January 26 2011
The announcement in October that the government intends to abolish gift duty will affect all people with current gifting programmes in place after the transfer of ownership of property into a family trust. It is expected that the legislation will take effect from 1 October 2011.
The government has signalled that the major reason for abolishing gift duty is that relatively little tax is raised (about $4 million) through gift duty relative to the total compliance costs of maintaining an annual gifting programme.
The government’s announcement has been hailed to some extent in the media since the current gift duty threshold of $27,000 per year means that it can take many years and even decades for the debt remaining after the transfer of a family home into a trust to be completely gifted to the trustees of the trust.
Notwithstanding the media hype, it is important to note that until the legislation is passed it is impossible to comment on exactly what the effects will be on existing gifting programmes and the legalities of transferring assets to a family trust. Each trust and its respective arrangements will need to be reviewed on their merits. In some instances it may be beneficial for an individual taxpayer to continue to retain some or all debt rather than completing the gifting programme.
If you have transferred your family home into a family trust and currently maintain an annual gifting programme, we will keep you abreast of developments. Once the legislation is in place we will contact you as to how it relates to your particular trust circumstances. In the meantime, if you have any queries, please contact us.