Legal, Tax & Resources
YES. Money partnering is legal in Australia
Money partnering is a legal activity in Australia. People have been borrowing money from private individuals to invest in property for as long as property investing has existed. However, there are specific rules that govern how it must be done to remain compliant.
The key is structure. A properly documented, correctly structured deal between two private parties, for investment purposes, sits clearly within Australian law.
The four Australian laws that apply to money partnering
Governs managed investment schemes, financial products, and company conduct. A single deal between one deal finder and one money partner does not typically constitute a managed investment scheme. Pooling funds from multiple investors does — get legal advice immediately.
Governs consumer credit, home loans, and personal lending. Applies if the borrower is an individual using the loan for personal or domestic purposes — generally NOT investment property. This is why experienced money partners insist on borrowing through a company or trust, not in an individual's name.
Governs superannuation fund investments. Applies to ALL SMSF lending arrangements. The arm's length and prohibited loan rules are critical. An SMSF cannot lend to its own members or their relatives. The interest rate must reflect commercial market rates.
Governs anti-money laundering and counter-terrorism financing. Both parties should verify the source of funds and carry out identity verification before funds change hands.
Three legal questions every participant needs to answer
Is this a managed investment scheme?
One deal finder, one money partner, deal finder doing the actual work: generally not a managed investment scheme. Raising funds from multiple investors and managing them centrally: get legal advice immediately.
Does anyone need an Australian Credit Licence?
An ACL is required when providing credit to individuals for personal, domestic, or household purposes. When funds are used to purchase or improve an investment property and the borrower is a company or trust rather than an individual consumer, an ACL is generally not required.
Are both parties getting independent legal advice?
ASIC strongly recommends that both parties obtain independent legal advice before signing any documents. Both parties must use their own separate solicitor — not the same one. This protects both sides and significantly reduces the risk of disputes.
When professional licensing is required
Situation
Consumer lending
Lending money to an individual for a personal or domestic purpose. The National Consumer Credit Protection Act applies.
What to do:
The lender may need an ACL. Speak with a specialist solicitor before proceeding. Penalties for unlicensed activity are severe.
Situation
Raising money from the public
Actively soliciting funds from multiple investors, advertising on social media, or running webinars inviting people to invest in your deals.
What to do:
You are likely operating a managed investment scheme requiring ASIC registration. Get legal advice immediately.
Situation
Consumer lending
Lending money to an individual for a personal or domestic purpose. The National Consumer Credit Protection Act applies.
What to do:
The lender may need an ACL. Speak with a specialist solicitor before proceeding. Penalties for unlicensed activity are severe.
The cleanest, most clearly legal structure is: one deal finder, one money partner, one specific property deal, properly documented by a solicitor, with the deal finder borrowing through a company or trust for investment purposes.
Using your SMSF as a money partner
Australia has over 600,000 SMSFs holding more than $880 billion in assets. Money partnering offers a structured, legal way to deploy super into better-performing assets -provided the rules are followed correctly.
Can an SMSF legally be a money partner?
Yes, provided the arrangement is conducted on arm's length terms — meaning the interest rate, repayment schedule, and security must reflect what a commercial lender would require. CRITICAL: An SMSF cannot lend money to its own members or their relatives.
What are the ATO's requirements?
Interest rate must reflect commercial market rates (typically 8%–12% pa). A formal signed Loan Agreement must be in place before funds are transferred. The loan must be secured by a first or second mortgage or registered caveat over property. The SMSF's trust deed and investment strategy must explicitly allow for private lending.
How much of your SMSF can you lend?
There is no specific ATO cap, but most SMSF specialists recommend private lending does not exceed 20%–30% of the fund's total assets. The ATO has specifically flagged SMSF private lending as a compliance focus area.
Step-by-step: setting up your SMSF for private lending
1. Review your trust deed — must permit lending to third parties
2. Update your investment strategy to include private lending as a permitted asset class
3. Obtain an independent property valuation before lending
4. Engage an SMSF specialist solicitor to prepare the Loan Agreement and security documentation
5. Register security on the title (first or second mortgage or caveat)
6. Set up a proper repayment schedule that is enforced strictly
7. Maintain complete documentation for annual audit
Common SMSF lending mistakes to avoid
• Lending to a related party (45% tax penalty risk)
• No written Loan Agreement
• Below-market interest rate (attracts ATO scrutiny)
• No registered security (may fail the fund's audit)
• Waiving or deferring repayments
• Putting more than 30% of the fund into one private loan
IMPORTANT: SMSF lending is a complex area. Before proceeding, speak with an SMSF specialist accountant or financial adviser who understands the SIS Act
Tax implications for both parties
A property is purchased, improved, and sold within 6 to 18 months. Ideal for money partnering because the timeline is defined, the exit strategy is clear, and the value-add component reduces risk.
Money partner — tax overview
Interest income is assessable income, declared in your tax return and taxed at your marginal rate. If lending through an SMSF in accumulation phase, interest is taxed at 15% — dramatically lower than most individual marginal rates. In pension phase, the tax rate is 0%. Profit share arrangements may be treated as ordinary income or attract CGT depending on deal structure — get specific advice.
Worked tax example
| Structure | Tax paid | After-tax return |
|---|---|---|
Individual (37% marginal) | $11,100 | $18,900 |
Individual (19% marginal) | $5,700 | $24,300 |
Company (25% base rate) | $7,500 | $22,500 |
SMSF accumulation (15%) | $4,500 | $25,500 |
SMSF pension phase (0%) | $0 | $30,000 |
Deal finder — tax overview
Interest paid to the money partner is generally tax deductible against rental income or property profit. When the property is sold, any profit may be subject to CGT. Individuals who have held the property for more than 12 months are eligible for the 50% CGT discount — companies are not, which is why many deal finders prefer a trust structure. If your deal involves property development or the sale of a new property, GST may apply.
Record keeping for ATO compliance
Keep for at least 5 years from tax return lodgement:
• Signed copies of all loan documentation (Loan Agreement, Personal Guarantee, Funds Direction Notice)
• Evidence of security registration
• Bank statements showing all fund transfers
• Records of all interest and principal repayments
• Property valuation reports
• All correspondence between parties
Your Australian money partnering checklists
Use these before every deal. Every item exists because something went wrong for someone who skipped it.
 Clear written deal summary (property, strategy, numbers, return, timeline, security) | Independent valuation from a qualified valuer. |
Figures calculated conservatively (costs 10–15% higher than expected) | Clear primary exit strategy and at least one backup |
Qualified property solicitor has reviewed all documentation | Borrowing through a company or trust, not in my own name |
Loan Agreement in place and signed | Personal Guarantee in place and signed |
Funds Direction Notice prepared and agreed | Money partner's security interest registered on the property title |
Money partner has obtained independent legal advice from their own solicitor | Source of money partner's funds confirmed |
Spoken with my accountant about tax implications | Contingency budget of at least 10% |
Received and understood a clear written deal summary | LVR does not exceed 80% (ideally below 70%) |
Independently verified the property valuation | Deal finder's identity, experience, and references confirmed |
Obtained independent legal advice from my own solicitor | Deal finder has a clear, realistic exit strategy for repaying me |
Formal Loan Agreement in place and signed | Spoken with my accountant about tax implications |
Personal Guarantee from the deal finder in place | If using SMSF: trust deed permits private lending and investment strategy is updated |
Security interest registered on the property title as a first mortgage or caveat | If using SMSF: borrower is not a related party and loan is on arm's length terms |
Funds Direction Notice in place — I know exactly where my funds are going |
Title search confirming current registered owner and all encumbrances | PPSR search against deal finder and any company or trust used |
Rates and land tax search confirming no outstanding amounts | Identity of all parties verified (100-point ID check) |
Planning search confirming zoning and pending applications | Source of funds confirmed and documented |
Building and pest inspection report | Proof of insurance provided — money partner noted as interested party |
For development: development approval in place or conditions fully understood | Independent valuation within last 90 days |
For commercial: all leases reviewed and tenant creditworthiness confirmed | Loan Agreement covers: default, death, incapacity, insolvency, extension, dispute resolution |
Deal finder's company or trust ASIC search — in good standing, no charges |
Frequently asked questions - Australian edition
Can I use money partnering to buy my first home?
Money partnering is primarily used for investment properties, not owner-occupied homes. If you're buying a home to live in, the lending arrangement falls under consumer credit law. Speak with a mortgage broker and solicitor before proceeding.
What is the difference between a money partner and a joint venture partner?
A money partner is essentially a lender — they provide capital in exchange for a return but typically do not take an ownership stake in the property. A joint venture partner often takes a share of the title or entity, creating a different legal and tax structure. Money partnering tends to be simpler and cleaner for shorter deals.
What returns can I realistically offer in today's market?
In the current Australian market (2025), most private lending arrangements offer between 8% and 14% per annum. The rate depends on deal risk, quality of security, experience of the deal finder, and LVR. Less experienced deal finders or higher-risk deals typically need to offer higher returns to attract capital.
What happens if the deal goes wrong and I cannot repay my money partner?
If you default on a Loan Agreement, the money partner can enforce their security. If they hold a first mortgage, they can take steps to sell the property. A personal guarantee means they can pursue you personally. Prevention is always better than cure: be conservative with projections and always have a contingency budget.
Can my family members be my money partner?
Yes, but the deal must be documented properly, conducted at arm's length, and the money partner must receive an appropriate market return. Loans between family members at zero or reduced rates can attract ATO scrutiny. SMSF funds absolutely cannot be lent to members or their relatives.
What happens to a deal if the deal finder passes away?
The Loan Agreement should specify what happens in the event of the deal finder's death, incapacity, or insolvency. In most cases, the debt becomes a claim against the deal finder's estate or company assets. Some sophisticated money partners require evidence of adequate life insurance before proceeding with larger deals.
What is the difference between a first mortgage and a second mortgage?
A first mortgage holder has priority over all other secured creditors and is paid out before anyone else if the property is sold. A second mortgage sits behind the first and only receives proceeds after it is satisfied. Most money partners in Australia should insist on a first mortgage.
How do I value a property to determine the appropriate LVR?
Valuation for private lending should be based on an independent written valuation from a registered property valuer — not a real estate agent's appraisal, not an automated online estimate, and not the deal finder's own projections. Most experienced money partners lend no more than 65%–70% of the independently assessed market value.
Can I use money partnering to buy my first home?
Money partnering is primarily used for investment properties, not owner-occupied homes. If you're buying a home to live in, the lending arrangement falls under consumer credit law. Speak with a mortgage broker and solicitor before proceeding.
What is the difference between a money partner and a joint venture partner?
A money partner is essentially a lender — they provide capital in exchange for a return but typically do not take an ownership stake in the property. A joint venture partner often takes a share of the title or entity, creating a different legal and tax structure. Money partnering tends to be simpler and cleaner for shorter deals.
What returns can I realistically offer in today's market?
In the current Australian market (2025), most private lending arrangements offer between 8% and 14% per annum. The rate depends on deal risk, quality of security, experience of the deal finder, and LVR. Less experienced deal finders or higher-risk deals typically need to offer higher returns to attract capital.
What happens if the deal goes wrong and I cannot repay my money partner?
If you default on a Loan Agreement, the money partner can enforce their security. If they hold a first mortgage, they can take steps to sell the property. A personal guarantee means they can pursue you personally. Prevention is always better than cure: be conservative with projections and always have a contingency budget.
Can my family members be my money partner?
Yes, but the deal must be documented properly, conducted at arm's length, and the money partner must receive an appropriate market return. Loans between family members at zero or reduced rates can attract ATO scrutiny. SMSF funds absolutely cannot be lent to members or their relatives.
What happens to a deal if the deal finder passes away?
The Loan Agreement should specify what happens in the event of the deal finder's death, incapacity, or insolvency. In most cases, the debt becomes a claim against the deal finder's estate or company assets. Some sophisticated money partners require evidence of adequate life insurance before proceeding with larger deals.
What is the difference between a first mortgage and a second mortgage?
A first mortgage holder has priority over all other secured creditors and is paid out before anyone else if the property is sold. A second mortgage sits behind the first and only receives proceeds after it is satisfied. Most money partners in Australia should insist on a first mortgage.
How do I value a property to determine the appropriate LVR?
Valuation for private lending should be based on an independent written valuation from a registered property valuer — not a real estate agent's appraisal, not an automated online estimate, and not the deal finder's own projections. Most experienced money partners lend no more than 65%–70% of the independently assessed market value.
Glossary: Every Australian money partnering term explained
AML (Anti-Money Laundering)
Rules requiring financial transactions to be traced back to a legitimate source.
APRA
The Australian Prudential Regulation Authority. Regulates banks and superannuation funds. APRA's tighter post-Royal Commission lending rules are one key reason private capital has become more important for property investors.
Arm's length
A transaction where both parties act independently. The ATO requires related-party transactions — including SMSF lending — to be conducted at arm's length to ensure they reflect genuine market terms.
ASIC
The Australian Securities and Investments Commission. Regulates financial services, consumer credit, and managed investment schemes.
ATO
The Australian Taxation Office. Administers income tax, CGT, GST, and SMSF compliance.
Australian Credit Licence (ACL)
A licence required to provide credit to consumers. Most money partnering deals involving investment properties through a company or trust do not require an ACL.
Caveat
A legal notice lodged on a property title to alert others that someone has an interest in the property. Commonly used by money partners to protect their position while formal mortgage documentation is being arranged.
CGT (Capital Gains Tax)
Tax paid on the profit from selling a capital asset. Individuals who have held a property for more than 12 months are entitled to a 50% CGT discount. Companies are not.
Default
A breach of the terms of a Loan Agreement. Can be a payment default, technical default (e.g. failing to maintain insurance), or event default (insolvency).
Discretionary trust
A trust where the trustee has discretion over how income and capital are distributed. Often used by deal finders to hold investment properties due to flexibility in income distribution and asset protection.
Equity
The difference between what a property is worth and what is owed against it. A $800,000 property with $500,000 in debt has $300,000 in equity.
Funds Direction Notice
A document specifying exactly where the money partner's funds are to be directed upon transfer. Provides transparency and a paper trail for both parties.
Loan Agreement
The formal written contract between the money partner and the deal finder. Sets out loan amount, interest rate, repayment terms, security provided, and default provisions.
LVR (Loan-to-Value Ratio)
Total debt secured against a property as a percentage of its value. An LVR of 70% = $700,000 debt against a $1,000,000 property. Lower LVRs provide more protection for the money partner.
Managed Investment Scheme (MIS)
A collective investment vehicle regulated by ASIC. Single bilateral private lending deals are generally not classified as an MIS.
Personal Guarantee
A legal document where the deal finder personally guarantees the debt. If security is insufficient, the money partner can pursue the deal finder personally for any shortfall.
PPSR
Personal Property Securities Register. A federal register of security interests over personal property. A PPSR search reveals existing security interests registered against an individual or company.
Refinancing
Replacing one debt facility with another. The most common deal exit is refinancing the money partner's loan with a bank loan once the property value has increased.
SIS Act
The Superannuation Industry (Supervision) Act 1993. Primary legislation governing how SMSFs operate, including investment strategies, prohibited transactions, and arm's length requirements.
SMSF (Self-Managed Super Fund)
A private superannuation fund managed by its own members. SMSFs can lend money to third parties as money partners, subject to ATO and SIS Act rules.
Stamp duty
A state government tax applied to property transactions (also called transfer duty in some states). Amount varies by state, property value, and buyer type.
Trust deed
The legal document that establishes and governs a trust. SMSF trustees must ensure their trust deed permits private lending before proceeding.
Variation agreement
A formal document that changes one or more terms of an existing Loan Agreement. Any change to the original deal must be captured in a signed variation agreement.
LEGAL DISCLAIMER: The information on this website is general in nature and is provided for general, high level educational purposes only. It does not constitute legal advice, financial advice, or any other form of professional advice. You should not rely on this website when making investment decisions. Laws, regulations, and individual circumstances vary. Always obtain independent legal advice from a qualified solicitor and independent financial advice from a licensed financial adviser before entering into any money partnering, lending, or investment arrangement. moneypartnering.com.au