Gift Duty
Gift Duty will be abolished from 1st October 2011
From 1st October there will no longer be any tax to pay on ‘gifting’ to another person or trust. Previously there was a limit of $27,000 per annum per person; amounts over this were liable for gift duty tax.
However there are several factors to consider before you ‘gift’ to another person
- The money is no longer yours if it is gifted to a trust or another person
- Protecting assets from creditors – if in financial difficulty you may have to prove you were solvent before the gift was made and the gift was not undertaken to disavantage a potential creditor claim or the gift may be undone.
- Protecting assets from relationships breakup – you may receive more protection by using a relationship property agreement which classifies items as ‘separate property’ and ‘relationships property’
- Be aware that there are different rules regarding gifts for rest home subsides
For gifting purposes, a gift is something given when:
- Nothing is received in return; or
- Something is received in return, but its value is less than the value of the property given.
Although gift duty will cease from 1st October 2011 it is still important to be able to quantify the value of any gift made. Different rules exist for gifting between the Income Tax Act which the IRD administer and the Social Securities Act which Work and Income NZ administer. Work and Income NZ for some benefits asset test individuals and will require confirmation of the value of any gift made.
If something of lesser value is given as a gift the value of the gift, is the difference between the two values.
For example these items can all be gifts:
- Transfers of any items (for example, company shares or land).
- Any form of payment.
- Creation of a trust.
- A forgiveness or reduction of debt.
- Allowing a debt to remain outstanding so that it can't be collected by normal legal action.
Gifts made to create a charitable trust, or in aid of such trust, society or institution are exempt from gift duty. From 1 July 2008 that charitable trust, society, or institution will need to be registered by the Charities Commission for the gift to be exempt from gift duty.
The table below outlines the rates of gift duty which applied before 1st October 2011. For more information on Gift Duty give us a call or visit the IRD Gift Duty Guide IR194
Value of Gift |
Duty Payable before 1st October 2011 |
| 0 to $27,000 | NIL |
| $27,001 to $36,000 | 5% of value over $27,000 |
| $36,001 to $54,000 | $450 plus 10% of value over $36,000 |
| $54,001 to $72,000 | $2,250 plus 20% of value over $54,000 |
| Over $72,000 | $5,850 plus 25% of value over $72,000 |
