Skip to content

Donations tax: What you need to know about gifting the deposit on a home

Parents can help their children acquire property by gifting them funds for a deposit, but a gift in excess of R100 000 will be subject to donations tax.

Donations Tax

Article summary

  • Parents can help their children get on the property ladder by gifting them the deposit for a home.
  • If this gift exceeds R100 000, it will be subject to donations tax.
  • Donations tax must be paid by the end of the month following the month during which the donation takes effect, or the donor and donee will be held liable.

Investing in your first home is an exciting event, but for many first-time home buyers, it’s a dream that remains out of reach. That is, unless their parents — wanting to give their children the best chance of success and for them to experience the joys of owning their own home — decide to step in and help their children get on the property ladder.

Donations tax: What it means for parents helping their children purchase property

In many cases the first-time home buyer will have monthly income that can help them cover the monthly repayments, but will lack the funds to put together a deposit. This is where parents can help out, by gifting the deposit to their children, improving their chances of home loan approval and of gaining favourable interest rates.

But you need to be aware that this gift will be subject to donations tax. Here’s what you need to know:

  • The donation tax rate is 20% (on donations below R30m).
  • Donations by natural persons not exceeding R100 000 per year are tax free.
  • The donation takes effect when all the legal formalities for a valid donation have been complied with.
  • Donations tax applies to any person (for example: individual, company or trust) that is a South African resident. Non-residents are not liable for donations tax.
  • If the donor fails to pay the tax within the payment period, the donor and donee are jointly and severally liable.

How do I pay donations tax?

After making the donation, complete the donations tax return and submit it to your nearest SARS branch together with your proof of payment.

What is the payment period for donations tax

Donations tax is payable at the end of the month following the month in which the donation was made.

Can the gift come in the form of a loan?

This will exempt it from donations tax, which only applies if nothing is given in return for the gifted funds. If the parents give their child an opportunity to treat it as a loan and pay it back over time, this offers flexibility with regards to payment terms. For example, parents may choose to allow their children to pay back the interest after the initial lump sum has been repaid.

Formalising the agreement

When deciding which path to follow, it is important that all parties involved are comfortable with the arrangement. It is advisable to draw up a formal document to ensure all family members are on the same page as to whether the money is a gift or a loan, and what the terms of the agreement are, for example what interest will be paid and when the money will be paid back.

While it might seem a bit extreme when dealing with family, it is important that this is drawn up and signed by all parties so that there are no misunderstandings down the line.

Once it’s time to take your first step on the property ladder, with or without the help of your parents, bear in mind that ooba Home Loans offers a range of tools that can make the home buying process easier. Start with their Bond Calculator, then use the ooba Home Loans Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.

Get pre-approved for a home loan in just 2 minutes

Get pre-approved

Ranked #1 in Financial Services on Hellopeter


Average rating of 4.82 from over 3 000 reviews

Simply The Best

Ooba home loans services are simply the best. My Consultant Bianca Dancer was so hands on and helpful from the get go. She guided me through the entire process and put me at ease being a first time buyer. I highly recommend their services.

Tia J

Excellent Service

Jay Govender and Maleshini Reddy from OOBA provided outstanding assistance and guidance in securing our home loan. Response times were excellent and they were professional and friendly.

Brice G

Bond Application

Estelle Vorster was really helpful in securing the best deal for my home loan, she not only negotiated a lower interest rate she went as far as securing 50% discount on the transfer costs.

Butana M