simple loan from relative

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RexS9999

Active Member
My father in law in a third world country wants to help me buy a house in a developed country. He has a simple loan agreement made up. He wires the money to me, say $75 K USD. I go to the bank with a copy of the loan contact. Explain where the money is from and the purpose. In a situation like this will the tax authorities in my developed country want to see bank statements from my father in law showing where he got the money? There are wealthy people in the third world. Has anyone done anything like this?
 

Martin Everson

Offshore Retiree
Staff member
Mentor Group Gold
Elite Member
My father in law in a third world country

Which third world country I would ask first? Money coming from certain high risk third world countries especially large amount in USD are scrutinized under a microscope. So if money came from Nigeria, DRC etc you may get asked questions.

He wires the money to me, say $75 K USD. I go to the bank with a copy of the loan contact. Explain where the money is from and the purpose.

Totally wrong order. You go to bank first and explain the situation, money, source, purpose etc. Then if all is good with bank then you ask him to wire money.

In a situation like this will the tax authorities in my developed country want to see bank statements from my father in law showing where he got the money?

If payment is stopped they will ask source of funds and whether they will require supporting paperwork is another question.

See the below anyway.


I would speak to your accountant to make sure everything is done correctly and enough info is kept to please ATO.
 

TacitusKilgore

Active Member
Keep in mind the loan with your father-in-law will almost certainly reduce your borrowing capacity in Australia since the bank takes that into account as existing debt.

As you're probably aware it's unlikely to be considered "income" since it's actually a loan and there is an agreement in place explicitly confirming so.

As others have said having documents to help you wouldn't be a bad thing. It's possible -- and I'm not sure of the likelihood of this happening -- that the bank will ultimately want to "look through" the loan and determine the ultimate source of those funds. In other words, were they originally obtained illegally by your father-in-law, etc.

Good luck!
 
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