Brainstorming problems with regular gifts from friend
December 2, 2011 9:03 PM Subscribe
Off the top of your head, what are the potential pitfalls with a friend giving me a regular gift of money?
posted by anonymous to work & money (8 answers total) 1 user marked this as a favorite
I know you are not my tax lawyer, and I will be consulting one, but since they are expensive and (I assume) bill by the hour, I'd like to think this through as much as possible first.
I have lost my job, and am unemployed. I have a chance of another position materialising (from my old employer) early next year. Meanwhile, a good friend and former colleague who draws a salary from my former employer has offered to make me regular gifts of the amount I was earning. Basically, the friend is independently wealthy and does not need their own salary. They also do not like being wealthy and prefer to give away as much money as possible. They live simply and frugally by choice.
The friend made me the offer recently that they would just pass on their post-tax salary payments to me each week, until I found another job. Because I was worried about potential weirdness in the friendship, and because it seemed a strange idea, I said no. This was a few weeks ago.
Today another person in my social circle said they had been approached by an "anonymous donor" who would like to support me until I find work. The deal is basically what the previous friend was offering. So it is pretty clear who the "anonymous donor" is, but somehow I am more comfortable with this situation.
I am thinking of accepting. I am in Australia. Gift tax does not apply on true gifts, but one of the metrics used to determine whether something is really a gift is whether there are regular payments, and another is whether there is an employment relationship. I worry that since the probable ultimate source of the money is a former colleague, and since I will continue to do some unpaid work for my former organisation, this could be construed as an employment relationship, even though the friend has never been my boss in any sense (and works on a different project). This is something I will ask the tax lawyer about.
My question is really whether there are other considerations I should be asking the tax lawyer, or any other lawyer, or if there are maybe better set-ups for this situation than the middleman friend basically handing over an envelope of cash every week.
I would absolutely consider this a loan (even though the friend would not) and would be glad to pay it back or pay it forward if and when I am able.
In case anyone is wondering, the friendship is purely platonic: we are both the same gender, and heterosexual.