We live in difficult financial times, so a bit of help from parents to buy a home, pay off a debt or survive a particularly rough patch is a great blessing. That’s what families are for, right? But no one stops to think about what might happen if circumstances change down the track. If a marriage or de facto relationship ends, that same support may end up under a microscope if there’s any dispute over whether it was a loan or a gift. Ultimately, in a divorce settlement, the Family Court will decide based on certain variables.
At The Hidden Asset, our services help people understand their marital finances. When outside funding is involved, things can get tricky. The nature of those contributions can completely change the overall property pool.
Proving it’s a loan: The onus is on the claimant
Imagine your parents helped you with twenty thousand dollars to put towards a home deposit a few years ago. Everyone understood it was money you’d pay back when you were able to. However, the marriage has now broken down, and your former partner insists it was a gift. Situations like this are more common than you realise.
In the eyes of the Family Court, the person claiming it was a loan must prove that it was indeed a loan. Without solid evidence, it will most likely be treated as a gift. This was the case in Shan & Prasad [2018] and Maddock & Maddock [2011], where funds were ruled to be gifts because there was no proof of repayment or agreement at the time the money changed hands.
What does the court look for to determine gift or loan?
To show that money was a genuine loan, the Family Court looks for clear evidence that repayment was expected. This might include a written agreement signed by both parties, repayments made before separation, interest charged or agreed upon, and correspondence showing how the arrangement was understood at the time.
What each side can prove matters. In Pelly & Pelly [2018], there was a signed agreement, interest applied, and regular repayments made while the couple was still together. Those details really verified that it was a genuine loan. Comparatively, in Biltoft & Biltoft (1995), there was nothing like that. The parents had given money toward a house, but there was no paperwork and no record of repayment. The court decided it was a gift and treated it as part of the asset pool.
Shinohara & Shinohara [2025] is a more recent case that has changed how the court views property in a separation. Judges now focus only on the assets and liabilities that exist at the time of the hearing. Money that has already been spent or given away can’t be added back into combined property. Essentially, this means evidence and timing are everything. If the money isn’t there and you can’t show where it went, the court can’t include it.
When obstruction and delay backfire
When disputes like this reach mediation, how each person handles it sets the tone. The court expects both sides to be reasonable and to keep things moving forward. Refusing to take part or dragging it out often ends up costing far more than it’s worth.
Under section 79(5)(d) of the Family Law Act, judges can consider wasted costs and poor conduct when deciding what is fair in the settlement. This means that unreasonable behaviour or refusal to compromise can directly affect the final outcome.
In Simons & Simons [2015], another case involving a discrepancy over whether family money was a loan or a gift, the husband repeatedly delayed mediation and withheld information that should have been shared in the earlier stages. Those actions increased legal costs and stretched the process far longer than necessary. The court acknowledged the impact of his behaviour and adjusted the property division in the wife’s favour to account for the extra time and expense.
Professional support
You don’t have to figure it out on your own.
When there’s disagreement over whether money was a loan or a gift, having the right guidance early is crucial.
- Community legal centres or Legal Aid – can provide advice on how to prepare for mediation and what documentation may help your case.
- Mediation services such as Interrelate – assist couples in resolving financial disputes without the added cost and stress of going to court.
- The Hidden Asset – We can identify what evidence exists and what’s missing to support or challenge a claim. We’ll review documents, bank records and repayment history to build a clear financial picture before mediation or settlement discussions.
If you’ve accepted help from family or are now in dispute
Family financial help is common, but it can cause tension later. If you’re giving or receiving money, a few simple steps can provide clarity and help protect everyone involved:
- Put it in writing – A clear loan agreement signed by both parties is the strongest proof of intent.
- Keep records – Note when repayments are made, any interest that’s agreed to, and correspondence that shows how the money was meant to be treated.
- Be open early – Honest conversations about expectations can prevent misunderstandings, should circumstances change.
- Get advice before acting – Speaking to a financial counsellor or legal service can save you time, money and stress in the future.
- Know when to let it go – If it can’t be proven as a loan, it shouldn’t be treated as one. Continuing to argue the point can waste valuable resources that could be better used to move forward.
If you’re facing uncertainty over how family money might be treated in your divorce settlement, contact us today for clear, practical guidance.
Forensic Accounting and
Divorce Services built for clarity
Beyond the numbers, there’s always a story, and we know where to look. From crypto trails and lifestyle audits to spending patterns and disclosure gaps. Our tools and proven systems are designed to uncover the financial truths bringing transparency, perspective, and a sense of direction.
Case Studies
Think you’ve heard it all? Our case studies lift the lid on what really goes down when money, trust, and separation collide.
Frequently Asked Questions
Who has the burden of proof if funds were given by family during a relationship and later one party says it was a gift?
The person claiming the contribution was a loan must prove it. Without clear evidence, the court will treat the transfer as a gift.
What sorts of evidence does the court look for to decide whether it was a loan rather than a gift?
Key evidence includes: a written agreement signed by both parties, repayments made before separation, interest being charged or agreed, and correspondence showing the original understanding.
What happens if the supporting documentation is missing or repayments weren’t made?
If there is no paperwork, no record of repayment, or no established expectation of repayment, then the court is likely to treat the amount as a gift and include it in the asset pool.
Does the timing of the transfer or repayment affect how the court treats the money?
Yes — timing is important. If the money has already been spent or given away and can’t be traced or is not part of the assets at the time of hearing, it may be difficult to include in the property pool.
Why is it important to act early and with proper documentation when providing or receiving funds from family?
Because having a clear agreement, keeping records of repayments or interest, and being open about expectations can help reduce disputes and costs later. Delays, withholding information, or obstructing process may lead the court to penalise conduct when dividing property.
Get in touch
Not sure where to begin? You’re not alone. We guide individuals and professionals through the financial complexities of divorce – step by step, with calm, expert support. Whether you’re feeling unsure or simply need a place to start, we’re here to help. Use the form to get in touch, or book an appointment today.