Gifts and Loans from Abroad Tax Rules

Documenting gifts or loans from related overseas entities

Editor: The ATO is currently reviewing certain arrangements where Australian taxpayers seek to disguise undeclared foreign income as a gift or loan.

Genuine gifts or loans received from related overseas entities (including family members and friends) are sometimes used to fund businesses or to acquire income producing assets.

In this context, a genuine gift or loan is one where:

  • the characterisation of the transaction as a gift or loan is supported by appropriate documentation;
  • the parties’ behaviour is consistent with that characterisation; and
  • the monies provided are sourced from funds genuinely independent of the taxpayer.   

Having good contemporaneous record keeping practices is desirable in case the ATO seeks to verify whether an amount is a genuine gift or loan.

The ATO has published detailed information to help taxpayers properly document genuine gifts or loans received from related overseas entities that are used for income purposes. 

The information can be accessed from the ATO website by searching for ‘Gifts or loan from related overseas entities’.

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