OVERVIEW
Overview
Gift tax is filed and paid by the recipient within three months of the end of the month in which the gift is made. The gift property deduction is applied by aggregating ten years for each category of donor, so the same amount produces a different result depending on whether it is transferred at once or spread over time. For property whose market value is not readily ascertainable, such as real estate or unlisted shares, the valuation method itself is frequently the point at issue.
VALUE Tax & Accounting considers the recipient's funding needs alongside the character of each asset and sets the order in which property should be transferred. Transferring assets expected to appreciate first attributes the increase to the recipient and reduces the overall burden. Because lending money without interest and transferring property below market value are both treated as gifts, movements of funds within a family are always reviewed in advance. After the gift we organise the flow of funds and the supporting evidence in preparation for a source-of-funds audit.
KEY ISSUES
Key tax issues in gift tax
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01
The gift property deduction and ten-year aggregation
Spouses, lineal ascendants, lineal descendants and other relatives each have a different deduction limit, aggregated over ten years. Gifts received from the same donor within ten years are combined in applying the rate.
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02
Valuation methods
Market value governs, and where a comparable sale is available that figure is used. Because the tax differs according to whether an appraisal is obtained or the published price is applied, this requires review in advance.
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03
Gifts of real estate and acquisition tax
Acquisition tax payable by the recipient arises in addition to gift tax. The rate rises for gifts of high-value housing in a regulated area, so the total cost must be calculated together.
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04
Interest-free loans and below-market transfers
Lending money to a family member without interest, or transferring property below market value, is treated as conferring a gift. A loan agreement alone is insufficient; interest must actually be paid and the principal repaid.
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05
The start-up and business succession regimes
Reduced rates apply to gifts made for a child's start-up or for succession to a family business. The permitted use and the continuing requirements are strict, so the ability to comply should be assessed before the regime is adopted.
HOW WE HELP
How VALUE Tax & Accounting responds
Building the gift plan
We set out the asset schedule, the family composition and any gifts made within the past ten years, and design the order in which property should be transferred, to whom and when.
Valuation and calculation
We review the valuation method for each asset, calculate the total cost including gift tax and acquisition tax, and compare the alternatives.
Filing and evidence management
We file within the deadline and advise on organising and retaining the flow of funds, agreements and interest payment records in preparation for later review.
FAQ
Gift tax FAQ
Q How much can be given to a child without tax? expand_more
A deduction limit for lineal descendants applies over ten years, with separate deductions for marriage and childbirth. Amounts already given within ten years are aggregated, so the earlier history must be confirmed first.
Q If money from a parent is treated as a loan, is it still a gift? expand_more
A written loan agreement alone is insufficient. Interest at an appropriate rate must actually be paid and the principal repaid for the arrangement to be recognised as a loan; otherwise it is treated as a gift and taxed.
Q Is it better to give cash or real estate? expand_more
Transferring assets most likely to appreciate first is frequently advantageous. Real estate carries acquisition tax and valuation issues as well, however, so the total cost should be calculated and compared.
Q If I sell property I received as a gift, is there further tax? expand_more
The value at which the gift was made becomes the acquisition value, and capital gains tax applies to any subsequent increase. Where property received from a spouse or a lineal ascendant or descendant is sold within a specified period, the donor's acquisition value applies instead, so the timing of disposal must be confirmed.
Q Will anyone know if no return is filed? expand_more
It is identified through property registration, financial records and any subsequent source-of-funds audit. Penalty tax for non-filing and for late payment is added, so filing within the deadline is the better course.