Can my daughters inherit my home tax-free when I die?
Your questions answered
Query: I am over 66 and have two daughters living with me who do not own any other property. Can I leave my home to both daughters without them paying inheritance tax if they hold onto the house for six years? Or can the house only be left to one of my daughters tax-free? John, Co Wexford
Answer: With the dwelling house exemption, you may be able to pass your house on to your daughters tax-free when you die - as long as all of the following conditions are met.
First: the property must have been occupied by you, the disponer, as your only or main residence at the date of your death. Second: the property must have been continually occupied by your two daughters as their only or main residence throughout the period of three years immediately preceding the date of the inheritance.
Third: it must be the only dwelling house to which your two daughters are beneficially entitled to, or have a beneficial interest in, at the date of inheritance of that dwelling house.
Fourth: your daughters must continue to occupy the dwelling house as their only or main residence for a period of six years following their receipt of the inherited property.
In most cases, the dwelling house exemption can now only be used for inheritances. The only way that this exemption can be used to pass on a property tax-free as a gift to a child while the parent or parents are still alive is where the child is a dependent relative (due to a physical or mental infirmity).
It is worth looking into inheritance tax thresholds in general, so that you know where you and your family stand in relation to the tax due on any gifts or inheritance. The threshold depends on the individual's relationship to the person who gave them the gift.
There are three group thresholds. The first group threshold, Group A, is where the person who receives the gift is a child of the disponer. It is this threshold which is relevant to you and your daughters.
The Group A threshold was increased to €320,000 for inheritances and gifts received on or after October 10, 2018. So even if your daughters are not able to benefit from the dwelling house exemption, each of them still has a €320,000 tax-free threshold - which means each daughter can get gifts or inheritances worth up to €320,000 tax-free from you over her lifetime.
In addition, your daughters could avail of the small gift exemption, which allows any individual to receive a gift up to the value of €3,000 from any person in any calendar year without having to pay gift tax. The small gift exemption of €3,000 does not reduce either of your daughter's group tax-free threshold, which is a lifetime threshold.
Query: I've been hit for emergency tax - apparently because my employer had my wrong employment details on the new PAYE system. How do I go about getting a refund of the emergency tax? Lisa, Co Roscommon
Answer: An individual will be taxed on an emergency basis if they have not provided their employer with a PPSN (Personal Public Service Number) or if they have not registered their first employment with the Revenue Commissioners.
So if you have worked in Ireland previously, you should provide your employer with your PPSN.
Using your PPSN, your employer must request a Revenue Payroll Notification (RPN) in order to make the correct tax deductions from your pay. Once the Revenue Commissioners issues a cumulative RPN to your employer, it will be able to take you off emergency tax. Your employer should then refund any tax that you have overpaid on your next pay day.
If you leave your job before getting the refund, you can claim a tax refund from the Revenue Commissioners by completing the relevant tax claim forms.
If starting your first ever job, you must register your job with the Revenue Commissioners - and an RPN will then be available to your employer. This will allow your employer to make the correct tax deductions from your pay - and for you to be taken off emergency tax.
Australian tax refund
Query: I've come back to Ireland after spending five years working and living in Australia. Am I due a refund for the tax I paid in Australia and if so, how would I claim it? Sarah, Co Waterford
Answer: Australia's tax year ends on June 30, at which point anyone who has worked in Australia the previous year needs to file a return. Many Irish people who have, or are currently working, in Australia are simply unaware of this obligation. What's more, many Irish workers do not realise that you can go as far back as 10 years when it comes to claiming any tax refunds that might be owed to you from your time working in Australia.
There are four primary cases in which people could find themselves getting a tax refund from Australia. Firstly, major changes to Australia's tax regime were introduced in January 2017, which meant that working holidaymakers can no longer be considered 'residents' in Australia for tax purposes and so must now pay tax at 15pc on every dollar they earn. However, these changes have not been implemented retrospectively, meaning anyone who worked in Australia in the eight years prior to the changes (that is, 2009 to 2016) and who has since returned home could still be eligible for tax rebates based on the old regime and the historic rates of tax.
Secondly, those who worked in Australia anytime between 2009 and 2016 could also be eligible for a superannuation refund - as a result of paying into Australia's auto-enrolment pension scheme. These refunds are usually about 62pc of the total fund accumulated.
Thirdly, anyone who worked in Australia after January 2017 could still be eligible for a refund for a myriad of reasons - such as overpayment of tax, refund of emergency tax and so on.
Finally, post-January 2017, workers could also be eligible for a superannuation refund - albeit at a lower rate (about 35pc of the total fund accumulated).
You have a number of options when it comes to filing your tax return. One is to simply go online through the Australian Tax Office (ATO) website and submit the return directly. You can also submit a paper return to the ATO by mail.
When filing your return, you will need records of your employment, bank details, a tax file number and any other documentation you received while working in Australia - such as payment summaries, receipts, invoices and contracts. Generally, you need to keep these documents for five years from when you lodge your tax return in case you are required to substantiate your claims. You should also note that there are a number of deductions you can make when filing a tax return to reduce your overall tax liability. These include vehicle and travel; clothing and laundry; home office costs; tools, equipment and other assets.
- Eileen Devereux is commercial director with Taxback.com
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Sunday Indo Business