I’m aware of gift tax re cash, but what is the rule re giving property, say a unit as a wedding present to a son. What should I take into account?
Henri in Wollongong, NSW
Top answer provided by:
Thank you for your question.
Australia does not have a gift tax, however if you are receiving a social security benefit i.e. Age Pension from the government, there are some rules about how much you can gift to someone before it could affect payments you receive.
What is gifting?
The Department of Human Services describes gifting as giving away assets or transferring them for less than their market value. This can include:
- Transferring units in a trust or company and not receiving full market value for them
- Selling or transferring a property for less than market value
- Buying a car for someone as a present
- Not requiring repayment for a sum of money
How much can you give?
For social security means test purposes, individuals and couples (combined) can give up to $10,000 in cash gifts and assets each financial year. This amount is also limited to $30,000 over five consecutive financial years.
Gifting within these limits may lead to your social security benefit increasing. You must tell Centrelink that you have made a gift within 14 days of making it.
If you happen to gift any more than this amount, Centrelink will treat the excess as a 'deprived asset'. This means that when Centrelink assesses whether you're eligible for the Age Pension and determines the amount you'll receive, this 'deprived asset' is still counted as an asset under the assets test and is subject to deeming under the income test, for five years. This could mean you are entitled to a lower social security benefit.
Other things to think about
I am assuming the property you are proposing to gift to your son is not your principal place of residence. If that is the case, there may be capital gains and stamp duty costs on the transfer of title based on the value of the property. Please speak to a tax accountant to understand your tax position.
Your son will also need to consider his personal financial and tax position. He generally will not need to pay tax on the property that you gift him. However, if he receives rent or decides to sell the property, he will need to pay tax on the rental income received and the capital gains (if any) on the sale of the property.
We would recommend seeking advice from a licensed financial adviser to get an understanding of your goals and make suitable recommendations tailored to you.
I hope this helps and all the best.
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