If my parents transfer money to our homeloan offset account weekly, could it be treated as gift money or borrowed money? Do I need to pay tax for that money? Do I need to provide evidence to prove it's gift money or borrowed money? Thanks!
Hey there @jjkk
That is very nice of your parents!
The gift money from your parents does not form part of your assessable income and you don’t have to declare it.
If the money goes on to produce income for you, for example bank interest, then this will become part of your assessable income.
For more information have a read of our tax on gifts and inheritance article.
Hey there @jjkk
That is very nice of your parents!
The gift money from your parents does not form part of your assessable income and you don’t have to declare it.
If the money goes on to produce income for you, for example bank interest, then this will become part of your assessable income.
For more information have a read of our tax on gifts and inheritance article.
I think the ATO have not fully understood your question and missed the mark with their response.
Yes, its always a great idea to keep evidence of any monetary or other gifts from anyone.
The main reason for keeping evidence is because if you get audited by the ATO and they see funds going into one of your accounts which appears to them to be additional funds to what you would ordinarily earn then they will ask where have these funds come funds and in the absense of any concrete evidence will treat those funds as assessable income to you.
Now with regular funds going into your account you have to be extremely careful with the evidence that you maintain because the ATO will not simply accept a record compiled by yourself even if it includes a letter from your parents. The ATO can and will go to the extent of checking your claims and they will ask your parents for a lot of evidence, for example how and from where those payments where made, and more importantly where did your parents get those funds??, and then they will check everything.
The ATO will not accept mere statements, they require evidence and they will raise default assessments if they think someone has tried not to pay tax by doing some sort of round robin transaction.
A lot of taxpayers have been caught by this because they underestimate the ATO, and all of a sudden they find they have placed their parents in the spotlight and ultimately paying tax on income which they should have correctly declared in the first place.
Some taxpayers that have been caught out have gone to the AAT or courts to challenge default assessments and have made claims like, my parents brought all this money with them from overseas when they moved over to Australia many years and have now given it to me, or I won all this money gambling, etc .. but the AAT have rejected those claims because the taxpayers did not have any concrete evidence.
So if you can prove these payments are actually gifts to the satisfaction of the ATO, not your satisfaction, then you do not have anything to worry about. But you must have not only written records composed by you but also concrete evidence that the ATO can verify.
Just remember, the income tax law places "the onus of proof on a taxpayer" to demonstate that what they claim is factual.
I hope this helps
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