If you want to be sure that your Christmas gift won’t gather dust in a drawer, you can’t go wrong with the gift of money.
Before you take out the cheque book, make sure you’re clear about the tax implications of gift-giving.
How will a cash gift affect your pension?
The good news is there’s no gift tax in Australia. However, if you are currently, or about to draw a pension, you should know that there are conditions as to where you place your cash or other assets.
If you’re planning on reducing your assets so you can qualify for the age pension, remember that you can only give cash gifts up to $10,000 each financial year – and that amount is capped at $30,000 over five consecutive financial years.
Any gifts over this amount will be considered a deprived asset and will be subject to deeming when your eligibility for the Centrelink pension is assessed. Keep in mind that these gifting rules apply to any gifts that you make in the five years before you receive any Centrelink payments. You’ll also need to let Centrelink know within 14 days of making your gift if the total of gifts made in a financial year exceeds $10,000.
What are the tax benefits of donating to charity?
If you’re making an extra donation to your favourite charity this Christmas, make sure you don’t miss out on the tax benefits that go with it. You can claim a tax deduction on any donation over $2 in your next tax return. This will reduce your taxable income by the donation amount, which means you’ll end up paying less tax.
But before you donate, check that your charity has been endorsed by the Australian Taxation Office (ATO) as a deductible gift recipient (DGR) organisation, or you won’t be able to claim it. You can find the list of DGRs online at the Australian Business Register or by calling the ATO on 13 28 61.
Remember also that a donation doesn’t include a cash contribution where you gain something in return. For example if you attend a fundraising dinner or buy a raffle ticket or chocolates for a worthy cause, you won’t be able to claim this money on your tax return.
Want to know more?
Understanding the implications of your planned gift giving can be confusing. To be sure you’re making the right financial decisions, contact our office and speak to one of our qualified advisers.
This information has been prepared by GWM Adviser Services Limited ABN 96 002 071 749 AFSL 230692, a National Australia Group Company, 105-153 Miller Street, North Sydney NSW 2060 Australia.