For the tax gurus here I have a rather simple question. I have got a friend looking to purchase their PPOR in Sydney and they have got a large deposit sitting in the bank which they got by selling their home overseas. This is a substantial sum earning interest at the moment while they decide where to buy. I suggested them to put it on the wife's name in a savings account to avoid getting taxed since she is not working which they liked but were not sure how to handle the transaction from a tax perspective. It will certainly show a large amount in the wife's account suddenly and may raise eyebrows in ATO. Do they declare that in their tax return? Is that something to be even worried about? I told them its a gift to the spouse which is not taxed but I am also not sure how to show this transaction on the tax return.
A transfer of cash from husband to wife is not taxable income and does not form part of an income tax return. I know some people who properly employ their spouse - but that is a different matter.
yes agree someone like @Terry_w will chip in as he is the resident lawyer but it will be important to prepare some form of gifting resolution so it is not considered to be a loan of some type in the event of any action being taken against you personally.
See my post Tax Tip 57: Gift Tax and Legal Tip 120: Properly Documenting Gifts Legal Tip 120: Properly Documenting Gifts
Think of the legal consequences, especially in regards to - death - incapacity - bankruptcy - divorce Of either of you. In most cases there will be no issues, but what if you die tomorrow. Is it a loan or a gift? There are very important estate planning consequences that flow because it it was a loan it will come back to you and pass out via your will. If a gift then not. What if the spouse dies - if a gift it would flow through her will or intestacy laws. What if you both die in an accident?
The other issue is of course the comment : I have got a friend looking to purchase their PPOR in Sydney and they have got a large deposit sitting in the bank which they got by selling their home overseas If the person was a tax resident at the time the foreign property sold there could be a tax issue in Australia. The interest that is being earned offshore would also be taxable income in Australia. The key issue is one for Austrack to consider not the ATO. Inward and outward transfers of funds can attract Austrack enquiries to determine the nature of the proceeds. The documentation of a gift or just "family savings" may assist that. Austrack want to ensure that the nature of the funds is not business income, laundered crime or terrorism proceeds and other forms of money that could have a tax issue. Doesnt seem to...But if you disclosed sale of a property offshore it could result in more questions from the ATO later.
Austrac - nothing to fear from them unless you are doing something dodgy. I used to be one of the top users of the Austrac system when I was in the AFP.
Agree. But some do get asked to explain things that they cant explain. The only concern is if you cant explain it. Sale of offshore property...woops didnt declare the CGT sale. Shared income from import export trades not in tax and so on. Doesnt affect legit issues like spouse gifts, family transfers, inheritance, sale of past home etc
