Identify the borrower when family money passes through a personal account

The money takes two steps to reach the business

A relative transfers funds to your personal account and you then send money to the company. Later, everyone describes it as the company family loan. Before relying on that description, ask the lawyer and accountant to review what was actually agreed and recorded. The path taken by the money and the identity of the borrower need to be understood together.

Preserve both transfers

Imagine a sibling providing funds after a conversation about helping a struggling workshop. Keep the sibling's transfer, the director's onward payment and the messages about the arrangement. Record any amount retained or used for another purpose. Do not assume matching bank references prove that the same legal obligation exists between every person involved in the chain.

Keep records aligned with the facts

business.gov.au recommends maintaining accurate business records and protecting them against unauthorised changes. Give the accountant the source documents rather than only the company bank receipt. Ask how the entry should reflect the actual arrangement after appropriate advice. A ledger label such as director loan or family loan is not a substitute for determining who made the commitment to repay whom.

Source: business.gov.au: Record keeping

Explain different recollections early

In the workshop example, the sibling may believe they lent personally to the director while the director believes the company borrowed. Tell the adviser about that difference without rewriting earlier messages. Ask how the position should be clarified and documented lawfully. Do not create a backdated company agreement simply because it would now be more convenient for one participant.

Check proposed repayments before making them

Ask who should receive a repayment under the actual arrangement and how it should be recorded. Avoid sending company money to a relative merely to match an assumed accounting category. If the company is financially distressed, obtain qualified insolvency advice about the proposed transaction. Do not assume family funding receives special repayment treatment because the people involved trusted each other.

Make future funding clearer at the start

Before any additional advance, have the parties, terms and recipient identified with advice and give the relative room for independent assessment. Keep the earlier transfers and any clarification together. A clear funding record reduces uncertainty about the obligation while preserving an honest history of how the family money entered the business.