and tax would be affected.
A family guarantee loan may be better. Mum could allow her property to be used as security. What if she gives the daughter $100k and the daughter goes through a family law separation - it could be lost.
