Hey all, Just wondering if I had a family member that had done particularly well out of the recent boom in Sydney and wanted to give me $300k how best I would go about this? 1/ would it just be a gift and thank you very much scenario or 2/ would i just say it was a temporary loan (that I may or may not ever pay back). Thanks!
The goal would be to simply get the 300k off the family member into my bam account without having to pay any tax and use it to pay down PPOR, buy further IP's, go on holidays or whatever.
Terry will be best to answer as he is the lawyer. I would think it would be best to gift if the other party didnt ever want the money back and document it accordingly as a gift. Issue with a loan which is never paid back is that party might die, wife or children claim it was an interest free loan repayable on demand, and then ask for the money back and take legal action to do so.
Depends. If advising you then a gift. If advising the other party. Think about it jointly and consider some asset protection and tax strategies. I have written 2 threads on this in the legal forum (parents) and there was another recent thread.
I went through your tips Terry and read the one about adults helping out children. I didn't realise the index was there it's extremely informative thanks. In this case it would be a brother helping me out. Assuming it is a $300k gift and we document it is it left at that? Like the ATO aren't going to make me pay tax on it as being income tax or some other rort they usually apply? I thought I read somewhere there was a maximum 'giftable' amount?
No tax on gifts, unless it is income disguised as a gift. Consider the issues which could arise on death of you or him bankruptcy of you or him family law dispute of you or him etc for example if you were to end up bankrupt the money would be lost, but if it was a loan from him he would be a creditor. If you gave a 2nd mortgage he would be a secured creditor. and take priority over everyone else except the first mortgage holder of that security. But this won't be good if he were to go bankrupt as your loan would be payable to his creditors. A possible way around this may be for him to gift to a discretionary trust which could then give you an interest free loan. But there are many other issues with this which need to be considered. Any gift is also subject to the clawback rules of the bankruptcy act and the conveyancing act and any loan is subject to the limitations act. The benefit of starting with a loan is that it can be forgiven, but a gift cannot be converted into a loan easily.
