Loan From Parents For Investment

 Author: RichATO(Community Support)Community Support

ATO Certified Response4 Jan 2022

Hello @marc2001

There are two common scenarios in this situation.

The first is when parents provide a child with a monetary gift with no expectation of repayment. No tax applies to the gifted funds. However, if evidence was required, a letter or email which confirms the money is a gift would be fine.

The second is when a loan is provided, with an agreed rate of interest, and an agreed timeframe for repayment. In this case you wouldn't need to declare the loan funds as income, but can claim a deduction for any interest paid that related to investment income earned.

Your parents would declare any interest received from the loan repayments as assessable income on their return(s).

The terms of the loan are completely up to you and your parents. You may agree that the loan funds are provided free of interest, in which case there are no tax implications for anyone.

I'd recommend that you put your loan agreement in writing so that it is available to us if you are audited at any time in the future.

There is no hard limit on the amount of funds that are gifted or loaned from a tax perspective. The $10K limit in 1 year you mention is set by Services Australia. This is the limit an individual can gift for their tax adjusted income for Centrelink payment purposes for pensions and other government support payments. People who are not receiving Centrelink payments are not bound by these limits.