Gift duty is a charge on any gifts over a certain value that one person makes to another. The person who gives the gift is liable to pay any gift duty due.

For gift duty purposes, a gift is something given in either of these situations:

If something of lesser value is given in return for a gift, the value of the gift for gift duty purposes is the difference between the two values.

These items can all be gifts:

A gift of any property which is in New Zealand is liable for gift duty. In addition, a gift of property which is outside New Zealand is liable for gift duty if the giver is a New Zealand resident for income tax purposes. In this situation, there may be a rebate for any gift duty that was paid overseas.

There is no gift duty payable if the value of all gifts in any 12 months is less than $27,000. As soon as the gifts that one person makes in any 12-month period add up to more than $27,000, that person will have to pay gift duty.

This table shows the rates of gift duty.

Value of gift       Rate of duty

$0 to $27,000       Nil
$27,001 to $36,000  5% of amount over $27,000
$36,001 to $54,000  $450 plus 10% of amount over $36,000
$54,001 to $72,000  $2,250 plus 20% of amount over $54,000
Over $72,000        $5,850 plus 25% of amount over $72,000

In some cases, gifts must be recorded with Inland Revenue even if they are not liable for duty. For example, you must fill in a Gift statement (IR 196) if you make gifts with a combined total value of over $12,000 in any 12-month period. You can download an IR 196 from the IRD Online Library on the IRD website.

Often, property that is being given will have to be valued for gift duty purposes to work out the amount of duty payable. These are the valuation methods that are acceptable.

Land

Other property
The giver may have to provide a valuation that is satisfactory to Inland Revenue.

When several gifts are made within 12 months

If one person makes several gifts within a 12-month period, the value of the gifts must be added together to work out the gift duty. The duty on the total gifts is then apportioned to each of the gifts included. The 12-month period includes the day on which the gift was made.

Value of the gift when the giver retains an interest in it

A person who makes a gift may reserve an interest in it for themselves. For example, a parent may gift a home to a child, with the reservation that the parent will live in the house until they die.

In some cases when there is a reservation, the gift may not be considered to be a true gift, so gift duty may not be charged.

There are no hard-and-fast rules about what does or does not count as a gift when the giver retains an interest in it. If you intend making such a gift, you'll need to check with Inland Revenue to find out if gift duty is payable.

A gift potentially becomes liable for gift duty on the date on which it becomes complete. Generally, a gift is complete when the giver cannot take it back. This will happen at these times for various types of gifts.

Cash
When physically handed over.

Cheque
When cashed (until then it can be stopped).

Land
The earlier of these two dates:

For a gift of land that creates a valid trust, the gift is complete on the date the trust is created.

Shares
As for land, except that the document is registered by the company.

Other goods
When the goods are handed over, or there is a deed of assignment.

Debt release and forgiveness
When a deed of release or forgiveness is completed.

These types of gifts are not subject to gift duty:

An exempt gift does not count towards the $27,000 of gifts that a taxpayer can make in a 12-month period before being liable for gift duty.

Anyone who makes a gift must fill in a Gift statement (IR 196) if:

You can download an IR 196 from the IRD Online Library on the IRD website.

Within three months of making the gift, the person must complete the IR 196 statement and send all copies to Inland Revenue in Christchurch. Be sure to include all supporting documentation with the gift statement, such as the deed of reduction of debt, or valuation of property.

When the IRD receive the IR 196 form, they send you an assessment if you are liable to pay gift duty. They also return one copy of the IR 196 form to you once it is checked.

When you make a gift that is subject to gift duty, you must send a gift statement to Inland Revenue within three months of the date of the gift.

Gift duty must be paid within six months of the date of the gift, regardless of whether the IRD has sent you an assessment.

If the duty is not paid within this time, an initial late payment penalty of 5% is added to the duty payable. A further 2% incremental penalty is payable for each month after the initial late payment penalty is charged.

In addition, interest will start from the day after the due date for payment of the gift duty until all interest, duty and penalties have been paid.

If you disagree with a gift duty assessment, and the IRD does not accept that their assessment is wrong, you must use the disputes resolution process. This process has certain steps that you must follow.

These steps are outlined in the brochure If you disagree with an assessment (IR 778). If you are considering disputing an assessment, this brochure helps you identify what action to take.

For full details about the disputes process, you can download a copy of the booklet Disputing an assessment from the IRD Online Library on the IRD website.