In Australia, a one-off loan between private individuals is legal and generally falls outside the National Credit Code, but it should be in writing, interest received must be declared to the ATO, and any unknown lender demanding fees should be reported to Scamwatch.
The federal framework: the NCCP Act 2009 and the National Credit Code
Australian consumer credit is governed by the National Consumer Credit Protection Act 2009, whose schedule forms the National Credit Code. This federal law applies uniformly across the six states and two territories, from Tasmania to the Northern Territory.
Why a loan from a friend usually sits outside the Code
The Code only covers credit provided in the course of a lending business, for a charge, to a natural person for personal use. An uncle who advances 3,000 AUD to his niece therefore needs no licence of any kind.
ASIC, APRA and AFCA: who oversees what
ASIC issues credit licences and runs the Moneysmart website, APRA supervises banks and credit unions, and AFCA resolves disputes with member firms free of charge. None of these bodies, however, will settle a purely private disagreement between two cousins.
The 48% cap and payday loans: a useful benchmark
Section 32A of the Code bars regulated non-bank lenders from exceeding an annual cost of 48%, fees included. For small loans under 2,000 AUD the limits are a 20% establishment fee and 4% a month. Between individuals, these thresholds remain a reference point.
Drafting a loan agreement or a deed signed before a witness
Australian law requires no set form, but a dated loan agreement, or a deed where no consideration is given, proves the debt. A Justice of the Peace witnesses signatures free of charge. Our guide to private loan contracts lists the essential clauses.
Interest received: lodging with the ATO by 31 October
The Australian Taxation Office treats interest received from a private borrower as taxable income, to be included in the annual return for the financial year running from 1 July to 30 June. The lender should therefore keep the repayment table and matching bank statements.
Centrelink and disguised gifts among Australian retirees
For the Age Pension, Centrelink applies gifting rules: money transferred without proof of repayment may be treated as a gift and reduce the pension. A documented loan remains an asset of the lender. Check with Services Australia before any large transfer.
Family help with a home purchase: loan or gift
Australian banks often ask for a signed statement confirming that a parental contribution is a non-repayable gift. If the money is actually lent, say so, because the debt affects the borrowing capacity calculated by the mortgage lender.
Online lending platforms: check the ACL licence
Any business matching borrowers with investors for consumer credit must hold an Australian Credit Licence or act as an authorised credit representative. The number appears in the public ASIC register, which should be consulted before opening an account.
Scams in Australian dollars: PayID, fake brokers and crypto
Scamwatch reports fake brokers demanding insurance fees before releasing a loan, emails imitating PayID and payments in cryptocurrency. Our page on loan scams paid in cryptocurrency describes this very widespread pattern and the warning signs to look for.
Where to report: Scamwatch, IDCARE, ReportCyber and your bank
After a fraud, call your bank first to stop transfers, then report the facts to Scamwatch, run by the ACCC's National Anti-Scam Centre. IDCARE helps in cases of identity theft, and ReportCyber takes complaints about cybercrime.
Five capitals, five small claims systems
Recovering an unpaid debt depends on the state: the Local Court in New South Wales, QCAT in Queensland and magistrates' courts elsewhere. See our pages on Sydney, Melbourne or Brisbane for local contacts.
Setting up a private loan in Australia, step by step
- Verify the other party's identity with an official Australian document, a state driver licence or passport, and refuse any deal with a stranger met online.
- Draft a loan agreement in English stating the amount in AUD, the rate, the term, the instalments and the consequence of late payment.
- Have both parties sign before a Justice of the Peace or an independent adult witness, then each keep an original.
- Pay the sum by transfer from an Australian account in the lender's name, never in cash, gift cards or bitcoin.
- Track each repayment in a shared table and reconcile it with bank statements when the financial year closes on 30 June.
- Declare interest received to the ATO and keep the records for at least five years, the period usually recommended.
Costs and caps to know in Australian dollars
| Item | Order of magnitude | Note |
|---|---|---|
| Rate agreed between relatives | Free to agree, often 0 to 8% (indicative) | Outside the National Credit Code if not a lending business |
| Cap for non-bank lenders | 48% a year, fees included | Section 32A of the National Credit Code |
| Small loan under 2,000 AUD | 20% establishment fee plus 4% a month | Legal cap for licensed lenders |
| Certification by a Justice of the Peace | Free (indicative) | Volunteer service in libraries and council offices |
| Tax on interest | Lender's marginal rate | Annual return to the ATO |
| Fees demanded by a fake lender | Total loss of the advance | Report to Scamwatch and your bank |
Australian documents to prepare before lending
- Passport or driver licence issued by an Australian state
- Lender's Tax File Number for declaring interest
- Loan agreement or deed signed and dated by both parties
- Bank details (BSB and account number) confirmed by phone
- Borrower's proof of income: payslips or notices of assessment
- Proof of the initial transfer and the repayment schedule
Mistakes and warning signs specific to Australia
- Paying "processing fees" or "insurance" to a lender before receiving a single dollar: no licensed lender asks for this.
- Accepting an offer received on Facebook, WhatsApp or Telegram from someone posing as a wealthy investor living overseas.
- Opening an email claiming your PayID must be "upgraded" for a payment: the message is fake.
- Handing over money with nothing in writing, which rules out any later action before your state's small claims tribunal.
- Confusing a family contribution declared to the bank as a gift with a repayable loan, at the risk of making a false statement.
Your questions on private loans in Australia
Do you need a licence to lend to a friend in Australia?
No, as long as you do not lend regularly as part of a business. The credit licence issued by ASIC is aimed at professionals. If you start making many paid loans to strangers, seek advice from a lawyer.
Is there a usury rate between private individuals in Australia?
There is no specific cap for an occasional private loan. The 48% ceiling applies to regulated non-bank lenders. An excessive rate can still be challenged in court as an unfair term, so keep it reasonable.
Can a working holiday visa holder borrow from an individual?
Nothing prevents it, but a 417 visa holder often leaves the country quickly, which complicates recovery. Plan a short schedule and get contact details in France for young people on a PVT, the French working holiday programme.
What should you do if a lender demands payment in gift cards?
Stop the exchange at once, as this is a clear sign of fraud. Contact your bank, report the profile to Scamwatch and, if you have sent an identity document, call IDCARE to limit identity theft.