Tax on Gifts and Inheritances

In Australia, gifts and inheritances are generally not considered as income and don’t require you to pay any Australian taxes. However, there are some exceptions where tax may be payable or capital gains tax (CGT) may apply. We will break them down below, but first, what does the ATO define as a gift? The following criteria correlates with the ATO’s definition of a gift:

• There is a transfer of money or property
• The transfer is made voluntarily
• The donor does not expect anything in return
• The donor does not materially benefit

My parents want to gift me money – do I pay tax on it?

No, gift money is not considered a part of your assessable income and therefore does not need to be declared, regardless of the amount.

If family or friends give you money towards a home deposit or to help with day-to-day fees it does not contribute to your assessable income. However, if that money goes on to produce income for you, for example bank interest, then this will become part of your assessable income.

A family member living overseas wants to give me money as a gift. Do I pay Australian tax on it?

No. Whether the gift is money or an asset from a foreign resident for tax purposes, the gift is treated the same as a gift from an Australian resident for tax purposes. The same rule regarding if the money goes on to produce income applies.

Do I pay tax if I gift someone money or an asset, like a house?

Gifting money to a family or friend has no tax implications for you or the receiver.

If you gift someone an asset like a house, we consider that transaction to be the same as you selling the house, and capital gains tax (CGT) will apply. If you’re entitles to the CGT main residence exemption, it still applies. If you’re not entitled to the CGT main residence exemption, or are only partially entitled, you’ll be liable for CGT.

How are other gifts like cryptocurrency or shares taxed?

Shares and cryptocurrency are known as capital assets, just like property.

If you’ve been gifted shares or cryptocurrency, you:

• only pay tax on any income produced by the shares or cryptocurrency
• may be liable for CGT when/if you dispose of the shares or cryptocurrency later.

If you’ve gifted someone shares or cryptocurrency, you may be liable for CGT since you’ve disposed of a capital asset.

If you inherit shares or cryptocurrency, you:

• don’t pay tax at the time of receiving them
• are liable to pay tax on any income produced by them
• may be liable for CGT when/if you dispose of the shares or cryptocurrency later.

I’ve received an inheritance from a deceased estate – do I have to declare it?

No. Generally, as the beneficiary of a deceased estate, if you inherit money or assets such as property or jewellery, you don’t have to declare it unless:

• The assets are left to tax-advantaged entities such as charities, or to a foreign resident.
• you inherited a dwelling from a foreign resident 

However, once you own the inheritance, you’ll pay tax on any income earned by it, for example bank interest or rental income.  You may also be liable for capital gains tax if you dispose of an inherited asset later.

If the inheritance you receive is super from the deceased’s super fund, it’s called a super death benefit.  The super fund trustee will inform you if tax is payable, and if it is the tax will be deducted from the super death benefit.

If you require professional advice contact the friendly team at Hooper Accountants.