G'Day,
I am short of $20,000 to settle a land purchase for an investment property. My friend is happy to help me out and give me $20,000 as a gift.
Can you please provide your valuable suggestions in terms of tax? What to do/not to do?
Edited….
I would surely be giving him back at some time later (whenever I want). It is a kind of unconditional lending/gift. He is just helping me to get over the line to cover shortfall for a land purchase.
Cheers
I gifted a close family friend £15,000 to get out of debt, pay off overdraft and survive when hit rough patch in between jobs. They paid it back in full just over a year later. Families and close friends do do this for people they trust. It's not that uncommon I think. (We did write a small IOU note and both signed it)
Never looked into the tax implications though, I'm sure such 'gifts' are taxed heavily. Interesting post.
gifted
IOU note
Is like an oxymoron if they were next to each other.
no you gave them a loan.
it would've been a gift if they hadn't repaid you.
Fair point, you're completely correct. Poor wording on my part.
I gift money to my friends if they need it, but I can't imagine having $20,000 to gift 😅
I dont see any tax complication here.
if you worry ask your friend to give you cash and you deposit the money or bank cheque.
I hate taxation law, but this what google says https://community.ato.gov.au/t5/General-tax-questions/Cash-g…
Or why not ask Ato?
If it isn't a gift and you are doing something to earn it, you may need to declare it accessible income. Depending on the nature of how you earnt it.
you are doing something to earn it
What are you implying mate? ;)
Friends with benefits…
Just get your mate to deposit to the settlement account directly.
This has to be the ATO posting this question. Reading all our answers & seeing if anyone will come up with a genuine answer around it so they can bust the user.
Who gives their friend $20k?!
My friend! A friend in need is a friend indeed :)
A friend in need is a friend indeed :)
But do take note of Greeks bearing gifts. :(
But a friend with weed is better.
…
A friend who's dressed in leather.
nah friends with benefits are the best….not that I have any friends… ☹
There is no "need" in investment properties though, it's always a "want".
id give my best mate that if he needed it.
he would be my bitch for a while
Yeah but not for something like to purchase an investment property. If they need $20k to have surgery or something, sure
I thought (perhaps incorrectly) that all non-cosmetic / essential surgery would be covered by medicare (in a public hospital)
cover shortfall for a land purchase.
Make sure you can service the loan because land doesn't generate any rent.
Leave that to next post.
Looking forward to seeing a post in 3 weeks, 'I loaned my friend $20k for their property and they defaulted straight away. What do I do?'
If you are short $20k for a land purchase for an investment, you can't afford to invest. Don't go through with it.
Well it really depends. The OP is at the settlement stage so no doubt s/he has already paid x% deposit and will likely lose that PLUS any detriment it has caused the vendor (e.g if the property sells less than the original contract price).
Now, if the OP has a standard 42 day settlement then I would agree with you, the s/he may not be able to afford this purchase given the recency of contract exchange.
However, if the OP has had a much longer settlement period - and it can happen especially with off the plan purchases - then I would be giving the OP the benefit of the doubt. Two years ago, you could borrow easily 20% or more than what lenders are willing to give you now, so I'm giving the OP the benefit of the doubt here.
Thank you, good comment. I've learned from you in this.
please have this documented as to whether this is a
a gift (not intended to be paid back)
a loan (intended to be paid back at what rate)
you don't want him coming back in X years saying you hold X percent of the property on trust for him
exactly.
where do you find such friends? my friend would not even buy me a packet of chips
Friends made through Ozbargain?
Gift? Loan? Equity?
Be very clear what this is going to be.
Does your friend need that 20k cleaned?
A complication might be for your friend if they are on or about to on Centrelink/pension benefits and they are trying to reduce their assets to stay under the threshold.
Friends problem
Worse problem would be if friend goes bankrupt and trustee claws back transfer from friend who now needs to sell the place to get 20k
Or worse again when friends life goes pear shaped when they are charged with a crime and need $20k for bail to stay out of gaol.
Where can I sign up to be your friend's friend?
there are no tax consequences. gifts are not taxable in australia.
An interest free loan also has no tax consequences.
for the sake of your friendship, clarify as a matter of certainty, the terms of the 'gift' or loan. Is there an expectation that you'll pay back? Over what timeframe? At what point? Is your friend going to get pissed if you haven't paid him/her back but you go on a $5-10k holiday? Resentment can brew slowly until it's all far too gone.
There is nothing you need to do or are liable for with regards to tax when receiving a monetary gift from a friend.
I do wonder what possesses people to come onto a bargain hunters website to ask for tax advice. Wouldn't you just google "tax gift ato"….(20 seconds pass)….oh look, here we go:
https://www.smh.com.au/money/ask-noel-is-there-any-gift-tax-…
If you are also borrowing to fund your purchase your bank may have some questions.
You're getting a $20k 'gift'?! Which episode of JUDGE JUDY will you be on?! 🤔
Trial By Kyle, Ten Network?
Wearing OzB T-Shirt…
you forgot Oprah
Any income derived from the $20,000 is subject to income tax
…you'll only be taxed the $2000 though, which is what? $200…..?
It’s a loan mate, not income or a gift, so no tax.
Thanks everyone for your valuable feedback. Yes - it is indeed an unconditional interest free loan.
"$20,000 gift from a friend to purchase investment property"
you must be a politician.
who 'gifts' 20k?