Money as gift and Tax

[InTheWild]

So I was visiting a friend last night.. Apparently her dad just sold their holiday house since all the children are out of the house and through varsity, he wants to give her (and to her siblings) R250k as a gift. She's been working for 2 years and earns a good salary (not sure how much, but she bought a flat and drives a nice car). Now the question she asked me (yeah, ask an IT dude about finances :erm: ), is how does tax work on something like this, is an amount like this taxed, and is there a threshold? Does anybody have some info on this?

Thanks

 

[Alton Turner Blackwood]

So I was visiting a friend last night.. Apparently her dad just sold their holiday house since all the children are out of the house and through varsity, he wants to give her (and to her siblings) R250k as a gift. She's been working for 2 years and earns a good salary (not sure how much, but she bought a flat and drives a nice car). Now the question she asked me (yeah, ask an IT dude about finances :erm: ), is how does tax work on something like this, is an amount like this taxed, and is there a threshold? Does anybody have some info on this?

Thanks

PM Celine

 

[IzZzy]

You will be taxed on the amount in excess of R100k at a rate of 20%. Her father should really just donate 100k this year, and the balance (next R100k) in the following tax year so as to make maximum use of the donations allowance.

 

[InTheWild]

You will be taxed on the amount in excess of R100k at a rate of 20%. Her father should really just donate 100k this year, and the balance (next R100k) in the following tax year so as to make maximum use of the donations allowance.

Thanks And I suppose she needs to declare this on her tax return?

 

[AlmightyBender]

Thanks And I suppose she needs to declare this on her tax return?

Most definitely

 

[Sokum]

You will be taxed on the amount in excess of R100k at a rate of 20%. Her father should really just donate 100k this year, and the balance (next R100k) in the following tax year so as to make maximum use of the donations allowance.

either that, or just split it 50k a month..

 

[P924]

Splitting it up per month will not affect the amount on her annual tax return... Only way of doing it is splitting it up per tax year (100k per year).

 

[Hemi300c]

Isn't it R120K per annum?

 

[InTheWild]

Isn't it R120K per annum?

Nah, just looked at the sars 2013 pocket guide (who carries a pocket guide for tax in their pocket :wtf it's R100k.

 

[DJ...]

either that, or just split it 50k a month..

How does this work?

 

[HPFM]

Or the Dad can provide the cash as a "loan" to the daughter... she signs an acknowledgement of debt, which he never calls in

 

[InTheWild]

Or the Dad can provide the cash as a "loan" to the daughter... she signs an acknowledgement of debt, which he never calls in

Is this legal?

 

[IzZzy]

Or the Dad can provide the cash as a "loan" to the daughter... she signs an acknowledgement of debt, which he never calls in

Yes he would be able to loan the full amount to her, and write off R100k per year - but you are entering into a dangerous game here of substance over form. I.e. in substance he never intended to loan the amount to her, and its true form is a donation.

Whether or not SARS sees through this is up to them.

 

[HPFM]

Yes he would be able to loan the full amount to her, and write off R100k per year - but you are entering into a dangerous game here of substance over form. I.e. in substance he never intended to loan the amount to her, and its true form is a donation.

Whether or not SARS sees through this is up to them.

Yeah legally, nothing wrong with it, as its a "loophole", but if abused regularly I am sure SARS would take a view on it.
Thats why you formalize the transaction with an acknowledgement of debt, which after 3 years will prescribe if not called in.

 

[DJ...]

SARS can still nail you for that if they're in the mood but that falls under the radar for individuals for the most part. Companies and directors get away with this each and every day...

 

[IzZzy]

Yeah legally, nothing wrong with it, as its a "loophole", but if abused regularly I am sure SARS would take a view on it.
Thats why you formalize the transaction with an acknowledgement of debt, which after 3 years will prescribe if not called in.

Not sure what you mean by formalise. An AoD just... acknowledges the debt and creates a separate legal causa under which to sue on. The three year prescription period would arise whether or not you sign an AoD (provided the loan amount is due, owing and payable). What I mean is that an AoD would not be a defence against an allegation of a sham by SARS.

SARS can still nail you for that if they're in the mood but that falls under the radar for individuals for the most part. Companies and directors get away with this each and every day...

Agree for your first sentence, and *cough* NWK *cough* for the second sentence.

 

[Hendrix]

How about he just pays the 250k into her bond? Is that legal or seen as a "donation" too?

 

[Freshy-ZN]

Double check but he could give each sibling R100k and then donate the rest to the Mom (theres a different limit to donations to spouses) and then the Mom could also donate R100 to each.

Then tell SARS to fsk off.

 

[DJ...]

IIRC the spousal donation will mean that profits on the donation will be taxed in the hands of the person donating it. I might be wrong here but I think that's the law.

Additionally SARS will see that as blatantly flouting the law - not sure you'd get away with it...

 

[F1 Fan]

Dude they should not be paying taxes on it. Find a loophole, the government does not deserve it.

I would suggest the " loan" that never gets called in. SARS won't really care if it doesn't have on a regular basis.