Author: danyal78(Initiate)Initiate 9 Dec 2025
My mother (68) is looking to sell her unit which she owns and move into a house, however I may need to loan her some money to do this. I'd like to understand the tax implications of loaning her the money.
Essentially I would like to understand what the tax implication are of me taking out a loan on my PPR of $100,000 and giving the money to her.
In simplistic form, with a bank interest rate of 6%, I would pay $6,000 interest in the first year, the loan becomes $106,000 in the second year and this will continue to compound.
Where I become unclear is that I have an investment loan currently with $100,000 in the offset. If I transfer that $100,000 to the PPR loan, technically my giving her the money is no longer costing me anything, but I have a cost because I am no longer saving 6% interest on my investment loan.
Again, if the money was in the offset of the investment loan I would be saving $6,000/year interest. This $6,000 would see my balance increase by $6,000/year and that would then compound year on year.
Interested in the best possible way I can loan my mum money, and recover my money in full to be no worse off than if I kept the $100K in my investment loan offset.
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Author: NikkiATO(Community Moderator)Community Moderator 10 Dec 2025
Hi @danyal78,
The tax implications of your loan arrangement depend on how you structure it and whether you charge interest. If you provide your mother with an interest-free loan, there are generally no immediate tax consequences for either of you - the loan itself isn't taxable income for her, and you won't have a tax deduction for the interest you pay on your borrowings.
However, your situation is more complex because you're considering moving funds from your investment loan offset account. When you remove money from an offset account that's reducing interest on a deductible investment loan, you're effectively losing a tax deduction. The $6,000 in interest you'd save on your investment loan (which would be tax deductible) becomes $6,000 in interest you'll pay on your home loan (which isn't deductible).
If you charge your mother interest on the loan, that interest income would be assessable and you'd need to declare it on your tax return. The interest rate should be at commercial rates, and you'll need proper loan documentation including the amount, repayment terms, and interest arrangements.
For family loans, it's important to keep records showing it's a genuine loan arrangement rather than a gift. This includes documenting the loan terms, repayment schedule, and any interest charges.
You should speak with a qualified tax adviser about structuring this arrangement to minimise the tax impact. They can help you work through the specific calculations and determine the most tax-effective approach for your circumstances.
