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What is the limit for tax free donations?

Posted 26 June 2013

Hi Tim

My girlfriend sold a house she inherited from her deceased mother and would like to split the income with her sister. The amount is approx R500 000, is there a way to transfer the money as a lump sum to her sister tax free?

An accountant advised us to "loan" her sister the whole amount and then to pay off the loan in lumps of R100 000 per year to avoid the 20% donations tax, but every year she needs to complete a declaration together with her tax form submission. Is this the only solution? Is there an easier way?

TaxTim TaxTim says:
26 June 2013 at 21:40

This would be the best solution, but it could give rise to interest on the loan which would be taxable in her hands if it were more then R23 800 per annum so be mindful of that.

Are you referring to a declaration for Donations Tax?

Stef says:
27 June 2013 at 8:34

Hello Tim

Thank you for the answer and yes I was also referring to a declaration when filing a tax return to SARS. In the mean time we found out that we can do an interest free loan to the sister, which would not incur any interest. I assume this would be the way to go.

TaxTim TaxTim says:
27 June 2013 at 14:13

Yes, that would work perfectly. If you can do an interest free loan and donate it off over 5 years, it would be the best possible route to follow.

Stef says:
27 June 2013 at 18:36

Thank you, Tim. Great feedback and answers, much appreciated.

TaxTim TaxTim says:
27 June 2013 at 19:42

Only a pleasure, glad we could assist!

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