The Government has confirmed that gift duty will be abolished from 1 October 2011.
In abolishing gift duty, the Government has said that gift duty no longer raises any significant revenue and imposes a high level of compliance costs on the private sector.
Gift duty repeal is expected to reduce Government revenue by $1 million a year and will provide administrative savings of $430,000 annually (this amount will be returned to the Crown). The repeal is estimated to reduce compliance costs imposed on the private sector by $70 million each year.
This means that gifting programmes, where debts are progressively forgiven by the donor at a rate of $27,000 every twelve months, will no longer be necessary to avoid gift duty. This would also result in reduced compliance costs as annual deeds of forgiveness will no longer be required to be prepared and filed.
However, until 1 October 2011, it is vital to closely monitor your current gifting program as the current rules will still apply.
Hayes Knight will keep clients informed on the specifics of how the abolition of gift duty will be administered once further details are released.