giving money to kids

Discussion in 'Accounting & Tax' started by Fernfurn, 6th Mar, 2020.

Join Australia's most dynamic and respected property investment community
  1. Fernfurn

    Fernfurn Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    162
    Location:
    by a Bellarine beach
    If you do not receive any pensions, and decide to give your kids money (no intent to lower income to receive pension, etc.) is there a limit on how much you can give away overall
     
  2. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    15,146
    Location:
    Sydney
    No. I assume you are referring to adult kids ? The issue of gifting can also impact other forms of benefits for up to 5 years. eg unemployment benefits, health care and even disaster relief.

    Retirement is a long time period with a uncertain end date. It may be wise to not gift but to review your estate planning. Gifting to adult kids who then divorce or suffer bankruptcy can upset some parents
     
  3. Ross Forrester

    Ross Forrester Well-Known Member

    Joined:
    30th Oct, 2016
    Posts:
    1,807
    Location:
    Perth, Western Australia
    If you gift an asset to a child you might incur a tax liability even if transferred for nothing.

    we do not have a gift tax unless you transfer under a deed of gift - then stamp duty might apply. So you can make a gift as large as you want.

    Instead of gifting you can lend money - and to be effective you should evidence the loan through a registered mortgage or a caveat.
     
    Mike A likes this.
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

    Joined:
    9th Jun, 2006
    Posts:
    30,887
    Location:
    Australia wide
    Even without a deed there could be duty and CGT consequences to gifting assets. But no tax on making cash gifts - unless it is income disguised as a gift.

    see
    Tax Tip 57: Gift Tax Tax Tip 57: Gift Tax

    But before making a gift you should consider the legal consequences. Could it be better to make an interest free loan instead as this can have several advantages in estate planning, asset protection, taxation and family law
     
  5. Mark F

    Mark F Well-Known Member

    Joined:
    29th Jan, 2020
    Posts:
    584
    Location:
    Canberra
    Maybe a bit off topic but the way I helped my daughter was to put my emergency money in her offset account. My emergency money is to cover serious unexpected costs like a new car or major health care etc without having to liquidate investments. So 50k went into her offset and delivers her a nice saving on interest each year so her house paid off quicker and I still have the cash available if needed.
     
    balwoges and Marg4000 like this.
  6. Ross Forrester

    Ross Forrester Well-Known Member

    Joined:
    30th Oct, 2016
    Posts:
    1,807
    Location:
    Perth, Western Australia
    Just makes sure she does not spend your emergency money!
     
    craigc and Mike A like this.
  7. Curious2019

    Curious2019 Well-Known Member

    Joined:
    27th Sep, 2019
    Posts:
    218
    Location:
    VIC
    Hmm not great asset protection.. if she defaults on her mortgage, your money could be taken by the bank!
     
  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

    Joined:
    9th Jun, 2006
    Posts:
    30,887
    Location:
    Australia wide
    Is it a loan or gift?
     
  9. Mark F

    Mark F Well-Known Member

    Joined:
    29th Jan, 2020
    Posts:
    584
    Location:
    Canberra
    I wouldn't have done it if I didn't trust her but all is good 5 years on.
    If that seemed likely I would buy out her mortgage. She bought well and current valuation sees her way in front.
    It is a loan until coronavirus gets me, after that it is moot, she will end up with it one way or another. She will need to use a bit of it to cremate me - no funeral insurance.
     
    Ross Forrester and Marg4000 like this.
  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

    Joined:
    9th Jun, 2006
    Posts:
    30,887
    Location:
    Australia wide
    It would prob help if she inherited it instead of receiving a gift.
     
  11. Ross Forrester

    Ross Forrester Well-Known Member

    Joined:
    30th Oct, 2016
    Posts:
    1,807
    Location:
    Perth, Western Australia
    It sounds like you have a great relationship going on there. Congratulations.
     
  12. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    15,146
    Location:
    Sydney
    Technically the ATO suggests this is a Part IVA scheme and not a valid offset and that the benefit that accrues to her is potentially assessable income. (Para 19) But they will never find out. And I am unaware of this ever being heard in a court / tribunal. TR 93/6 is a ruling largely in respect of banks and not customers.
     
  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

    Joined:
    9th Jun, 2006
    Posts:
    30,887
    Location:
    Australia wide
    This is a misinterpretation of TR 93/6.
     
  14. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    15,146
    Location:
    Sydney
    Perhaps - As I indicated it is a view applied to banks. Part IVA can cancel any tax benefit of course. Daughter would likely argue she was not in receipt of income. Unless there was a exchange of value with Dad it may be difficult to argue income was derived. I encountered such a case several years back where Centrelink argued that daughter was paying dad (for example) in a manner akin to interest in an offset arrangement. Never was argued as taxable but Centrelink considered that the regular amount reflected a sharing of the benefit and that the payment based on this was income to the father. Then they aslo imposed the gifting rule on assets which was applied to affect the pension.
     
  15. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

    Joined:
    9th Jun, 2006
    Posts:
    30,887
    Location:
    Australia wide
    Extremely unlikely that Part IVA could apply to a situation like a parent lending or gifting money to their adult child who puts those funds into her offset. That TR certainly doesn't apply in this situation.

    But seek tax advice if reading this.
     
    fritzsticker and Ross Forrester like this.