You will have heard by now that Gift Duty is to be abolished as from 1 October 2011. However for people who have established Trusts, with one of the reasons being to assist with them qualifying for the Residential Care Subsidy, they may wish to continue with their Gifting programme at $27,000 per annum.
The reason for this is that, the Government, under the Social Security Act 1964, and the regulations established in accordance with that Act, hold that the following sums will be taken into account when determining whether a party is eligible for that subsidy.
A. Gifts in excess of $6,000 per annum made in the last five years prior to application for the subsidy.
B. Gifts in excess of $27,000 per annum made in any year prior to the above five year period, ie. any such gifts made more than five years prior to the application.
Please note that in relation to gifts made in excess of $27,000 in any period more than five years prior to the application, there is no limit as to how far back these gifts, in excess of $27,000, will be considered.
It is possible that, as from 1 October 2011, a person may write-off any debt owing to them by their Trust. However, if one of the reasons for establishing the Trust and transferring assets to it, was to assist with qualifying for the Residential Care Subsidy, then that person should consider continuing to gift at $27,000 per annum.
For some people there will be quite a number of reasons why they established a Trust and transferred their assets to the Trust, for example:
1. Estate planning reasons.
2. General asset protection reasons, especially where the person is in business.
3. Relationship property claim protection, indeed - qualification for the Residential Care Subsidy.
The reasons for Trusts are varied and numerous, and a decision in each particular circumstance needs to be considered.
We believe that the on-going management of Trusts, including annual meetings, confirmation of strategies, correct and timely minute recording of decisions will be crucial to ensure Trusts will meet future tests of compliances.