So I have a fairly big mortgage and a family member of mine has a fairly large sum of cash.
As he doesn't want to invest in any investments, it's just sitting there in the bank gaining interest in which he is taxed. At the same time, I have this mortgage in which a sizeable chunk of my payment is interest.
I was thinking as my bank allows me to open multiple offset accounts. I was thinking if I can open one up for him - he then puts the money in there. He can take the money out whenever he likes - but every month, I pay him interest for the money he has in there.
Thereby, we both benefit. He doesn't have to pay tax and I pay a lower interest rate (as his savings interest rate would be less than my mortgage interest rate).
Just wondering - will this work and is this legal? I figure surely, it can't be illegal for him to lend me money surely but does he technically have to pay tax on the extra "interest" payments I'm giving him?
The whole thing will be informal. We're a close family and there's absolutely no issue regarding trust. We've also got steady jobs and I am well ahead on my mortgage too. It's more about "if I have to pay interest, I'd rather pay family, rather than a bank"
If it helps - I'm in Australia.