Lending to a friend for offset account returns.

Discussion in 'Accounting, Tax & Legal' started by goponcho__, 6th Feb, 2019.

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  1. goponcho__

    goponcho__ Well-Known Member

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    So, i have a friend who has no PPOR, getting minimal interest in a savings account say 2.5% which is then taxed at 48.5%.

    He is wanting to loan me money so i can sit it in my offset account against my PPOR, which has a interest rate of 4% currently. Would not have to pay tax on this return either as it is merely reducing interest payments.

    From a tax perspective, is this fine for him to loan me say 100k, transfer account to account, and then i transfer him back a later date?

    Do i need a loan agreement?

    Please disregard issues with the inherent risk of my friends investment itself - eg unsecured loan, me leaving the country, me being sued.
     
    Last edited by a moderator: 6th Feb, 2019
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  2. goponcho__

    goponcho__ Well-Known Member

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    Thinking more about this, would my friend have to pay tax on any amount he receives back in excess of the original loan principal????
     
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  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Plus Member

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    Yes it is fine. You don't need a loan agreement as you are the borrower, but he should certainly ask for one in case something happens.

    If you pay him money for this it would be interest and taxable in his hands.
     
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