You may have read that the Government abolished gift duty from 1 October 2011. This has led to the common perception that an individual may now make a gift exceeding $27,000.00 or a couple may now make a gift in excess of $54,000.00, without any adverse consequences.
This perception is in some circumstances incorrect.
It is true that gifts exceeding $27,000.00 (or $54,000.00 for a couple) will not incur gift duty if the gift was made after 1 October 2011.
However, there will be adverse consequences if the donor (or where a couple makes gifts, one of the donors) seeks a long term residential care subsidy. The Social Security (Long Term Residential Care) Regulations 2005 have a significant impact on such gifts.
Regulation 9 defines “allowable gifts”. These include gifts made by the person being means assessed, or his or her spouse or partner. Gifts made in the five years immediately before applying for a subsidy must not exceed $6,000.00 in each year (this gifting amount has changed over time).
Regulation 9B deals with the deprivation of property and income in the years prior to the above gifting period of five years prior to the date of the means assessment.
During this earlier period, gifts made in any 12 month period are considered a “deprivation” of property to the extent the total value of gifts in each such period exceeds $27,000.00. An example set out in Regulation 9B indicates that the $27,000.00 permitted gifting relates to gifts made by both the person being means assessed and his or her spouse or partner.
In November 2011 a Social Security Appeal Authority considered gifts made by a married couple together totalling $54,000.00 per annum. While such gifts did not attract gift duty, the Authority found that any gifting exceeding $27,000.00 made by a couple will be considered “a deprivation of property” and will be “clawed back” into the means assessment. In this case, 17 years of excess gifting was “clawed back”.
We recommend those gifting programmes should be re-evaluated, now that the interpretation of “excess gifting” has been decided by the Social Security Appeal Authority.
We suggest you contact us to consider the impact the Regulations and the Appeal Authority’s interpretation has on your gifting programme.