Mother’s day is all about being spoilt by the children and some mom’s will be so overwhelmed by the love and attention. Just incase you want to reciprocate, Mom’s… beware there are limitations.
Be careful Mom’s not to give away your children’s inheritance too soon, the tax man will charge you a fortune.You can only give up to R100 000 per year after which your will have to pay 20% in donations tax.
You can give and receive any amount to your husband but when it comes to the children SARS puts the brakes on.
So if you suddenly bought your child a million rand house and a fancy German car then SARS could be after you in terms of how necessary and reasonable the donation was towards the upkeep of your child.
When you really study the taxation formula of donations tax you realise that it is a form of tax to stop you from offloading your assets before you die, thereby avoiding estate duty. You see, when you die your estate is taxed after exemptions, costs and liabilities at a rate of 20%. The easiest thing you could do if this was not in place would be to give the children everything just before you die.
This way SARS won’t get much. So, donations tax is a mechanism put in place to ensure that SARS gets its slice of the revenue whilst you are alive. When you die SARS will collect the rest. So, mom’s, enjoy the day and just be aware of that impulsive urge to give your children too much. It could cost you more than you realise!!!
Listen to Paul Roelofse's chat below...
Read more from Paul Roelofse at www.investforlife.co.za