Date: 24 September 2026
By Cameron Cowley, Special Counsel Tax & Legal, Roberts + Morrow
For many parents, helping an adult child buy their first home feels like a natural thing to do.
Perhaps you have built up savings, paid off your own home or reached a stage where you would rather see your children benefit from some of their inheritance now, when they need it most.
But if you are considering handing over a substantial amount of money, there is an important question to ask first:
Is the money a gift – or is it genuinely a loan?
The distinction can become particularly important if your child’s circumstances change in the future.
Consider this scenario
Mum and Dad want to help their daughter Lucy, purchase a home.
They provide her with $200,000 towards the deposit. Lucy is married to Fabio.
Mum and Dad intend for the $200,000 to remain their money and ultimately be repaid. But what happens if Lucy and Fabio separate?
If Mum and Dad want the money to be treated as a genuine loan rather than a gift, simply saying “Lucy knows she has to pay us back” may not be enough.
The arrangement needs to look and operate like a real loan.
A family loan should be documented
At a minimum, a family loan should be recorded in a written loan agreement and signed by the parties.
Importantly, it should be a genuine legal arrangement rather than an informal family understanding.
What happens after the documents are signed matters too.
The parties need to comply with the arrangement because, if the nature of the loan is questioned later, its history may be examined. The lender may need to demonstrate that the money was genuinely advanced as a loan rather than given as a gift.
Keeping appropriate records of amounts advanced under the loan is therefore also important.
What makes a family loan stronger?
For families wanting greater protection, there are several ways a loan can be structured more robustly.
Security can be important. A mortgage over property, for example, can provide significantly stronger security than relying on an informal arrangement.
The terms of the loan should also resemble a genuine commercial arrangement. Depending on the circumstances, that could include:
- an interest rate;
- repayments of principal and interest;
- a defined loan term;
- an understanding that the debt will not simply be forgiven; and
- separate legal representation for the lender and borrower.
The appropriate structure will depend on the family and the circumstances, but the underlying principle is the same: if you intend the money to be a loan, your actions and documentation should support that intention.
When family loans can become problematic
Problems can arise when there is a mismatch between what the family says the arrangement is and what actually happens.
For example, a purported family loan may be more difficult to establish where no repayments are ever made, or where repayments are merely nominal, such as $100 each year.
Loans that are simply “repayable on demand” can create their own issues over time, including questions around statutory limitation periods.
Families also need to be careful about what is disclosed when the child applies for finance. A family loan should not be hidden from a bank, and declarations made about assets and liabilities in lending applications need to be accurate.
Helping your family while protecting your position
Helping your children financially can be enormously rewarding. But when the amounts involved are significant, it is worth thinking beyond the immediate purchase.
A properly structured arrangement can help provide clarity for parents, adult children and their partners – and potentially prevent much more difficult conversations later.
Before advancing a substantial amount of money to a child or other family member, speak with your legal adviser about what you are trying to achieve and how the arrangement should be documented.
Thinking of helping your children with a property purchase or other significant financial commitment? The Roberts + Morrow Legal Solutions team can help you understand the options and put an appropriate structure in place.
Article written by Cameron Cowley, Special Counsel – RMLS
