Deposit Gift Calculator South Africa
Calculate donations tax when parents gift a property deposit to a child — Section 56 tax, Section 7C loan trap, FICA reporting, and compare lump sum vs multi-year gifting vs parental surety
- Written gift letter signed by donor confirming the amount is a non-repayable gift (not a loan)
- Donor's bank statements showing the source of funds (typically 3 months)
- Recipient's bank statements showing the gift deposit received
- FICA documentation for amounts over R25,000
- Some banks require the gift to be in the applicant's account for 30–90 days before application
Understanding Deposit Gift Tax in South Africa Section 56 • Section 7C • FICA • Example
Section 56: Donations Tax
When parents gift a child money for a property deposit, Section 56 of the Income Tax Act imposes donations tax on the donor (the parent). The first R100,000 donated per tax year (March to February) is exempt. Any amount above the exemption is taxed at 20% for cumulative donations under R30 million, and 25% above R30 million.
Donations tax is the donor's liability — the parent pays, not the child. It must be paid to SARS within 3 months of the date of donation.
Section 7C: Interest-Free Loan Anti-Avoidance
To avoid donations tax, some parents loan money to children at 0% interest. SARS closed this loophole via Section 7C: if a loan is made to a connected person (including children) at below the official interest rate (repo + 1%), the foregone interest is deemed a donation subject to donations tax. The "official rate" is currently 7.75%.
FICA Reporting
Any cash transfer of R25,000 or more triggers FICA (Financial Intelligence Centre Act) reporting obligations. The receiving bank and conveyancing attorney must obtain and record proof of the source of funds. Both parent and child will be asked for supporting documentation — typically three months of bank statements showing where the funds came from.
Worked Example — R300,000 Parental Gift
Nkosi gifts his daughter Nomsa R300,000 for a property deposit. He has made no prior donations this tax year.
Donations tax: (R300,000 − R100,000 exemption) × 20% = R40,000 payable by Nkosi to SARS. Nomsa receives the full R300,000 (the daughter does not pay the tax).
Alternative: Nkosi gifts R100,000 this year, R100,000 next year, R100,000 the year after. Zero donations tax — but Nomsa must wait 3 years to buy. She will need a gift letter each year confirming non-repayable transfer.
Frequently Asked Questions
Do parents pay tax when gifting a deposit to their child in South Africa?
Yes. Under Section 56 of the Income Tax Act, the donor (parent) pays donations tax on any amount gifted above the annual R100,000 exemption. The rate is 20% on the taxable portion. The child (recipient) does not pay any tax on the gift received. Donations tax must be paid to SARS within 3 months of the donation date.
Can my parents loan me money for a deposit instead of gifting it?
Yes, but there is an important catch. Under Section 7C of the Income Tax Act, loans to connected persons (including children) at below the official interest rate (currently 7.75%) trigger a deemed donation equal to the notional interest foregone. This deemed donation is subject to donations tax. To avoid Section 7C, parents should charge at least the official interest rate. Additionally, banks may not accept a loan (repayable) as part of the deposit — they require the deposit to be genuinely non-repayable.
Will a bank accept a parental gift as my deposit?
Yes, South African banks accept parental gifts as deposits, provided the gift is properly documented as non-repayable. You will need a signed gift letter from the donor confirming it is a gift not a loan, three months of the donor's bank statements showing source of funds, and proof of receipt. Some banks also require the gift to be in your account for 30–90 days before the application date.
Is a gift between spouses subject to donations tax?
No. Donations between spouses are fully exempt from donations tax under Section 56(1)(b) of the Income Tax Act, regardless of the amount. This exemption applies to legally married spouses, whether in community of property or with an antenuptial contract. Note that this exemption does not apply to partners in a customary union or cohabiting partners (lobola arrangements are handled separately).
Can parents become sureties on the bond instead of gifting the deposit?
Yes. Parents can stand surety for a child's home loan, which allows the bank to consider the parent's income and assets to improve the child's affordability profile — potentially allowing a higher bond without a deposit. The risk is that the parent is jointly and severally liable for the full loan amount if the child defaults. The parent's credit bureau profile will also reflect the bond. This strategy avoids donations tax entirely.