parking someone else's money in my offset account

J

james55

My sister has about $500k that she wants to park temporarily in my offset account as she hasn't found a property to buy yet.

How does this need to be done so that the tax office doesn't think the money is income and make me pay tax on it? I will obviously have to pay it back to her when she needs the money.
 
Probably you need some sort of paperwork. So if ATO considers it as income you can show that to them and the paperwork is good if anything unexpected happens as $500k is a lot of money.
 
Well it wouldn't but I don't want any issues with the tax office asking where I got the money from and cause a hassle.
 
Singo said:
Probably you need some sort of paperwork. So if ATO considers it as income you can show that to them and the paperwork is good if anything unexpected happens as $500k is a lot of money.
Click to expand...

yeah so what kind of paperwork would be required? A signed letter saying its a loan?
 
james55 said:
How does this need to be done so that the tax office doesn't think the money is income and make me pay tax on it? I will obviously have to pay it back to her when she needs the money.
Click to expand...

You won't receive any income. You'll just be paying less interest on your loan.
 
As above.

No tax to pay.

However, things will get VERY messy if you go under the proverbial bus waiting around the corner for all of us.

Full documentation advisable, preferably by a legal person.
Marg
 
Saw this happen with a client once. The ATO asked same thing. They suggested the money was not yours and "on trust" and that there was an assessable benefit to the trust. No distirbution made by the trustee ?? Then taxed in hands of the trustee - YOU. Their position was VERY arguable. Costs a lot to fight their position + penalties + interest.

This is just a modified form of the split loans decision. ie "Save tax and pay off your home loan". Offsets dont always mean its not income was the message.

Smells and sounds like a scheme. Doing it to "save tax"? Why else ? Its a scheme without a private ruling.
 
Or even worse you are in a defacto relationship and your relationship breaks down and your ex claims she is entitled to half of the 500k as it was a gift from your sister. Could end up very nasty and messy.
 
Write it up as a interest free loan between yourself and sister.

Must be paid back on demand.

Avoids trust issue mentioned and also ownership of money.

Cheers
 
Do we really have to try and put the fear of God into people over money coming from a relative, into an offset account? I guess I better go get a private ruling for that PAYG income that I get from my job because my boss must be dodging tax by paying me wages. Honestly. A loan agreement would be prudent for other reasons, not tax ones.
 
I had a friend ;) who did the exact same thing and the sky didn't fall down, well not yet anyway!

But it is always best to consider the worst case scenario and have a contingency in place.
 
Last edited:
Gift it to a trust....:rolleyes:

There are several issues to consider here, the 5 things for starters.

Divorce - you or her
Death - you or her
De Bankruptcy
Incapacity
Tax

What would happen if you die? Your executor may say it was a gift and not a loan if not documented. Expensive litigation results

Divorce - court thinks you are making this loan agreement up...

Bankruptcy - sister is an unsecured creditor. she would probably lose money even if it was documented.

You lose capacity, your attorney or court appointed guardian takes control - disputes over loans etc.

Tax - sister will probably want an income for this. Would you pay and will it be declared.
 
The problem is advisers we do see these issues and the repercussions and legal fees involved in cleaning up these messes. A voluntary disclosure i did 2 years back involved gifts of close to 5m from mother to son . Mother hong kong resident to him an australian resident. Son also held shares undocumented in trust for mother. Shares received dividends. ATO claimed the amounts were the dividend payments to him and not gifts from the mother. They asked for documentation to prove it was a gift. Documentation to prove the shares were held on trust. None of which existed. Ending up settling for a sum i cant disclose. Now none of this applies in this case but it happens every day. As a practising lawyer terry sees nightmares every week.
 
I am a professional just like the other two gents so do have some intelligence when it comes to these issues, but Wow what a silly plan for all the reasons terry has highlighted. you just got $500 of free legal advice right there.

Your sister should put in in a high interest savings account until she finds a property.

No ifs,buts, maybes about it.
 
You must log in or register to reply here.

Similar threads

V
Deductibility of deposit interest from offset
Replies
2
Views
2K
vlvh
V
M
Using PPOR offset account for PI deposit
Replies
4
Views
1K
Jamie M
Jamie M
C
Gifting money into family trust
Replies
15
Views
12K
Terry_w
Terry_w
Pedro61
Offset loan
Replies
6
Views
2K
perthguy
P
V
did i contaminated my equity loan
Replies
9
Views
2K
veech23
V
Back
Top