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Who pays and how much tax will be due on gifts given to family? Will there be a donations tax?

Posted 20 August 2012 under Tax Questions



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My dad has investments, can he give lump sums to his kids as gifts and who will pay tax and how much? He was told he is not allowed to gift more that R5000.00 a year.

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TaxTimTaxTim says:
11 August 2012 at 16:35

A taxpayer can donate up to R100 000 per tax year and not have to pay any Donations Tax. Any amount over that will incur a donations tax of 20% which he will have to pay over to SARS. If your dad gives to his spouse then this is tax free regardless of the amount.


Jinx says:
12 August 2012 at 9:19

2 more questions regarding above.

1. If it is a once of amount must the recipient declare it in some one on their tax return( gift received would be to settle debt)
2. Everytime my dad wants to withdraw money from his investments he has to explain what the money would be used for, this is through a financial advisor at one of our major banks, why should he explain what he wants to do with his money.
PS my dad is a pensioner who has various investments and policies.


TaxTimTaxTim says:
13 August 2012 at 11:19

If in total, the donations made exceed R100 000 for the tax year then the person making the donations needs to complete a IT144 declaration detailing all the donations and how much tax will be payable. The recipient should declare on his/her ITR12 that they received a donation under the "Amounts not considered taxable" section. In your case was this money owed to your father and he said you no longer need to pay it and therefore "donated" it to you?

Usually one doesn't need to state why you wish to withdraw your funds, but depending on the nature of where the funds are invested and perhaps the investment house, they may require some form of audit trail. Usually a request is made and the money is just deposited back into the account. Ask your father to find out if it is a SARS or Reserve Bank requirement or just bank policy.


Mark says:
25 November 2012 at 8:46

We are 4 kids and my dad has given each of us R100000, will he have to pay donations tax on R300000 of is the allowance per kid?


TaxTimTaxTim says:
25 November 2012 at 12:42

Hi Mark,

Unfortunately the answer to your question is yes your father would have to pay donations tax on R300 000 as the limit is R100 000 per tax year regardless of who the donation is made to if they are not a registered Public Benefit Organisation. What you dad could do is donate R100 000 to your mother tax free as donations between spouses are not taxable and then she can donate R100 000 and that why your dad would only be taxed on R200 000.

Regards,
Tim


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