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Thread: South African Donation Tax - Exempt Question

  1. #1
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    Post South African Donation Tax - Exempt Question

    Hi, I have been all over the internet and Trying to answer a very simple tax questions.

    I am a South African Resident Living in Australia - Every Month I send money back to my parents to help them out.
    Do they need to pay tax on the money I send them?

    My understanding is, no, they don;t need to pay tax on it, but the Reserve exchange control tax it in anycase....? Can a tax professional please assist.



    The Only by-law I can find is this :

    "Donations tax

    The principle aim when donations tax was introduced into the Income Tax Act 58 of 1962 (the Act) was to prevent taxpayers from donating assets during their lifetime with the aim of avoiding estate duty. Donations tax is levied at a rate of 20% on value of any property disposed of under a donation by a resident, unless a specific exemption is available to the donor.

    Exempt donations

    Section 56(1) of the Act provides an exemption from donations tax for certain types of donations made such as property donated to, inter alia, a Public Benefit Organisation. Section 56(2)(b) of the Act provides further that donations tax shall not be payable where, during a year of assessment, a natural person disposes of property under a donation, provided the value of property donated does not exceed R100,000. In addition, section 56(2)(c) of the Income Tax Act provides that a donor may also make bona fide contributions towards the maintenance of any person as the Commissioner considers to be reasonable without attracting donations tax.

    It appears that the exemption allowed under section 56(2)(c) of the Act does not require the maintenance to be paid in relation to a dependant of the donor. Donations in the form of maintenance may therefore be made to any person whether it be an ailing parent or a relative attending university. The only requirement is that the donation must be a bona fide contribution towards the maintenance of another person.

    A bona fide contribution will be a question of fact to be decided by the Commissioner in the exercise of his discretionary powers.

    Commentators suggest that, in general, bona fide donations will be determined by taking into account the reasonable needs of the donee and the means of the donor. It is important to note that, in terms of section 63 of the Act, the decision regarding the bona fide nature of the donation made upon the exercise of discretionary powers by the Commissioner, is not subject to objection and appeal and can only be taken on review where the donor is in disagreement. It is therefore essential that a donor provides sufficient information to the Commissioner so as to place him in a position to make an informed decision regarding the bona fide nature of the maintenance of another person.

    The term 'maintenance' is not defined in the Act, however, the ordinary dictionary meaning refers to any amount paid in the form of an allowance for ailment or support. Depending on the nature of the person being supported, the determination of what is regarded as 'maintenance' could become a very subjective analysis. "

  2. #2
    Gold Member Houses4Rent's Avatar
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    My wife and myself donate each year R100k to our trust to reduce the loan account. I.e. R100k are tax free on both sides. Anything above that costs 20% to the donor and is taxable as income for the recipient.

    I am no professional, but I doubt I am far off the mark.
    "We treat your investment as we treat our own"
    Global Residential Property Investor / Specialized Letting Agent & Property Manager

  3. #3
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    Your question may not be as simple as it appears.
    Tax is seldom simple and what must be borne in mind, in your situuation, is that it is a cross border transaction.

    There are 2 crisp issues, foreign exchange regs and taxation.
    Foreign exchange allows for R 1 million a year to move to family.

    On the tax issues. Let sclear up the first point.
    You say you are a SA resident living in Australia.
    Can we presume that is meant to be that you are South African (a citizen) but now living and working in Australia.
    If this is the correct position then you are not resident in South Africa which is important from a South African tax regime perspective.

    As you point out, maintenance and donations are seen form 2 different perspectives.
    In this regard are your parents working, and what is their age.

    As I understand it your requirement, is not too reduce your tax bill but merely to provide money to your parents.
    In which case the real question is: if I wish to move R300 000 a year to my parents in SA, how can I do so with the least tax implications?
    Anthony Sterne
    DISCLAIMER The above is merely a comment in discussion form and an open public arena. It does not constitute a legal opinion or professional advice in any manner or form.

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    Dear Sterne Law,

    Thank you for the reply,

    You are correct - I am a (RSA Citizen) living and working in Australia.
    My Parents are 58 and 61 of age. One is working as a teacher (58) earning a meagre wage of approximate R130,000. The other (61) is not working.

    I supplement their income with another R150,000 a year (which I want to increase to R250,000.

    My Question is: - Currently they are paying Tax on the R150,000 I send them each year - Is this correct?
    My understanding is that money I send them should fall under a "maintenance payment" and is not Taxable.

    Second Question is: How to I deal with the Exchange Regulator to get them to understand this, if this is the case.

    Thank you.

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