Tax and SARS knowledge base
What tax applies when I receive a donation from a family member?
What tax applies when I receive a donation from a family member?
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Direct answer
Receiving money from a family member does not allow a taxpayer to decide the tax outcome from the relationship alone. Record who paid, who received, why the transfer was made, whether anything was expected in return and whether there were conditions. SARS's current Donations Tax page should be checked for the donor's administration position; the recipient's income-tax position requires the actual transaction documents.
A transfer called a gift may in fact be a loan, reimbursement, payment for services, business distribution, trust payment or an amount subject to a condition. Do not enter it as trading income merely because it arrived in a bank account, and do not exclude it without retaining evidence that supports the explanation.
What this means in practice
The best evidence is created at the time of payment. A short signed gift letter can identify the donor, recipient, date, amount, purpose and confirmation that no services, goods or repayment are required. Bank proof should match the letter. If the donor paid a supplier directly, keep the invoice and correspondence instead of pretending there was a cash gift.
SARS's donations-tax material should be checked from the donor's facts, including whether a declaration or another rule could be relevant. This guide does not calculate donations tax, determine liability, or make an exemption claim.
Large, repeated, conditional, cross-border or business-linked transfers deserve a full review. A payment may affect the donor's records, source-of-funds evidence, estate planning or a recipient's ability to explain bank deposits. Keep a contemporaneous file rather than trying to recreate an explanation during a SARS verification.
Step-by-step
- Identify the exact legal nature.
Ask whether the transfer is genuinely a gift, loan, repayment, reimbursement, support payment, service fee or business transaction.
- Create a gift letter where appropriate.
State the parties, date, amount, purpose, lack of repayment obligation and lack of goods or services supplied in return.
- Keep the payment trail.
Retain bank records, transfer reference, correspondence and any document showing where the funds originated.
- Review conditions carefully.
If the recipient must perform work, use funds for a business, make a later repayment or meet another condition, do not assume an ordinary gift treatment.
- Consider the donor's position separately.
The donor should obtain current advice on donations tax. The recipient should not undertake the donor's calculation from a generic guide.
- Preserve return support.
Keep the documentation with ITR12 records for at least five years, especially where an unexplained bank deposit could be queried.
Documents and records to keep
- Signed gift letter or loan agreement, as applicable.
- Bank statements and payment confirmation.
- Correspondence confirming purpose and conditions.
- Evidence that no services or business consideration were supplied for a gift.
- Donor documents where shared appropriately and necessary to explain source of funds.
- The recipient's ITR12, assessment and supporting file.
Important limits and exceptions
This guide does not say that every family transfer is non-taxable income or that every donation is exempt from donations tax. It does not cover divorce settlements, maintenance, trust distributions, inheritances, foreign gifts, loans or payments for a family business. Those situations need their own documents and advice.
Avoid cash gifts without a record. If cash was received, create a contemporaneous written record and retain available evidence. Do not backdate documents or invent a gift description to explain an unrelated receipt.
When to get tailored advice
Get advice for a material donation, foreign transfer, conditional gift, transfer from a trust, business-related payment, gift of an asset or a pattern of recurring support. TaxProof can prepare a clear evidence pack.