Thursday 8 December 2016

Your Questions: Must my daughter pay tax on my cash gift, even though she has moved to Australia?

Paul Dillon

Published 30/08/2015 | 02:30

In Australia, there is no gift tax on gifts from parents to children
In Australia, there is no gift tax on gifts from parents to children

I have sent my daughter, who lives in Australia, a cash gift of €30,000 to help her buy her first home over there. Will she have to pay any tax to the Irish Revenue Commissioners - or to the tax authorities in Australia - as a result of receiving this gift? She has been living and working in Australia for three years and currently has no plans to return to Ireland. Geraldine, Templeogue, Dublin 6W

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In Ireland, Capital Acquisition Tax (CAT) at a rate of 33pc applies on gifts between individuals. A person is liable to CAT where either the beneficiary of the gift (in this case, your daughter) or the disponer (in this case, yourself) is resident or ordinarily resident in Ireland and where the beneficiary has breached the relevant tax-free threshold for CAT.

The current tax-free threshold that applies for gifts and inheritances between parents and children is €225,000. This means your daughter can inherit or receive gifts worth up to €225,000 from you over her lifetime - without having to pay tax on those gifts or inheritances. Once that threshold is breached, she will need to pay tax on the balance.

In your case, if your daughter has not received previous gifts from you or your husband exceeding this threshold, she will not have to pay CAT.

However, if the threshold has been breached, €27,000 of the €30,000 gift will be liable to tax at 33pc. This is because the first €3,000 of any gift received from an individual in a year is ignored for CAT purposes.

If tax is due, a short Form IT38 needs to be filled out online with Revenue through the Revenue Online System (ROS).

The filling dates are as follows - if the gift date is between September 1 and December 31, 2015, the return is due on October 31, 2016; if the gift is between January 1 and August, 31 2015, the filing date is October 31, 2015.

In Australia, there is no gift tax on gifts from parents to children.

As a hospital consultant, I am entitled to a flat-rate employment expenses allowance of €695 a year. How do I go about claiming that allowance?

Jim, Blackrock, Co Dublin

This allowance should be coded on your tax credit certificate - if not, you should contact your local tax office to ensure your tax credit certificate is amended going forward.

If you have not previously claimed this allowance, you should claim it on your annual tax return. Remember you can only claim allowances and reliefs that you were entitled to for the last four years - you cannot claim for allowances that you were entitled to more than four years ago.

I recently received a letter from the Revenue Commissioners, saying that it has come to their attention that a property I own is no longer my principal private residence.

I bought this house in 2007 and lived in it until late 2010 - when I bought another house which then became my main home. I have rented out the first home (that is, the one I bought in 2007) since late 2010 - however, I received mortgage interest relief for that home until 2014. I never received or claimed mortgage interest relief on the second property.

Will I now have to pay back any of the mortgage interest relief received for the first property? If so, will it be possible to claim mortgage interest relief for the property I bought and have lived in since late 2010?

Are there any other tax issues which I need to be aware of as a result of renting out a property which was once my principal private residence?

Mary, Avoca, Co Wicklow

Mortgage interest relief is provided at source by your lender and is available in respect of qualifying mortgages taken out up to and including December 31, 2012. Such mortgages are eligible for relief until December 31, 2017. The advantage of this relief is that it reduces your mortgage interest bill - and therefore, your monthly repayments - for the years that you are eligible for it.

The house which you rented out will not qualify for mortgage interest relief from the date that it was no longer your principle private residence and therefore you will need to repay that interest relief. Your new house will qualify for mortgage interest relief and you will need to apply for that relief separately.

There are important tax issues which you should be aware of if renting out a property. If you rent out your house, the net rental income is liable to income tax, PRSI and the universal social charge. Net rental income is calculated as rental income less mortgage interest (you can write 75pc of your mortgage interest on the rented property off your tax bill) and other expenses such as maintenance and repairs.

You may also be entitled to a capital allowance on any furniture or fixture and fittings provided with the house - at a rate of 12.5pc over eight years.

If you owe the Revenue Commissioners tax as a result of the rental income you have earned on your first property, this liability will need to be disclosed on your tax return and the liability paid to Revenue. Interest and late payment charges and penalties will apply if you are late paying any tax owed.

If you sell your first house in the future, you will potentially be liable to Capital Gains Tax (CGT - a tax paid on the profit earned from the sale of certain properties or asset) on the sale, as the house will not be your principle private residence for the entire period of ownership.

You do not have to pay CGT on any profits earned from the sale of a principal private residence.

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