A particularly common scenario today, is seeing a couple wanting to enter into the property market and there way of doing so being supplemented by a cash gift from one party’s parents, often in the vicinity of tens if not hundreds of thousands of dollars.
The gift may be used to supplement the deposit, to cover certain expenses e.g. stamp duty, or to reduce the overall mortgage amount. Regardless of how it is applied, it is imperative to consider the legal and financial implications of providing such a gift, including what happens if the relationship breaks down and the house needs to be sold and is it really a gift or a loan?
It is common in this scenario for a dispute to arise about the characterisation of the funds. In other words, the parties may wish to argue that the funds were not a gift but actually a loan, and ought to be repaid as part of the property settlement (if the couple has separated).
In Australia, the relationship of parent and child gives rise to a legal presumption that money advanced to the child is intended to be a gift unless there is evidence to the contrary. Evidence to support that position may be in the form of a Loan Agreement, which needs to meet certain legal requirements, and the circumstances of the advancement would need to support that position such as repayments of the principal loan amount or interest accrued.
In circumstances where the monies are characterised as a gift, the party who received the gift from their parents can claim it as a financial contribution that they made to the relationship.
Depending on a number of factors such as:

– the amount of gifted monies;
– when it was received and how it was applied;
– the length of the relationship; and
– other financial contributions made by the parties;
the party who received the gift may be able to claim that they ought to receive an adjustment in their favour in the overall division of property due to their contribution of the gifted monies.

It is also possible to enter into a private Financial Agreement, made pursuant to the Family Law Act 1975, whereby the party’s agree to determine how the gift will be treated in the event of separation in the future.

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