Borrowing from oversears relatives to invest in Australia ?

Long story short:

Have some relatives overseas. They have some money in their bank accounts earning 1.xx% pa interest. They are willing to lend to me at 3.99% pa interest charge. The relationship is close enough to not require the property as security and both understand the currency risks. Basically they will lend me in AUD. I repay interest to them in AUD and at maturity of 10 years, I pay them the outstanding principal back in AUD as of today's exchange rate. I keep the profit or loss. Is it a good deal ? For me it is just like borrowing from a local bank.

Is there any ATO or government things to prevent me from doing this ?

 

The risk is to them.
great deal for you

 

Do you want to claim the interest? Tax Tip 37: Withhold tax on interest you pay to overseas entities

 

Terry:
Never thought about it. What are the implications if I do or if I don't ?

 

It's a real pain in the ass in general. You will need to withhold tax on the interest which is just a really annoying administrative pain in the ass.

You also want to make sure that you do everything above board and at arms length or you will quickly come under scrutiny for transfer pricing given they're family members (different countries greatly impact the risk here).

It's still a viable option, just speak to your accountant and make sure you're doing everything right or you can find yourself on the wrong side of the coin from the ATO's perspective and lose your deduction or worse. There is nothing illegal about what you propose, just the administrative process that goes with it is a pain in the ass.

 

Reading your response, it does feel it is really 'pain in the ass' !

 

deductibility of interest