Is a cash gift from family member assessable?

[trump]

Hi all,

Happy new year to everyone.

After checking the ATO site and searching the forum I am still unclear about whether or not a cash gift from a relative is assessable as income.

The scenario is my step-daughter is splitting with her partner and they have offered me a price on their house. I am keen to help so that my daughter can stay in the house with their 2 children as tenants. It's also a reasonable investment, notwithstanding my no-family investment policy!

My daughter's share of the equity is $80,000 which she wants to gift to me so that I can hold it in the house, with the intention of gifting it back at some future date. My accountant tells me this is not assessable income.

My feeling is that there must be a tax implication here. When I gift it back the amount may include a share of any capital gain, surely the ATO would want a piece of that?

Any comments?

Thanks

Trump

 

[Muz]

Cash Gift

Hi Trump,

Not sure re ATO implications but have you thought of the following....if your daughter is on Centrelink benefits as a sole parent they have their own gifting rules, also not sure how Child Support would look at this either!!

Sounds to me like she is sort of keeping a share of the house if you're talking capital gains in the future. Why couldn't you buy the ex's partners share of the house?? Lots of options and lots to think about!!

Bottom line is see your Accountant

 

[DaleGG]

Hi

Cash gifts from family are NOT taxable income and do not need to be declared on your tax return.

Does she want to adopt another parent?

Dale

 

[Garry K]

Hi all,

My daughter's share of the equity is $80,000 which she wants to gift to me so that I can hold it in the house, with the intention of gifting it back at some future date. My accountant tells me this is not assessable income.

Trump

Hi Trump.
I'm not clear on the reasons for this approach, however have you considered "buying" the home with your daughter as tenants in common (as opposed to joint ownership), where you each own a stated perecentage of the house.

eg
House is worth $320K
Daughters share $80K or 25%
You own 75% (or 3 parts), your daughter owns 25% (or 1 part).

That way your daughter retains her part ownership, participates in possible capital gain. You can each buy each others share later.

This does however complicate position if you wish it to be an IP.

GarryK

 

[trump]

Thanks for your replies DaleGG and Muz.

It is a messy situation and we're just trying to make sure our daughter's interests are protected and she gets to look after her family properly as she works through this.

Tom

 

[quiggles]

Then it may be that you want to speak to a family law specialist lawyer first regarding strategy and (I assume) asset protection. Hope things work out for the best.

 

[saskatoon]

Trump,
what about establishing a trust to buy the property from your daughter & partner. She could then rent the property from the trust, and her equity could be loaned to the trust to assist in the purchase. (May involve juggling of finance!). As the beneficiary her interests would be protected.
Terry

 

[Mry]

As said before, cash gifts are not assessable.

I recommend you do two things though -

1 - Make a stat dec declaring an amount of $80,000 as a gift. It makes a nice paper trail to show that it is a gift.
2 - Make out a sale contract for the $80,000. This ensures that you have a capital base for the acquisition of the property so you can reduce your tax bill later.

I assume you have a reasonable basis for making the $80,000 the purchase price? It does represent the value of what you will be acquiring?

Yes, the ATO will look at the market value of the property at sale and purchase (if they do decide to audit) since it will be a contract between family members. Normally they would expect that you would buy and sell at market value in such instances (where I normally rely on a real estate agent's estimate of sale value). If you decide to contract the sale price outside of normal market values, you'd better have a good reason or keep your head ducked down.

That is the tax position. but as it has been said before, your affairs appear to be quite messy. It also appears from your message that you will be owning it in conjunction with a 3rd party (I would guess the ex-partner) who could have plans for the house that you may disagree with. I would recommend seeing an accountant and/or lawyer.

Also remember that you need to think about your own financial and legal position before you jump into a potential mess. It is easy to make bad financial decisions when family are involved.

 

[trump]

Thanks again

Thank you all for taking the time to reply, your comments have given me some good ideas about how to proceed from here.

Regards
Tom

 

[julia]

Trump,
Just another consideration as you work through the maze. If the property is 100% in your step daughter's name she can exempt any future capital gain from tax. As CGT is a tax on inflation this is very important in a long term investment. Imagine if in 5 years time the house was worth twice as much but in your name and she had to move for work. If you are in a high tax bracket, by the time you paid the tax out of the proceeds she would not have the money to buy a similar house.

Julia Hartman
[email protected]
www.bantacs.com.au