Where a gift from a related overseas entity is used to fund a taxpayer’s business or to acquire income producing assets, appropriate supporting documents should be kept by the taxpayer that shows the amount received is a genuine gift.
Depending on the nature of the gift, the supporting documents may include:
🔸 any contemporaneous declarations the donor has made in their country of residence about the nature of the amounts transferred;
🔸 an executed contemporaneous deed of gift prepared by the donor;
🔸 formal identification of the donor (such as a copy of their photo identification from their passport or identity card);
🔸 a certified copy of the donor's will or distribution statement for the estate;
🔸 a copy of the donor's bank statements showing the gift and the donor's wealth *before* they made the gift;
🔸 financial records reflecting the donor's transfer to the taxpayer.
(This list is non-exhaustive and whether a document is appropriate will depend on the circumstances of the gift).
The ATO will not necessarily be satisfied that an amount has been correctly characterised as a genuine gift merely because the taxpayer has provided supporting documents.
Should there be uncertainty about whether an amount is a genuine gift, the ATO:
🔸 will evaluate the taxpayer's evidence together with other available evidence to determine the character of the receipt;
🔸 may also make further inquiries to verify information and documents provided;
🔸 will form a view based on all information and evidence made available to it (not just the evidence provided by the taxpayer).
In our next post in this series, we look at appropriate records where loans are made by related overseas entities which are used to fund a taxpayer’s business or to acquire income producing assets. - Stay tuned!
You must seek appropriate advice to ensure that you keep contemporaneous records suitable for your circumstances. The information provided here is not to be relied upon as legal or accounting advice.