When Family “Loans” Don’t Count: What the case of Han & Han [2026] FedCFamC1A 54 means for Family Law property settlements.
Family Loans in Property Settlement: When is a “Loan” not really a Loan?
In a family law property settlement, money advanced by parents or relatives will not automatically be treated as a loan or deducted from the asset pool. The Court will look at whether the debt is real, enforceable and likely to be repaid in practice.
It is common in family law matters for one party to assert that money received from parents or relatives should be treated as a loan and deducted from the asset pool. However, the recent appeal decision in Han makes clear that simply calling something a “loan” does not mean the Court will treat it as a liability that needs to be repaid.
Background to Han & Han: The Alleged Family Loans
In Han, the husband asserted that he owed approximately $4.66 million to his parents and some corporations controlled by his parents. The funds had been advanced to the husband over some time and were formalised by way of a loan agreement and secured by a caveat against property.
Despite this, at the trial the Court excluded the loans from the matrimonial asset pool. The husband appealed that decision, arguing, among other things, that the trial judge made an error in failing to properly recognise the debt.
When Will the Court Treat a Family Loan as a Real Debt?
A key issue in the case was not whether there was a document describing the arrangement as a loan, but whether the debt was “real” in a practical sense.
The Full Court reaffirmed a well-established principle that in property matters, not all liabilities are automatically deducted from the asset pool. This is particularly relevant in circumstances involving family members, where financial arrangements are often more informal and flexible than commercial dealings.
Why the Family Loan Was Not Deducted From the Asset Pool
Despite the existence of documentation said to support the loans, the Court was not persuaded that the $4.66 million liability should be recognised. A number of factors were relevant such as:
- There was a lack of persuasive evidence that the alleged lenders intended to enforce repayment in any meaningful way. While there were assertions that the loans had become payable, there was little evidence of genuine recovery action consistent with what one would expect from an arm’s length creditor.
- The Court also had concerns about the clarity and reliability of the evidence regarding the quantum of the alleged debt.
- The broader context of the financial relationship was relevant. The advances had occurred within a family setting, where financial dealings are often more flexible and less strictly enforced than in commercial environments.
- The Court took a practical view of the caveat registered relied upon. It found that the “charge” did not create a true proprietary interest in the property like a registered mortgage would. In simple terms, a charge or caveat may offer some protection, but it does not give a lender real, enforceable rights over the property. A caveat, in particular, is only temporary and does not allow a creditor to directly recover the debt. As a result, these features carried little weight in supporting the argument that the arrangement operated as a genuine commercial loan.
Ultimately, the husband’s appeal was unsuccessful, and he was ordered to pay the wife’s costs amounting to $27,962.
The Risk if a Family Loan Is Not Recognised in a Property Settlement
One of the clearest messages from Han is that the Court will look beyond labels and documentation. Simply calling something a “loan” and even taking the steps to making it seem like a “loan” does not make it one for the purposes of a property settlement. Even where there is a written agreement, security, or a history of financial transfers, the Court will examine how the arrangement operates in reality. In particular, the Court will consider whether the parties have conducted themselves in a manner consistent with a genuine debtor–creditor relationship.
Family arrangements often fall short of that standard. There may be no fixed repayment terms, no enforcement, and no real expectation that the money will ever be repaid in the ordinary course. Where that is the case, the Court may conclude that the liability should not reduce the asset pool.
Importantly, this can create a significant practical consequence for parties in family law proceedings. If an alleged loan is not recognised by the Court, the debt may not be deducted from the asset pool when determining the division of property. This can result in a larger pool being available for division between the parties.
However, that does not necessarily mean the alleged borrower is released from responsibility for the debt outside the family law proceedings. In some circumstances, a party may still remain personally liable to repay money advanced by family members, even though the Court did not recognise the liability as reducing the matrimonial asset pool. This can create substantial financial risk for the party who received the funds, particularly if repayment is later sought after the property settlement has been finalised.
What This Means if Your Parents or Relatives Advanced Money
If you are involved in a property settlement and there are loans from family members in issue, it is important to approach the matter with a clear understanding of how the Court will assess those arrangements.
The key question is not simply whether a loan exists on paper, but whether it is likely to be enforced in reality.
The Court may consider matters such as whether there is a genuine expectation of repayment, whether any repayments have actually been made, whether the lender has taken steps to enforce the debt, and whether the arrangement resembles a commercial transaction.
If those factors are not present, there is a real risk that the alleged liability will be given little weight or disregarded altogether.
Importantly, parties should be aware that even if the Court declines to treat a family advance as a liability for the purposes of adjusting property interests, the person who received the funds may still face demands for repayment outside the family law proceedings. This means a party could ultimately receive a smaller share of the overall property pool than anticipated while still carrying ongoing repayment obligations to family members.
How Our Family Lawyers Can Help With Disputed Family Loans
Cases like Han highlight how complex property settlement matters can become, particularly where family financial arrangements are involved.
Disputes about alleged loans can have a significant impact on the overall asset pool and the outcome of a matter.
Here at Delaney Roberts Specialist Family Lawyers, our Lawyers regularly advises clients in relation to disputed liabilities, family loans, and property settlements. We can assist you in assessing the strength of a claimed liability, gathering the necessary evidence, and presenting your case in a way that aligns with the Court’s approach.
If you are navigating a separation and there are issues surrounding loans or financial contributions from family members, it is important to obtain advice early.
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The information in this article is not legal advice and is intended to provide commentary and general information only. It should not be relied upon or used as a definitive or complete statement of the relevant law. You should obtain formal legal advice specific to your particular circumstance. Liability limited by a scheme approved under Professional Standards Legislation.
