Are gifts taxable? I am frequently asked the questions, what are the tax implications of giving money away? If I receive money as a gift, do I need to pay tax on it? The answers are varied. The most recent that I heard was in a meeting with someone who mentioned their tennis partner told them they can only give away $10,000 per year and anything over that is taxable.
This confusion isn’t surprising, as when you search the Australian Tax Office website, they have a sentence which reads ‘Other amounts that are not taxable: generally, you do not have to declare…small gifts such as cash birthday presents (however gifts maybe taxable if they are large amounts…).
But there is no guidance given on what is small and what is large.
I have spoken to the ATO about this on several occasions and the verbal advice I have received is the same; there is no tax on gifts in Australia. Giving away money is not a taxable event for the recipient. However, if the person giving the monetary gift sells an asset, e.g. investment property, share portfolio, etc., then that event may give rise to a capital gains tax, but the act of giving itself is not taxable.
If you dig deep into the ATO archives you can find a little more commentary on this. The ATO was asked this question;
Do the monetary gifts from your parent form part of your assessable income?
The short answer is no. These monetary gifts from your parents would NOT form part of your assessable income, given the following facts and circumstances:
- Your parents have provided you with a gift of money out of natural love and affection to financially support you and your family.
- The gift has either been provided to you individually, or jointly with your spouse.
- The gift is voluntary.
- The gift does not have a connection to any income-producing activity of you or your family.
- The gift is sourced from funds that are beneficially owned by your parent in their own name.
Given the above facts, this gift does not have any connection to income producing activity and would not be assessable income.
So there you have it, there is no tax on genuine cash gifts made in Australia. And for completeness, the $10,000 ‘annual limit’ referred to above relates to the amount that can be given away by a recipient of the Age Pension. This is often confused with a tax limit but as the ATO has said above giving away money is not taxable.
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