My parents would like to help me with my mortgage by sending money to me from overseas. As the receiver of the money, what tax implications will I have, in terms of my tax position, and do I need to declare it on my tax return? As the sender, what tax implications will my parents have (who are non-residents of Australia for tax purposes)? The money sent will be "after-tax savings from overseas". I am not in receipt of any government benefits. Thanks in advance.
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That’s great that your parents are in a position to be able to help fund your mortgage.
Generally speaking, there are no tax implications on receiving a gift of money from someone as one off monetary gifts are not considered as “income”, unless if you invest the money and make interest on it. It’s the interest that is taxed and not the initial gift. There is also no need to declare the initial monetary gift in your tax return.
Regarding your parents, I strongly suggest that your parents check with their home country in relation to any tax consequences prior to gifting you the money as it all depends on their country’s tax policy. For example, if your parents are in the USA they can gift you up to $14,000 without any tax implications. However, anything more than this will be taxed, but chances are they won’t be taxed as they can gift up to about 5.4 million in their lifetime before they have to pay tax.
You also must be careful as the ATO will generally question large sums of money being transferred from overseas into your bank account. If you are going to be repaying back the money this may raise questions as to how much is a “gift”. The ATO may elect to tax your parents at commercial interest rates if they think that the gift is instead a ‘loan’. With your parents being overseas, you may have a withholding tax obligation. In this instance it would be best to speak to an Accountant regarding the tax treatment if you intend to re-pay the gift to your parents.
It is advised that you check the rules that apply to any money you receive from foreign sources into your Australian bank account. The taxation responsibilities you need to be aware of are clearly outlined on the Australian Taxation Office (ATO) website. If you need more assistance, call the ATO or talk to an accountant.
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