Nobody writes it down. That is how nearly every one of these matters begins.
Parents help with a deposit, the money moves, and the paperwork never happens, because asking your own family to sign something feels like an accusation. Then the relationship ends, and the question everyone skipped becomes the only one that matters: was that money a gift or a loan?
Here is the plain answer. Where nothing was documented at the time, the money is usually treated as a gift. A gift does not come off the top of the property pool. It stays in as a financial contribution, weighed along with everything else.
That one classification decides where the money ends up.
Is it a gift or a loan?
Money from a parent to a child starts out presumed to be a gift. Lawyers call it the presumption of advancement: the law assumes a parent handing money to their child means to benefit them, not to create a debt.
The presumption survives, but it does not carry the weight people expect. The High Court has made clear that the objective facts of what actually happened matter more.
See Bosanac v Commissioner of Taxation [2022] HCA 34.
So the real question is what the facts show. A court works through four:
- Was anything written down at the time the money changed hands?
- Was there a repayment obligation, with an amount and a date?
- Was any security taken over the property?
- Has repayment ever been sought?
Four no’s and you have a gift, whatever anyone remembers agreeing to around the kitchen table. That is an evidence problem, not a memory problem. Our guide on how to prove the money was a gift, not a loan sets out what that evidence looks like.
If the court treats it as a gift
A gift is not a debt, so nothing comes off the top. It goes into the property pool as a financial contribution, usually credited to the side of the family it came from. If your parents put $100,000 into the deposit, that normally counts on your side of the ledger and can move the split in your favour.
Usually. Not always. Money or property that goes into joint names can be found to be a gift to both of you. In one Full Court matter, parents transferred 60 acres to their son and his wife, and the court held the land was a gift to the couple, not to the son alone.
See Mabb & Mabb & Anor [2020] FamCAFC 18.
A deposit paid into a joint account, or a title in both names, is much harder to argue was help for one person only.
Either way, the gift is assessed at the contributions stage under the Family Law Act, and the court then weighs each person’s current and future circumstances before landing on a division.
The framework sits in s 79 of the Family Law Act 1975 for married couples and s 90SM for de facto couples, with current and future circumstances at s 79(5) and s 90SM(5).
How those contributions turn into percentages is its own topic, and the work my team and I do as property settlement lawyers.
If the court treats it as a loan
A genuine, enforceable debt is deducted before anything is divided, so only the net balance gets split. Repaying your parents is still your obligation, not something the court hands them. That is why the word “loan” turns up so often after a separation.
Here is the catch. A soft loan does not do the job. Where the arrangement is vague, was never going to be chased, or has sat unpaid for years, a court can leave it out of the pool.
See In the Marriage of Biltoft [1995] FamCA 45; (1995) FLC 92-614.
The test I put to clients is blunt. Would Mum and Dad actually sue for it? If the honest answer is no, a court is unlikely to treat it as a debt either.
It has to be disclosed either way. Since 10 June 2025 the duty of full and frank disclosure sits in the Act itself, for married and de facto couples alike. A family loan left off your disclosure is a credibility problem on top of a money problem.
See the court’s guidance on the duty of disclosure, now at s 71B for married couples and s 90RI for de facto couples.
One more thing. A genuine loan can carry interest and tax consequences; a gift generally does not. Ask your accountant before the money moves.
A real matter: $75,000 and a $300,000 house
A father advanced $75,000 to his daughter so she could buy a $300,000 house. She bought it, everyone got on with their lives, and nothing was recorded about what the money was for.
Years later, he claimed he owned a quarter of the house. He had not been helping her, he said, he had been investing.
The court ruled he owned nothing. The money was a gift.
So here is the lesson, and it is the same one every time. Document it. Put in writing what the money is for, whether you expect it back, and whether you are buying an interest in the property. Leave it unwritten and the answer gets built years later from the paperwork, not from what anyone remembers.
How to protect the money before it changes hands
Three things work, and all three have to happen before the money moves.
- A written loan agreement, made at the time. An amount, a repayment obligation, and a date. Not a note drawn up after the separation, which reads to a court exactly like what it is.
- Security over the property. A registered mortgage, or a caveat where your parents hold an interest that supports one, makes the loan real rather than assumed and puts everyone on notice.
- A binding financial agreement. The instrument built to quarantine family money. Couples can make one before, during or after a marriage or a de facto relationship, and each person needs their own independent legal advice for it to bind.
See the court’s page on financial agreements. The provisions are ss 90B, 90C and 90D for marriages and ss 90UB, 90UC and 90UD for de facto relationships, with the independent advice requirement at ss 90G and 90UJ.
What not to do
Do not put the property in your parents’ names to keep it out of a settlement.
It does not work the way people hope. A court looks past whose name is on the title to who actually paid: the purchase price, the mortgage repayments, the upkeep. “It is not in my name” does not end the argument.
What it does do is pull your parents into your court case as parties. They get their own lawyers, they pay their own legal fees, and a matter that was already hard gets harder for everyone in the family. So no, I do not advise it.
The five ways the money usually arrives
Family help takes one of five shapes. What matters is what each does if the relationship ends.
| How the money arrives | What it is | What happens if the relationship ends |
|---|---|---|
| Gift | Money handed over with no expectation of repayment | Stays in the pool as a contribution, as above |
| Loan | Money advanced on terms | Deducted only if it is genuine and enforceable, as above |
| Guarantor | Parents guarantee the mortgage, usually with their own home as security | The guarantee is an agreement between your parents and the lender, so your separation does not, by itself, end it |
| Equity release | Parents redraw against their own home and pass the funds on | Classified as a gift or a loan on the same test. Their debt to the bank stays theirs |
| Co-purchase | Parents go on the title with you | Their interest has to be dealt with in the settlement, and they can be drawn into the proceedings |
What else can go wrong down the track
- Repayment disputes. A loan with no repayment date is an argument waiting to happen, usually between a parent and their own child, years later.
- Financial trouble on either side. If anyone in the arrangement strikes financial trouble, what was written down at the time is the only evidence anyone has to work from. Nothing written means nothing to point to.
- Guarantor exposure. A default on the mortgage becomes your parents’ problem too, not only yours.
The numbers behind the bank of mum and dad
Parental help is no longer the exception. Mozo’s Bank of Mum and Dad Report 2025 puts the average parental gift toward a home deposit at $74,040, up from $69,907 in 2021, and found three quarters of the parents who help expect no repayment at all, against a third of them in 2021.
Read that second figure again. Most parents are not lending. They are giving, without ever saying so in writing, and “we always understood it would come back to us” is not a document.
If your parents’ money is caught up in a separation, or you are the parent watching it happen, get advice before positions harden. For the wider picture on how a division is worked out, start with our property settlement lawyers page. Or just ask someone: me and my team work through this every week, on both sides of it. Call 1300 614 732 for a free discovery call and we will tell you where the money stands, even if the answer is that you do not need us yet.
Frequently Asked Questions
Is money from the bank of mum and dad a gift or a loan in family law?
It turns on what was documented at the time. Money from a parent to a child is presumed to be a gift, and where nothing was written down it is usually treated as one. A gift stays in the property pool as a contribution rather than coming off the top.
Does a loan from my parents come off the property pool in a divorce?
Only if it is a genuine, enforceable debt. A documented loan with a repayment obligation comes off the pool before the division. A vague arrangement nobody ever chased can be disregarded, which leaves the full amount in the pool to be split.
What is the presumption of advancement?
It is the legal starting point that money or property passed from a parent to a child is meant as a gift rather than a loan. Evidence of what was actually intended can displace it, and the objective facts carry more weight than the presumption itself.
Can my parents get their money back if my relationship ends?
Sometimes. If the advance was a genuine loan, documented and enforceable, it is deducted from the pool before anything is divided, so only the net balance gets split. Repaying them is still the borrower’s obligation, not something the court does. If it was a gift, it does not come back, although it is usually credited as a contribution from the child’s side of the family.
Does a loan agreement with my parents have to be in writing?
In practice, yes. A court looks for an agreement made at the time, with an amount, a repayment obligation and a date, plus any security taken and whether repayment was ever sought. An undocumented family loan is very hard to prove years later.
Can a binding financial agreement protect money from my parents?
Yes, quarantining money like this is one of the things it is built for. Couples can make one before, during or after a marriage or a de facto relationship, and each person must receive their own independent legal advice for the agreement to be binding.
