Quick answer:
Is money from a family member treated as a loan in a property settlement? Only if there is clear evidence of an enforceable loan agreement. Australian family courts look for agreed terms such as the amount, repayment, interest and what happens on default. If those terms are vague or undocumented, the money is unlikely to be treated as a debt of the relationship. It may instead be treated as a financial contribution made by or on behalf of the spouse whose family provided it, as happened in Giolla & Giolla (No 3) [2026] FedCFamC1F 97
Key takeaways
- A family loan is only a liability in a property settlement if it is proven to be a genuine, enforceable loan.
- Vague, verbal or poorly documented arrangements are unlikely to be accepted as loans.
- If the money is not a loan, it is not automatically a gift. It may be treated as a contribution on behalf of one spouse.
- A party’s own statement that money “was a loan” may carry little or no weight as evidence.
- Families who intend to lend money should put clear, signed terms in writing and get legal advice.
What is an intra-family loan?
An intra-family loan is money provided by a family member, most often a parent, to a child or a couple, usually to help buy a home, start a business or cover living costs. These arrangements are common in Australia, but they are often informal. When a relationship breaks down, the key question in property proceedings becomes whether the money was a loan that must be repaid or something else, such as a gift or a contribution.
Why does it matter whether family money is a loan or a gift?
The answer can significantly change how the property pool is divided:
- If it is a loan, it is generally treated as a liability. The debt reduces the net property pool available for division between the parties.
- If it is not a loan, the money is usually assessed as a contribution under section 79 of the Family Law Act 1975 (Cth), which can increase the share of the spouse on whose behalf it was given.
This is why disputes over family loans often arise. One party may argue that money from their family was a “loan” in order to reduce the pool and the other party’s entitlement, while the other party argues it was a gift or contribution.
Case overview: Giolla & Giolla (No 3) [2026] FedCFamC1F 97
In Giolla & Giolla (No 3), the wife’s father claimed he had lent the couple a total of AUD $6 million to buy real estate in Australia. He said the loan arose from an oral agreement, which was later followed by a separate handwritten agreement.
The father joined the proceedings as a second respondent, seeking to recover the funds he said he was owed, plus interest and costs.
Both the husband and the wife accepted that the father had made significant financial contributions over a sustained period. The dispute was about whether those contributions were a legally enforceable loan.
Why wasn’t the money treated as a loan?
The court found that the arrangement was not clear or certain enough to be a legally recognised loan agreement. None of the essential terms, including the amount, repayment, interest and enforceability, were established with sufficient clarity.
The oral agreement
The alleged oral agreement was said to have been reached over a series of telephone calls and a family meeting, where the loan amount, repayments and interest were discussed. Agreements made this way are difficult to prove, particularly when the parties’ recollections differ.
The handwritten agreement
The written document only covered the following points:
- The father would not sue the couple if they entered into a written agreement to formalise the “loan agreement” reached orally.
- The husband and wife acknowledged that they had been lent money.
- The funds were lent for the purpose of buying property in Australia.
- The husband and wife agreed to pay interest from 30 January 2020 if the loan was not repaid before then.
Important terms usually found in a loan agreement, such as what counts as default and the consequences of default, were not addressed.
The wife’s statements
The wife had stated that the money from her father was a loan. The court found these statements were inadmissible opinions, so they did not help establish that a loan existed.
If family money is not a loan, is it automatically a gift?
No. This is one of the most useful points from the case. The court did not simply label the money a gift. Instead, it characterised the funds as a financial contribution made by the father on the wife’s behalf.
In practice, this means the money was not deducted from the property pool as a debt, but it was recognised as a contribution attributable to the wife when the court assessed each party’s contributions.
How does the court assess contributions under section 79?
When dividing a property pool, section 79 of the Family Law Act 1975 (Cth) requires the court to consider the contributions made by each party, both financial and non-financial. These include direct financial contributions, contributions made on a party’s behalf (such as by a parent), and contributions as homemaker and parent. Since 10 June 2025, the steps the court follows when making property orders are set out expressly in the Act.
In Giolla & Giolla (No 3), the wife’s homemaking contributions, her labour and the financial contributions made on her behalf by her father led to her receiving an overall division of 75% of the property pool.
How can families document a loan properly?
The main lesson from this case is that courts will scrutinise family arrangements just as closely as commercial ones. If you intend money to be repaid, consider the following:
- Put it in writing at the time the money is advanced, not years later.
- Set out the essential terms: the amount, repayment dates or schedule, interest rate (if any), and what happens on default.
- Have both spouses sign the agreement, not just the family member’s own child.
- Consider security, such as a registered mortgage over the property bought with the funds.
- Keep records of the transfer and of any repayments or interest actually paid.
- Get independent legal advice for both the lender and the borrowers before signing.
A loan that is never repaid, never demanded and never acted on may still be treated as a gift or contribution, even if a document exists.
How Ramsden Family Law can help
If you are considering your options in a family law matter, or you need advice about how money from family will be treated in a property settlement, contact us today. Our team of experienced family law solicitors can help you to understand your position, gather the correct evidence and protect your interests.
The content of this article is general information only and must not be relied on as legal advice. You should seek specific advice about your own circumstances.
Frequently Asked Questions
Can my parents get back money they lent us after we separate?
Possibly, but only if they can prove an enforceable loan existed. In Giolla & Giolla (No 3), the father joined the proceedings to recover his money, but the court found no enforceable loan. Clear, signed terms made at the time of the loan give the best chance of the money being recognised as a debt.
Is money from my parents counted as my contribution?
Often, yes. Courts commonly treat money provided by a party’s family as a contribution made on that party’s behalf, which can be taken into account when deciding how the property pool is divided.
Does a handwritten note prove a family loan?
Not on its own. A note may help, but the court will look at whether it sets out the essential terms of a loan, such as amount, repayment, interest and default, and whether the parties actually treated it as a loan.
Can a family member who lent money join our property settlement case?
Yes. A third party who claims to be owed money, such as a parent, can seek to join family law property proceedings, as the wife’s father did in this case.
Does a family loan need interest to be valid?
Not necessarily. However, the more clearly the terms are recorded, including whether interest applies, the more likely a court is to accept that a genuine loan existed.
