Love Money in Australia: Risks, Rewards & 2025 Considerations

In a world of soaring living costs, tighter lending criteria, and ever-rising property prices, many Australians are turning to an age-old funding source: love money. Whether it’s a parent helping with a first home deposit, a mate investing in your new side hustle, or a sibling lending a hand during a rough patch, borrowing from friends and family has become a surprisingly common financial move in 2025. But while love money can open doors banks won’t, it also brings hidden risks—and potential rewards—you won’t find in any loan contract.

What is Love Money, and Why is it Booming in 2025?

Love money refers to funds borrowed from family members or friends, typically on more flexible or informal terms than banks or other financial institutions would offer. It can be a loan, a gift, or even an equity stake in a business. In 2025, love money is on the rise across Australia, driven by several trends:

• Stricter Lending Standards: With APRA maintaining tighter serviceability buffers and lenders scrutinising applications more closely, many would-be borrowers are finding it harder to secure traditional finance.

• High Property Prices: CoreLogic’s 2025 data shows median house prices in Sydney and Melbourne still well above pre-pandemic levels, making the Bank of Mum and Dad the nation’s ninth-largest lender by volume.

• Entrepreneurial Boom: The surge in small business startups and side hustles post-pandemic means more Aussies are seeking flexible, early-stage capital—often from their inner circle.

According to a 2025 Finder survey, nearly one in five Australians have lent or gifted significant sums to family or friends in the past two years. But is it really a smart move—for either side?

The Risks: When Love and Money Collide

Mixing relationships and money is fraught, and love money comes with pitfalls you won’t find in a standard bank loan. Here’s what can go wrong:

• Relationship Strain: Unclear terms, missed repayments, or changing circumstances can quickly turn warm family ties frosty. ASIC’s MoneySmart warns that informal loans are a leading cause of family disputes, especially when expectations are mismatched.

• Legal Grey Areas: Without a formal contract, it’s often unclear whether the money is a loan, a gift, or an investment. In 2025, courts continue to see a rise in family loan disputes—especially over property deposits and inheritances.

• Tax Implications: The ATO has ramped up scrutiny on large transfers between individuals. Gifts above $10,000 can impact pension eligibility, and ‘loans’ with no interest may be treated as gifts for tax purposes.

• Financial Pressure: For lenders, tying up cash in a loved one’s venture or property can limit their own financial flexibility, especially if the arrangement sours or repayment is delayed.

Real-world example: In 2024, a Melbourne couple lent $70,000 to their daughter to buy a home, but without a written agreement, a later relationship breakdown led to a bitter court battle over whether it was a loan or a gift. Such cases are increasingly common as property values and family contributions rise.

How to Protect Yourself (and Your Relationships)

With the right approach, love money can be a win-win. Here’s how to manage the risks and preserve your relationships:

• Put it in Writing: Draft a simple loan agreement outlining the amount, repayment schedule, interest (if any), and consequences of missed payments. In 2025, free templates are widely available online, and legal services can formalise the arrangement for a modest fee.

• Talk About the ‘What Ifs’: Discuss scenarios like job loss, relationship breakdown, or early repayment. Clear communication upfront can prevent awkwardness or resentment down the track.

• Understand the Tax and Centrelink Impact: Check whether the loan or gift affects your pension, tax obligations, or eligibility for government benefits. The ATO’s latest guidance and Centrelink’s means testing rules in 2025 are stricter than ever.

• Consider a Security: For large sums, especially for property purchases, registering a caveat or second mortgage can protect the lender’s interest—though this adds complexity and cost.

For borrowers, honesty about your ability to repay—and sticking to the agreed terms—is critical. For lenders, never give more than you can afford to lose.

When Love Money Makes Sense—and When to Think Twice

Love money isn’t always a bad idea. In fact, it can be a lifeline for first-home buyers, small business founders, or anyone shut out of traditional finance. But it works best when:

• Both parties treat the arrangement as a business transaction, not a favour.

• There’s full transparency about risks, expectations, and timeframes.

• The arrangement is documented and, for large sums, independently reviewed.

In 2025, with banks cautious and property as expensive as ever, love money will remain a fixture of Australian finance. But the smartest families treat it with the same care and rigour as any other investment—because love may be priceless, but money always has a cost.