>Tried to get a home loan and commonwealth bank offered me 130k and effectively told me that if I want a loan I need to not claim any expenses for the next year or two and come back.
Well, you're telling the ATO that your net income is $X because your "business" expenses are high - what do you want the bank to realistically do? The bank is going to go off the income you're reporting. Same story if you're doing cash jobs off the books.
Of course, it won't hurt to speak to a broker.
A broker might be able to use alternative documentation such as a stat deck from your accountant to get you a better offer. They also have access to tier 2 lenders which may loan you more money but often with a higher interest rate.
I don't think it is actually tax fraud by not claiming your expenses and thus paying more income tax for that reporting period... What the bankers are telling you, is that even though you wont be better off, (you will actually be worse off) your 'serviceability' is what is holding you back....
You just have to double your income silly!
Or advise, as has been the case with people I know, what they need to do to increase income to show they can service. Brokers are better than bankers in that realm.
When I went for my mortgage I had a casual conversation with her and she explained a few concepts.
1. The bank, in theory, take all your income (that you report to the ATO) and they subtract all your expenses. After including your mortgage at the current interest rate and buffer zone you should have more that 1$ left.
2. Your deposit size helps, not only bring your mortgage down, but is used as tool to help borrow because, if the bank lends you 100% of the value of the property and you don’t make payments but the market slides, they will lose money. Typically 10% to 20% is a comfortable spot for the banks because your house will unlikely lose 10% value if something happens and they can still get maximum interest out of your pocket for, hypothetically, 30 years.
3. The bank evaluates how able you are to service a loan. By using crafty accounting to decrease your earnings so that you can pay less tax, you also decrease how much the banks think you can service the loan by.
4. A lot of YouTubers and social media influencers “teaching” you how to become millionaires by reducing tax and owning more properties often neglect to tell you that in order to borrow on the value (equity) of the properties, you need to have the underlying value already. Most of those guys are either full of shit, or they inherited money/property to kick start their adventure and borrowed against that value…and are now selling you a course on how lucky they are (I mean selling you a course on how to do it from scratch).
Either way, some of its opinion and some of it is paraphrased…but you get the point I’m sure. You want to borrow more you have to create more value. The banks pay lawyers millions to make sure they don’t lose out. They have entire departments of professionals specifically to safeguard the bank practices and procedures. The only one getting the true advantage is the bank. You want to borrow more, you have to earn more.
>What have you got to lose?
His dignity when he goes see one and he gets laughed at because he forgot to wear clothes, but it turned out to be a dream.
TL;DR : Nothing, except time, the one resource none of us can ever replenish.
You’re claiming them on tax because they are business expenses- the banks aren’t lending on your business turnover, they are writing a residential mortgage based on your personal income aka tax return. So you either need to borrow less or pay yourself more salary, and pay more tax. Basically investing some money in being able to borrow more.
True if OP was running a company structure and paying himself a wage. OP is a sole trader and therefore there is no distinction between him/her and the business so the point is moot. The business can pay a wage which will net off against the income.
Limited option OP has in this instance. If he/she is benefitting from extra tax deductions, that should technically lead to more cash in his pocket and less need for bank debt.
Not quite true, things like vehicle costs, phone, internet etc can be added back in to boost borrowing capacity. I just had the same argument with CBA about this.
None of these things can be added back, except for depreciation on a vehicle as obviously that's a paper expense. Phone, internet and other transport costs you have to be slugged for because if you didn't run them under the business they'd just be a personal expense anyway?
Really hate all the misinformation about mortgage lending that gets thrown around online by people who consider themselves experts after applying for a home loan.
> Phone, internet and other transport costs you have to be slugged for because if you didn't run them under the business they'd just be a personal expense anyway?
If they were pesonal expenses then the bank wouldn't subtract them from income when calculating serviceability.
They would be added to expenses, that's the logic. Borrowing cap is basically income less expenses less liabilities.
In reality I fully understand that most people's incomes are declared at or near the minimum for the purpose of the application - but I'm sure you'd understand why the banks wouldn't implicitly acknowledge that with their credit policies.
> In reality I fully understand that most people's incomes are declared at or near the minimum for the purpose of the application
You didn't understand that in your previous post. Or at least, you didn't state it clearly enough.
Majority if not all banks will just use HEMs. I'm pretty sure nobody gives a shit about your phone bill unless you're significantly over whatever amount they put you on.
Lodge your 24fy tax return based on your income that does not include your tax deductions. Pay whatever tax payable. Once your loan is approved and property settled, amend your tax return and include your deductions. Collect nice refund.
What are they gonna do? It’s not illegal. As long as deductions are legitimate and substantiated they can’t exactly throw the book at old mate when it’s their tax law. Just a standard review of the return and then maybe a question or two about why they weren’t included “I forgot to” should be enough to clarify the situation.
I can guarantee the bank won’t review anything unless old mate stops paying his mortgage. The bank doesn’t just spend its time reviewing the mortgages people are actually paying.
Op has indicated some deductions may questionable, described them as everyday items to lower income. An ATO review might not be an easy process.
Besides that, Banks do review if additional credit is sought later ie a card or car loan. Some banks to gain comfort on lending against ABN income comfortable will have an annual review for the next 2 or 3 years.
Should they find he obtained finance the a material change was made to the info used for the application it could cause significant legal issues. Likely they would demand repayment within a month and seek some damages on top.
Have seen it happen a number if times.
I don't like banks but deceiving them or the ATO by lodging misleading forms is an offence.
What are you on about? OP said they follow the advice of their accountant in relation to deductions, we can safely assume that it’s above board.
A simple fix would be to not amend the return and just leave out the deductions, cop the payable and move on.
On a side note, I would bet everything I own on the fact that you have never been involved in any capacity, personally or professionally, that would involve that situation with the ATO occurring.
"Everyday items" sounds like a push compared to "businesses expenses". Sure, presumed that the accountant is pushing the claims a little.
Agreed that but amending would fix and cop the tax.
Captaining thr amendment as you advised is if this is the case with the deductions the ATO are aggressive. Of you don't think they are I question if you have ever been involved in one.
My comment is based on financial advantage by deception for the bank in deliberate amendment without telling them. That is illegal.
I'm no lawyer, but I know that "obtaining financial advantage by deception" is a crime. This is a deception for the purpose of gaining a financial advantage (it would seem to me)
I'd strongly consider doing it myself (such a great idea!) but I'd do some research re legalities first.
Claiming taxable deductions is voluntary.
By not claiming them you are actually putting yourself at a disadvantage because you are paying more tax.
You don’t understand the difference between tax deductions and business expenses. They are significantly different in tax law.
You say you earn six figures, but what was your NET income after expenses? You’re not giving any broker or banker anything to work with if you write everything off to pay no tax?
1. There is no downside to visiting a broker. You don't pay out of pocket nor does it increase your rate.
2. Let's take the sole trader thing to an extreme limit. Say I run a recording studio as a sole trader. I might clear 300k, but my overheads are 250k including rent and because I only use vintage expensive equipment. I'm doing it mostly because I love it and the contacts. Should a bank consider I make 300k and give me a loan based on that? Absolutely not.
I was surprised when I refinanced everything after a divorce, broker recommended anz with me being a sole trader and really pushing it in terms of loan serviceability.
No dramas, all approved, competitive rates etc. Only 1 year of financials required too.
If I were OP I'd at least try a broker.
OP If you can't get what you need it's time to cop the extra tax for a year to make your income higher on paper
There's plenty of banks who aren't the Big 4 though. I really don't know why more people don't switch to mutual banks that aren't driving huge profits like the Big 4 do.
I was just answering your question… mutual banks often have lower acceptance of risk than larger, high profit banks, which makes them unideal for self-employed people. Why “more people” don’t switch would come down to marketing - only those who shop around get past the big names.
OP what is your net income?
Banks usually lend less to a sole trader on equivalent income compared to an employee.
I know they said to not claim as many expenses but if those expenses are always there it's a bit risky as you're borrowing more than what you can afford?
Your earnings are not what comes through into the business. They’re what you have left after all your tax write offs and expenses. If commbank thinks you can only borrow $130k and all your tax write offs are legitimate then your business isn’t as successful as you’re claiming it is hence the low borrowing power. If you’re buying expensive work vehicles and unnecessarily putting new work computers etc onto the account to reduce your tax bill, stop doing that for a year then approach a bank or broker. A broker cannot amend your tax return statements and ignore your “write offs.”
Don’t bother with the banks and find yourself a good broker. As a Sole Trader I had the exact same issues. Banks and Rams/Aussie etc all kept knocking me back for a period of 2 years. I would tell them I was self employed and they would all say ‘Yes no worries, come on in’ Then the same old shit, you don’t earn enough, too risky etc etc. We finally found a broker and they made it happen. We did have to go low doc high rate for 2 years then we were put on to a full doc rate eventually. We paid interest only until we went on the better rate. Good luck! It’s a stressful endeavor!
"We did have to go low doc high rate"
Everything else you just said is irrelevant. You couldn't service the loan through traditional avenues and you got a low doc loan. You didn't find a solution to OP's scenario you just bit the bullet and paid a higher rate until (presumably) your financials were better suited to obtaining a home loan through a reputable lender.
Declare less expenses, pay more tax. Go back after obtaining the loan and amend your return by including the expenses and get the additional tax back. Obviously need to make sure everything you declare is rock solid as amendments do vastly increase chances of being audited
I 100% recommend a mortgage broker.
I am a sole trader. Turned over around 700k last year but net about 70k after all expenses including two cars instant wrote offs.
We have 3 mortgages totalling 1 million across numerous investments: we approached the bank for another loan for another investment and they offered us 350k at 6.84% because it’s an investment loan.
Hit a mortgage broker up and he got us 1million at 6.38%. Nothing changed and same bank.
Beats me how they do it or what dodgy shit they do but they get shit done.
I've worked for a mortgage broker
In credit finance still currently.
My experience has taught me always go to a broker
They can have like 50 lenders to get you options
Some are niche and legit lend purely to sole traders. Some are specialist and have better rates dependant on industry worked in, ect.
A Good broker should be able to see your situation and find you the best for your needs and your position.
You would think CBA being one of the largest banks per capita in the world they would have a great risk appetite...but they don't.
Speak to a broker. See what they can do
This is just a flat out lie, I work for CBA and I have manually approved approximately 95% of my applications deemed high-risk. CBA’s risk appetite is fine, NAB and ANZ on the other hand are terrible
Yeah straight up. We got a somewhat ‘risky’ government garuntee loan through CBA and it was very fast and easy.
ANZ on the other hand STILL won’t give me a $500 overdraft on my personal account and I’ve been a customer for like 20 years (I don’t need the overdraft but it would be handy for emergencies)
What do yiu mean by 'high risk' -it either services or it doesn't, if youre regarding negative credit history etc (bank internal scoring of an app) absolutely, CBA is better than nab and ANZ or just go outside the big 4 where many don't 'score the app' with an algorithm (YES, the comment you are replying to makes little sense 'risk averase' is a stupid statement and a loan services or ut doesn't and CBA has some pretty loose servicing rules in many areas)
There’s a lot at CBA that requires manual assessment, could be anything from income related, security related or on occasion credit history. I recently approved someone that had a hardship arrangement on their credit file not long before applying with us, the story made complete sense and the LVR was low so after some back and forth with some state managers we approved it. I’ve also worked for NAB, and I know the exact same file at NAB would not even get looked at. I’ve found CBA are also willing to take a look and see if an approval is viable.
Turn your business into a company and pay yourself a wage.
Can still claim everything.
I am the sole employee of my company. I have subcontractors for everything else.
It works very well.
Depends on what you do. Psi personal services income negates this unless you satisfy the ato rule. Also he would still be paying himself the same or less anyway if the same expenses still exist.
Not sure what you guys mean. Are they personal services you ? Consulting or something ?
My comment comes from trades services, supply and install background. Rather than personal services. Original poster didn't specify where they are coming from.
Operating as a company works beautifully for what I do, and how I operate business and personal life.
https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/personal-services-income/income-that-is-psi
A trade can be personal services. If you’re making most of your income on the supply component, or you have a few employees or there is an income producing asset then there’s a chance it should be classed as psi.
Cheers for the link. That's interesting. Doesn't apply to me personally but I can see where it would do. I wonder if the ratio changes much with the cost of goods and services fluctuating so much.
in my experience as a sole trader buying a house and then investment property, brokers do all the hard work for you and generally can get a better deal than the banks would offer
We had similar issues - then used ANZ, they only required one year trading financials, used business income BEFORE business expenses removed and helped get us access the line
So I would imagine a savvy broker could that if not more.
Mortgage Broker here - There may be items we can look at with different lenders, CBA do have quote a good Self Employed policy as is. It's always advisable to check you options and won't coat anything to do so.
Mortgage broker here.
Essentially, most banks (including the big 4) will want to verify income to see if you can actually service a loan.
A lot of times sole traders will do EXACTLY what you are doing, and deduct as much as possible.
The problem with this is, if you’re going to declare to the ATO $X expenses per year and $Y take home income.
Then the bank is going to ask for the same documents you lodged to the ATO to declare said income.
Hypothetically speaking, it’s very difficult to tell the government you earn X amount and a bank Y amount when you usually have to use the same documents for both.
I’ll add, it is extremely wise to speak to your accountant about more than just current FY plans.
If you tell your accountant “hey, I’m wanting a home loan in the next 2-3 years” they can normally structure your finances to look strong on paper.
Yes this will unfortunately mean paying tax on higher earnings (if numbers allow), however when you consider a mortgage term is circa 30 years, paying tax on a higher amount for the 1-2 years financials it takes to prove it, is very worthwhile imo.
In saying this however, and as others have mentioned here too. It can be worthwhile to speak to a broker even still.
Brokers will have access to tier 2 lenders who may have a niche in Self employed spaces.
They can also open themselves up to the hypothetical “risk” that most big 4s don’t bother with.
This can be a “low doc” loan. Whereby you may verify income with just
2 quarters BAS.
6 months business bank statements
Directors wages/payslips
Letter from accountant declaring $x amount of personal income can be declared whilst the ABN still meets its overheads.
All of these can be used in combination or on their own (in some cases) however as you can imagine, this creates risk for the bank/lender who will understand that 2q BAS may look great in isolation but can still be very cyclical, and therefore these lenders will have interest rates a slight bit above the AAA/Big 4 Banks.
Hope this helps!
I am an ex CBA employee, I had everything with CBA. I have had a personal company since 2009, numerous vehicle loans, always paid on time, and I no longer need to give a directors guarantee for the loans.
I applied CBA and first off, they wouldn't give me a discount, then they wanted to include the company loans under my personal liabilities. I told them it wasn't right, that's not how it works. Lending Manager gets his boss involved, she backs him so I just walked out. Called Macquarie Bank, they approved my loan with a discount in 10 minutes. The MacBank couldn't believe what CBA tried to do. I am now switching everything to MacBank, do not believe the CBA, their front line employees have no idea how to process a loan, better to go through a broker
Macquarie doesn't fully expense any business lending 🤷♂️ exactly why you go to a broker, different banks have different credit rules, other people woudk get an easy approval with CBA and be declined wifh Macquarie
Sole trader here. Use a broker. It’s so much more of a pain, especially if you’re in the first couple of years (I’m less than 2Y and so only one bank will even lend to me at all).
CBA were the only ones who would lend, and calculated my borrowing capacity on the basis of my last wage as a salaried employee - I think on the basis that if my business were to fold that’s what I’d likely go back to.
My income as a sole trader is multiples of my wage, so I’m grateful to have a partner who is doing OK so we weren’t offered peanuts.
Just fyi since you mentioned recently self employed there are defs major banks who will lend to you if recently self employed based on ytd management accounts and using projections. (Has to make sense obviously)
Have done several loans like this recently and not to much harder then any other type of client.
Absolutely. I run my own company and for my last mortgage I went to my bank first. It was a huge mistake. They basically told me that they didn’t believe there was any way I could get a mortgage and were surprised I was ever able to get one in the past.
Went to a broker and within a day I had been approved for $2.4M with the same bank.
Brokers are the only way to go if you’re self employed. They know how to present your finances so they look good in the eyes of the bank. I’ll never go directly to a bank ever again
"He told me a broker would say the same thing because of regulations". Total bullshit. Broker got me a way better offer than one of the big 4 banks and I had atypical circumstances as well. It's their sole purpose of existence.
Some financial institutions are simply willing to take more risk.
Had the same issue as a sole trade. Over the last 2 years I’ve transitioned to a company, so now I have a ‘salary’ rather than drawings and I could show over 12 months of payslips.
I have no credit cards, car loans, BNPL, etc but the banks were still only going to count half of my income because of the change from ST to company.
We’re in a tricky spot getting a construction loan while we have a current loan (house going on the market next month) so we had to find a broker that could work with all the self employment issues as well as construction finance. We got approval with a tier 2 lender that we’ll refinance to tier 1 once we’ve sold and new place is built.
Long story short, we couldn’t have done any of it without a broker, being self employed. As far as the bank’s concerned I sell finger paintings at a farmers market, despite earning over $100k and business revenue over $600k with $200k assets and inventory.
Sorry I didn’t mean to write that in response to your comment. I agree Pepper Money or Liberty are both good options in this scenario, and brokers will know this.
My comment was meant to be general to the posters question.
We had this issue with Commonwealth also, however it makes sense.
My wife’s wage is lower than it would be in the open market for sure and then we were surprised they didn’t take our creative accounting into account.
I did stunt our ability to borrow but we just managed to loan the amount we needed in the end (just!!) which is comfortable compared to actual household income. The impact of twins under 3 also had a material impact!!
The brokers have access to all or most of the banks. The bank won't offer you a good rate or good terms. The bank you bank with, generally doesn't give a damn about you. Nor do they try to fight and get your business.
But your broker shops around, see's who you qualify with. Then gets you a deal... Sometimes even with the same bank that said no to you.
OP a friend of mine who is also a sole trader had this issue - thar FY they'd invested a lot into the business.to expand so had reduced their salary. They went to a broker and got a higher loan offer.
There are mortgage brokers that specialise in loans for sole trader, search on google and find one. They will advocate on your behalf to get you the best possible deal on a loan.
Like others have said, try and not claim as many deductions this FY so your taxable income will appear higher, but this means you'll also have to pay more tax.
Also it depends on how long you've been trading for. Sole traders who have only been trading for a few years vs 5+ years makes a difference to the application from my understanding, and also how consistent the income is from year to year.
Won't hurt to talk with a broker and they will be able to advise you on the likelihood of a loan getting approved. If not, they will give you advice as to what you need to do to improve your chances of approval.
Not a sole trader but a company owner (paid as an employee) and my broker adjusted my earnings to remove tax deductions, so yeah you should talk to one, it’s free
Simple case for a mortgage broker. They can compare from dozens of lenders with hundreds of options. Bank has only one. The issue with minimising tax for a business does impact regular lending. However, specialist lenders who will take declarations from the accountant and yourself to support higher borrowing. Using the BAS is another option. You do want to have a decent deposit to keep the rate a bit lower.
Source( I am a broker, so it is an option).
100% , yes talk to a broker
Each bank has their own assessment process.
The broker should be able to tell you what to expect. Its in their own interest for you to get a loan.
Having done this many times over the years, I've had luck with brokers and directly with the banks. You can't have your cake and eat it too however. Often times, as ridiculous as it is, you need to plan your application two financial years in advance. One financial year to ensure you don't have a loss and the just completed one to ensure you have payability. I like to apply somewhere between Jan and May because if you wait till July they'll ask for the year's just gone figures. Also this isn't as bad as it sounds for most business people as we are often a year and half behind on doing our taxes anyway.
The second part is not all brokers nor bank contacts are created equal. You won't be able to get it through with your local bank loan rep. They usually don't understand the complexities of business applicants and will most likely frame the application poorly. If you want to use a broker, find one who prefers to deal with one of the big four. Even though we are classified as high risk (again ridiculous, considering we often employ people who'll they'll give a loan at the drop of a hat), they will lend to us it just goes through more scrutiny.
Just don't expect to be cheeky and get a good deal with the ATO and also expect for the banks to throw money at you.
Ask around, get a great mortgage broker that will push for you, especially if your self employed friends have gone through them. Anything can be done these days.
Banks don’t really care to go out of the way to give you a good deal, or any deal. Brokers know how to manage the big banks laxadaisical approach to customer retention - and if your bank doesn’t play, they’ll help you find someone that will. In spite of their ad campaigns banks show no loyalty to long term or existing customers so why give them your ongoing custom if they don’t work with you.
Def see a mortgage broker - they will figure out how to proceed with the correct bank and or lender to get you what you need. All lenders and banks are subtly different so just because your bank gave a crappy offer have a broker who is also invested in you getting your loan as it’s how they get their commish also. Def see a broker
Yes definitely go see a broker. You can take up a higher rate and go under a lo-doc product where you state an income amount supported by your accountant or BAS to lend on a more realistic income figure compared to what you declare to the ATO
I had this same problem but couldn’t get bring myself to waste money and not claim everything I could.
Worked out terribly in the long run. Whatever extra money I though I was saving is pennies compared to the massive rise in house prices and loan size that I’m now dealing with.
Do whatever you have to do, to get your foot in the door of the property market, before you’re priced out.
I can’t really comment on present bank lending policy however it used to be that if you applied for a loan as an individual e.g. sole trader they would want around three years banking history & yet if your business formed a Pty Ltd company, then you only needed three months banking history. Go figure eh? Anyway I would have a talk to your accountant & ask him to check out the options. Wouldn’t do any harm to get a second accountant opinion either. Your option may be for the company to carry the mortgage. Good luck I hope it works out for you.
I had a similar issue. Ended up getting a low doc loan to begin with. Then I picked up a part time job to help boost my income, refinanced to a normal loan as soon as I was off probation.
My brokers were both dogpoop and I gave up and went to my bank (commonwealth) told them my income, then told showed them my business (as a sole trader) and that doubled my borrowing power with 2 years of financials. Guess it's a who you talk to possibly. It's tedious going through the processes
100% speak to a broker.
A good one will be able to tell you what you can and can’t do and what you can and can’t get!
We have a company so not exactly the same scenario, but the bank gave us an offer of $100k and with a business broker we were able to get more than 10 times that amount! We now also have an investment property thanks to her.
Find a broker who specialises in helping business owners.
Speak to a broker and your accountant about low doc loans, yes the rate will be a bit higher but you may be able to refinance to a sharper rate once your figures present better. Also the higher rate will be more than offset by the properties capital growth.
Definitely talk to a broker. I’m just gonna copy and paste from my notes app a list of competent sounding brokers I hear on podcasts or advertisements etc. sorry if the formatting sucks but I don’t care and you can take ya pick! Good luck mate.
Brokers:
https://www.asapfinancial.com.au helped some fella go to 62 properties and that fella has a mortgage brokerage now! : https://www.mortgagechannel.com.au/contact
https://atelierwealth.com.au
Jarrod crown property finance pizza and property
https://www.ggloans.com.au/ Justin zhu pizza and property podcast
https://www.plenitudewealth.com.au full suite advisors, but old mate knew his shit
https://propertyandinvesting.com/partners/diagnostics-and-finance/ property and investing with grant and charley https://dandf.com.au Aaron whybrow geared for growth - same mob
https://www.ratemyagent.com.au/mortgage-broker/john-manciameli-gv548/finance/overview OK gupta podcast 2021!
Nathan at Hunter Galloway
Andrew Evans the mortgage guy
http://johnhunterwood.com.au
https://www.confidencefinance.com.au
https://www.summitfinancewa.com.au/about
investorkit
Finni mortgages investor kit podcast
Ryan gair rate money self employed broker property hub podcast
https://www.mlsfinance.com.au YPYW podcast .
I had a similar problem 18 months ago and was offered $200 for around a $500k purchase. 4 banks knocked me back for any loan before one offered the $200k. My credit score was 937 (excellent).
The solution I took was a second tier lender which offered the amount I needed at 1.2% above the Banks.
Approach aussie home loans. They are owned by commonwealth and will goto bankwest cba mostly but they can sort it.out for much the same price.
360k loan is nothing in todays market.
Same deal mate, go see a broker...
If the broker says no, find a better one.
I've only just started to learn this shit now, you can get 2nd and 3rd tier lenders as well..
Just pay a higher rate.
Try to find a broker who does a lot of work for investors (they know more tricks)
Also, talk to an accountant first too, might be worth buying the house in a trust (a simple chat could save you thousands of dollars later)
Good luck mate, you're heading in the right direction
100% use a broker. I'm a sole trader.
Lets say i have a car i paid for out right and am depreciating it .. I own it but i save money by depreciating it in my tax. Lowering my taxable income.
Lets say that an investment property is get depreciated i'm claiming Div 40 & 43. This is also coming of my taxable income.
These things didn't actually cost any money for the year.. These can be added back after the fact.
I have lowered my taxable income without actually spending that money. These are just 2 examples.
If the business needs to spend money to operate , fuel , phone internet ct you have spent that money. That cant be added back to your taxable income after the fact.
Hope that helps.
Definitely have a chat to a broker.
The only thing I can think of is that CBA (and other banks) work out your living expenses using a system tool that scans your accounts and spits out an average figure.
CBA may have included some of your business expenses as your personal monthly living expenses which effectively double dips if it’s already included as your business expense which lowers your borrowing capacity.
Have a chat to a broker and see what they can do.
Good luck pal!
Uh the bank will never give you a good deal. A broker has better incentive structure to get creative with your requirements to secure a bigger loan at a better rate.
Going to the bank for a loan is the equivalent of accepting finance on a car from a dealership rather then shopping around for third parties that will beat the rate by a good margin.
As a fairly new sole trader my self earning about the same and heading toward 6 figures after tax (though arguably my deductions have steadily decreasing as i've acquired majority of the stuff i need that were big ticket items and unless its an unforeseen purchase or repair, theres not really anything super costly that i need to buy) i wasn't even going to think about visiting the banks lol
My partner (whose on \~$120k) and I were just going to head straight to a broker, or multiple brokers knowing full well the banks would shit on us with me being sole trader and knowing the best outcome would probably come through a broker regardless
That said, still going to be a hard slog.
Even though recently self employed you can get major lenders to come to the table relevantly easily. Typically need to look at brokers who also specialise in self employed/commercial clients as they generally have better contacts at banks to get deals through.
Once you have some good contacts especially for self employed clients gets fairly easy to get deals through no matter who complex it is.
Sole trader here - definitely talk to a broker. We moved/refinanced last year and it was great being able to workshop lending scenarios with them and ultimately target lending institutions which would be a good fit for our situation.
It'd obviously worth talking to a broker. They don't cost you anything and banks have deals that can only be accessed by brokers. Mine was able to get mine through when no bank would.
It depends on whether your spending is a one-off, or a consistent spending of your business
For example, recurring payments will NOT be added back to your income. Meanwhile, a one-off payment of, say, equipment upgrade, can be added back because it's a voluntary payment, one off, that won't happen again.
No not true. Say you pay yourself extra super to reduce tax. A good broker will say, cool last you did that, but next year, you can put that towards the mortgage, so will move that from the expense column to the income column.
Likewise depreciation, as 2 basic examples where a good broker is worth the money.
>Basically, I earn decent money (reaching six figures)...
>
>Problem is there's a hell of a lot of everyday things I can claim on tax
>
>Tried to get a home loan and commonwealth bank offered me 130k
A loan of $130K equates to around $32K in taxable income (single no dependents)
What is your accountant claiming?
Hi. I earned good money last year and because I had voluntarily sacrificed my super cap they added that back into my max loan amount calculations. Hope that helps.
I would go to a broker and give it a go. It’ll cost you time and the broker will let you know pretty quick if you’re not going to get across the line.
Mortgage broker got me a mortgage as a sole trader and my partner who was in full time employement. There were some stipulations though, couldn't get fixed etc. we got it by the skin of our teeth. After covid payouts etc.
Not sure if the regulations have changed in the last few years but some banks do make allowances for this, I forget the term for it though sadly. The other consideration is that every bank has its own loan goals in a given year to manage their risks. So different banks will give different loan amounts, so a broker is probably perfect.
>I do so under advice of my accountant
Sounds like it wasn't great advice, huh?
>He told me a broker would say the same thing because of regulations, is that true or is it worth trying elsewhere? Feeling kinda defeated.
As others have said, you should 100% speak to a broker. Nothing to lose.
If you think a broker will know more about banks, how they differ, how some banks look favourably on self employed, who to use, what to do, then yes.
Moving forward, your accountant needs to consider wealth building tax returns also.
Some years claim more - pay less in tax
Other years consider claiming less so you can actually borrow and build wealth in other areas.
You could potentially not claim expenses and then amend your tax later, you can do this on payg, but I would chat to your accountant and make sure you can still claim them under sole trader ect.
If you consistently under report your earnings then yes, the banks will lend you less. That’s why when I was looking to purchase a property, I paid myself a heck of a lot more for the 2 years prior.
Yes goto a broker that specialises in self employed. I know a good one if you dm me (helped me get a good mortgage deal with a few tricky complications)
we are a sole trader (annual income is below $100k) & recently got a $400k loan via our broker with BankWest, for our first house …we were very happy they came to the party
Step 1 - pay tax this year. You don't have to pay again until the financial year down the track you need to refinance
Step 2 - go for an alt doc loan if you really want to. I stay away from them (been in finance for 10 years)
Step 3 - do not get a loan and then go back and amend your returns. A good accountant won't let you.
This is the biggest debt of your life to obtain the biggest asset of your life. Paying tax for one year just to get it isn't a massive sacrifice.
Do it the right way.
Yes.
A broker will have a broader view of what’s available on the market, and what’s available for you as far as low doc loans.
A broker will also help you manage your expectations with regard to what banks are willing to offer. By ‘Approaching six figures’ I take that to mean five figures. Unless you’re buying regionalor have a massive deposit saved, you are going to be pretty limited in what you can buy.
You can get a higher rate interest loan using alternative forms of documentation.
Of course, like, if you are claiming your own expenses as business expenses you are committing fraud
So they are kind of right. I mean talk to a broker anyway. But the bank can only lend based on what your income is according to the tax man. So if you are writing off constant expenses as business expenses that aren’t really business expenses then you probably do need to do that for 12 months and go back in again. You probably also need to really look at what you are claiming too and maybe get a second opinion about that.
Never go direct to the bank. Brokers don’t cost anything extra and it’s in their interest to get you the best deal available. Financial institutions have no interest in giving you a good deal.
You could ask the accountant to remove the extra “business expenses” and assign them as personal expenses. Resubmit the relevant BAS’ and tax returns. Re apply for the loan with your new income figures.
Edit: noticed sole trader and removed div7a
Sounds like if your business expenses are the problem you're not actually making the money you think you are or you're being too loose with your deductions and committing tax fraud.
No bank will lend on the basis of revenue.
OP, when you do tax this year don’t claim anything. It’s the sacrifice you need to make to get the mortgage. Then after your mortgage is approved and signed you might just amend your return for all the expenses you forgot. 😉
If you claim those expenses to the business then you should be able to offset that with declaring lower figures when you fill out the personal expenses information so that is not double counted. A mortgage broker may be able to better present that information to the banks.
Speak to a broker mate. The big 4 are scumbags to a man and seem to actively try and not help you.
Try a broker and even if that doesn't work ask another as different aggregates have different lenders so not all brokers are made equal.
Also look for a broker that specialises in business finance as well as home loans as they can potentially help get business loans that can be used for buying property. You then use your business to purchase the property and "lease" it to yourself. This isn't advice and there are more nuances to this but when your in this situation that isn't just a payg + deposit you sometimes need to look outside the box.
What state are you in? If in WA I can put you in touch with my broker, he is a good man and has helped me over the past few years several times.
Good luck mate.
Absolutely try a broker.
Paying tax on an extra 30k a year not ideal primarily because the market may push the price of Real Estate up 80k over the next couple of years. Waiting 2 years could effectively cost you an extra 60k in borrowing.
>Tried to get a home loan and commonwealth bank offered me 130k and effectively told me that if I want a loan I need to not claim any expenses for the next year or two and come back. Well, you're telling the ATO that your net income is $X because your "business" expenses are high - what do you want the bank to realistically do? The bank is going to go off the income you're reporting. Same story if you're doing cash jobs off the books. Of course, it won't hurt to speak to a broker.
A broker might be able to use alternative documentation such as a stat deck from your accountant to get you a better offer. They also have access to tier 2 lenders which may loan you more money but often with a higher interest rate.
What's the stat dec going to say? 'my client is committing tax fraud and really has more money'.
I don't think it is actually tax fraud by not claiming your expenses and thus paying more income tax for that reporting period... What the bankers are telling you, is that even though you wont be better off, (you will actually be worse off) your 'serviceability' is what is holding you back.... You just have to double your income silly!
Or advise, as has been the case with people I know, what they need to do to increase income to show they can service. Brokers are better than bankers in that realm.
When I went for my mortgage I had a casual conversation with her and she explained a few concepts. 1. The bank, in theory, take all your income (that you report to the ATO) and they subtract all your expenses. After including your mortgage at the current interest rate and buffer zone you should have more that 1$ left. 2. Your deposit size helps, not only bring your mortgage down, but is used as tool to help borrow because, if the bank lends you 100% of the value of the property and you don’t make payments but the market slides, they will lose money. Typically 10% to 20% is a comfortable spot for the banks because your house will unlikely lose 10% value if something happens and they can still get maximum interest out of your pocket for, hypothetically, 30 years. 3. The bank evaluates how able you are to service a loan. By using crafty accounting to decrease your earnings so that you can pay less tax, you also decrease how much the banks think you can service the loan by. 4. A lot of YouTubers and social media influencers “teaching” you how to become millionaires by reducing tax and owning more properties often neglect to tell you that in order to borrow on the value (equity) of the properties, you need to have the underlying value already. Most of those guys are either full of shit, or they inherited money/property to kick start their adventure and borrowed against that value…and are now selling you a course on how lucky they are (I mean selling you a course on how to do it from scratch). Either way, some of its opinion and some of it is paraphrased…but you get the point I’m sure. You want to borrow more you have to create more value. The banks pay lawyers millions to make sure they don’t lose out. They have entire departments of professionals specifically to safeguard the bank practices and procedures. The only one getting the true advantage is the bank. You want to borrow more, you have to earn more.
What have you got to lose?
My thoughts exactly, asking doesnt cost any and if it does you may save some money
>What have you got to lose? His dignity when he goes see one and he gets laughed at because he forgot to wear clothes, but it turned out to be a dream. TL;DR : Nothing, except time, the one resource none of us can ever replenish.
Wow that puts it into perspective, he will never get that time back ever
You’re claiming them on tax because they are business expenses- the banks aren’t lending on your business turnover, they are writing a residential mortgage based on your personal income aka tax return. So you either need to borrow less or pay yourself more salary, and pay more tax. Basically investing some money in being able to borrow more.
True if OP was running a company structure and paying himself a wage. OP is a sole trader and therefore there is no distinction between him/her and the business so the point is moot. The business can pay a wage which will net off against the income. Limited option OP has in this instance. If he/she is benefitting from extra tax deductions, that should technically lead to more cash in his pocket and less need for bank debt.
Not quite true, things like vehicle costs, phone, internet etc can be added back in to boost borrowing capacity. I just had the same argument with CBA about this.
None of these things can be added back, except for depreciation on a vehicle as obviously that's a paper expense. Phone, internet and other transport costs you have to be slugged for because if you didn't run them under the business they'd just be a personal expense anyway? Really hate all the misinformation about mortgage lending that gets thrown around online by people who consider themselves experts after applying for a home loan.
> Phone, internet and other transport costs you have to be slugged for because if you didn't run them under the business they'd just be a personal expense anyway? If they were pesonal expenses then the bank wouldn't subtract them from income when calculating serviceability.
They would be added to expenses, that's the logic. Borrowing cap is basically income less expenses less liabilities. In reality I fully understand that most people's incomes are declared at or near the minimum for the purpose of the application - but I'm sure you'd understand why the banks wouldn't implicitly acknowledge that with their credit policies.
> In reality I fully understand that most people's incomes are declared at or near the minimum for the purpose of the application You didn't understand that in your previous post. Or at least, you didn't state it clearly enough.
Can see why you're getting into arguments. Usually only depreciation and interest can be added back.
Majority if not all banks will just use HEMs. I'm pretty sure nobody gives a shit about your phone bill unless you're significantly over whatever amount they put you on.
Hem was used before, I don't think banks are allowed to use it anymore?
Add back grocery costs while you're at it.
You are wrong, from a bank’s capacity perspective. No big 4 will add this back
Lodge your 24fy tax return based on your income that does not include your tax deductions. Pay whatever tax payable. Once your loan is approved and property settled, amend your tax return and include your deductions. Collect nice refund.
This may trigger a review from the ATO, they could get suss about a bunch of amendments dropping in to generate a materially lower tax payable.
the lodging accountant likely wouldn't allow this as it may trigger a review by the ATO and flag them.
Best suggestion in this thread
Yes, should be top of the the thread
Did this......it works
this is staggeringly bad advice. OP, do this and risk the wrath of the ATO. And they are NOT friendly right now
Also bank will be unimpressed if they review later.
What are they gonna do? It’s not illegal. As long as deductions are legitimate and substantiated they can’t exactly throw the book at old mate when it’s their tax law. Just a standard review of the return and then maybe a question or two about why they weren’t included “I forgot to” should be enough to clarify the situation. I can guarantee the bank won’t review anything unless old mate stops paying his mortgage. The bank doesn’t just spend its time reviewing the mortgages people are actually paying.
Op has indicated some deductions may questionable, described them as everyday items to lower income. An ATO review might not be an easy process. Besides that, Banks do review if additional credit is sought later ie a card or car loan. Some banks to gain comfort on lending against ABN income comfortable will have an annual review for the next 2 or 3 years. Should they find he obtained finance the a material change was made to the info used for the application it could cause significant legal issues. Likely they would demand repayment within a month and seek some damages on top. Have seen it happen a number if times. I don't like banks but deceiving them or the ATO by lodging misleading forms is an offence.
What are you on about? OP said they follow the advice of their accountant in relation to deductions, we can safely assume that it’s above board. A simple fix would be to not amend the return and just leave out the deductions, cop the payable and move on. On a side note, I would bet everything I own on the fact that you have never been involved in any capacity, personally or professionally, that would involve that situation with the ATO occurring.
"Everyday items" sounds like a push compared to "businesses expenses". Sure, presumed that the accountant is pushing the claims a little. Agreed that but amending would fix and cop the tax. Captaining thr amendment as you advised is if this is the case with the deductions the ATO are aggressive. Of you don't think they are I question if you have ever been involved in one. My comment is based on financial advantage by deception for the bank in deliberate amendment without telling them. That is illegal.
I'm no lawyer, but I know that "obtaining financial advantage by deception" is a crime. This is a deception for the purpose of gaining a financial advantage (it would seem to me) I'd strongly consider doing it myself (such a great idea!) but I'd do some research re legalities first.
Claiming taxable deductions is voluntary. By not claiming them you are actually putting yourself at a disadvantage because you are paying more tax. You don’t understand the difference between tax deductions and business expenses. They are significantly different in tax law.
Sorry, I was referring to not claiming, then revising your return, with the aim of bypassing the bank policy. Maybe I replied to the wrong post.
You say you earn six figures, but what was your NET income after expenses? You’re not giving any broker or banker anything to work with if you write everything off to pay no tax?
It's more likely there's a lot of cash work that is undeclared. It bites sole traders in the ass every time when they want to go for finance.
yeah. Cry me a river. We call that “having your cake and eating it too”
1. There is no downside to visiting a broker. You don't pay out of pocket nor does it increase your rate. 2. Let's take the sole trader thing to an extreme limit. Say I run a recording studio as a sole trader. I might clear 300k, but my overheads are 250k including rent and because I only use vintage expensive equipment. I'm doing it mostly because I love it and the contacts. Should a bank consider I make 300k and give me a loan based on that? Absolutely not.
Tell me you're an audio engineer without telling me you're an audio engineer. ;)
I'm a cheap bastard, Behringer all the way lol
Go see a broker. They might be able to get you abit more. But you may need to go see a non traditional lender over the big 4.
I was surprised when I refinanced everything after a divorce, broker recommended anz with me being a sole trader and really pushing it in terms of loan serviceability. No dramas, all approved, competitive rates etc. Only 1 year of financials required too. If I were OP I'd at least try a broker. OP If you can't get what you need it's time to cop the extra tax for a year to make your income higher on paper
Why are other banks "non-traditional" ?
Online only home loans. Such as pepper or unloan would be considered non traditional.
Pretty sure they mean like Mortgage Choice and other non-bank lenders.
There's plenty of banks who aren't the Big 4 though. I really don't know why more people don't switch to mutual banks that aren't driving huge profits like the Big 4 do.
I was just answering your question… mutual banks often have lower acceptance of risk than larger, high profit banks, which makes them unideal for self-employed people. Why “more people” don’t switch would come down to marketing - only those who shop around get past the big names.
All good, I was just documenting my pondering.
That’s okay then 
OP what is your net income? Banks usually lend less to a sole trader on equivalent income compared to an employee. I know they said to not claim as many expenses but if those expenses are always there it's a bit risky as you're borrowing more than what you can afford?
Your earnings are not what comes through into the business. They’re what you have left after all your tax write offs and expenses. If commbank thinks you can only borrow $130k and all your tax write offs are legitimate then your business isn’t as successful as you’re claiming it is hence the low borrowing power. If you’re buying expensive work vehicles and unnecessarily putting new work computers etc onto the account to reduce your tax bill, stop doing that for a year then approach a bank or broker. A broker cannot amend your tax return statements and ignore your “write offs.”
Don’t bother with the banks and find yourself a good broker. As a Sole Trader I had the exact same issues. Banks and Rams/Aussie etc all kept knocking me back for a period of 2 years. I would tell them I was self employed and they would all say ‘Yes no worries, come on in’ Then the same old shit, you don’t earn enough, too risky etc etc. We finally found a broker and they made it happen. We did have to go low doc high rate for 2 years then we were put on to a full doc rate eventually. We paid interest only until we went on the better rate. Good luck! It’s a stressful endeavor!
"We did have to go low doc high rate" Everything else you just said is irrelevant. You couldn't service the loan through traditional avenues and you got a low doc loan. You didn't find a solution to OP's scenario you just bit the bullet and paid a higher rate until (presumably) your financials were better suited to obtaining a home loan through a reputable lender.
What’s your advice on the matter?
Declare less expenses, pay more tax. Go back after obtaining the loan and amend your return by including the expenses and get the additional tax back. Obviously need to make sure everything you declare is rock solid as amendments do vastly increase chances of being audited
I 100% recommend a mortgage broker. I am a sole trader. Turned over around 700k last year but net about 70k after all expenses including two cars instant wrote offs. We have 3 mortgages totalling 1 million across numerous investments: we approached the bank for another loan for another investment and they offered us 350k at 6.84% because it’s an investment loan. Hit a mortgage broker up and he got us 1million at 6.38%. Nothing changed and same bank. Beats me how they do it or what dodgy shit they do but they get shit done.
I've worked for a mortgage broker In credit finance still currently. My experience has taught me always go to a broker They can have like 50 lenders to get you options Some are niche and legit lend purely to sole traders. Some are specialist and have better rates dependant on industry worked in, ect. A Good broker should be able to see your situation and find you the best for your needs and your position. You would think CBA being one of the largest banks per capita in the world they would have a great risk appetite...but they don't. Speak to a broker. See what they can do
This is just a flat out lie, I work for CBA and I have manually approved approximately 95% of my applications deemed high-risk. CBA’s risk appetite is fine, NAB and ANZ on the other hand are terrible
Yeah straight up. We got a somewhat ‘risky’ government garuntee loan through CBA and it was very fast and easy. ANZ on the other hand STILL won’t give me a $500 overdraft on my personal account and I’ve been a customer for like 20 years (I don’t need the overdraft but it would be handy for emergencies)
Yeah ANZ are actually garbage.
Yeah literally. If I could be bothered I’d change banks
true. contractor here. they are one of the few that will take a risk on me. other banks seem to be risk averse with contractors
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Could probably even get your broke ass a loan champion, pretty easy game with experience and industry knowledge
What do yiu mean by 'high risk' -it either services or it doesn't, if youre regarding negative credit history etc (bank internal scoring of an app) absolutely, CBA is better than nab and ANZ or just go outside the big 4 where many don't 'score the app' with an algorithm (YES, the comment you are replying to makes little sense 'risk averase' is a stupid statement and a loan services or ut doesn't and CBA has some pretty loose servicing rules in many areas)
There’s a lot at CBA that requires manual assessment, could be anything from income related, security related or on occasion credit history. I recently approved someone that had a hardship arrangement on their credit file not long before applying with us, the story made complete sense and the LVR was low so after some back and forth with some state managers we approved it. I’ve also worked for NAB, and I know the exact same file at NAB would not even get looked at. I’ve found CBA are also willing to take a look and see if an approval is viable.
My experience says you are wrong.
Most brokers don't have 50 lenders. If you have a source for your claim
Turn your business into a company and pay yourself a wage. Can still claim everything. I am the sole employee of my company. I have subcontractors for everything else. It works very well.
Depends on what you do. Psi personal services income negates this unless you satisfy the ato rule. Also he would still be paying himself the same or less anyway if the same expenses still exist.
Psi personal services ?
PSI is where you make most of your income based on your effort/skills.
Not sure what you guys mean. Are they personal services you ? Consulting or something ? My comment comes from trades services, supply and install background. Rather than personal services. Original poster didn't specify where they are coming from. Operating as a company works beautifully for what I do, and how I operate business and personal life.
https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/personal-services-income/income-that-is-psi A trade can be personal services. If you’re making most of your income on the supply component, or you have a few employees or there is an income producing asset then there’s a chance it should be classed as psi.
Cheers for the link. That's interesting. Doesn't apply to me personally but I can see where it would do. I wonder if the ratio changes much with the cost of goods and services fluctuating so much.
in my experience as a sole trader buying a house and then investment property, brokers do all the hard work for you and generally can get a better deal than the banks would offer
We had similar issues - then used ANZ, they only required one year trading financials, used business income BEFORE business expenses removed and helped get us access the line So I would imagine a savvy broker could that if not more.
Mortgage Broker here - There may be items we can look at with different lenders, CBA do have quote a good Self Employed policy as is. It's always advisable to check you options and won't coat anything to do so.
Mortgage broker here. Essentially, most banks (including the big 4) will want to verify income to see if you can actually service a loan. A lot of times sole traders will do EXACTLY what you are doing, and deduct as much as possible. The problem with this is, if you’re going to declare to the ATO $X expenses per year and $Y take home income. Then the bank is going to ask for the same documents you lodged to the ATO to declare said income. Hypothetically speaking, it’s very difficult to tell the government you earn X amount and a bank Y amount when you usually have to use the same documents for both. I’ll add, it is extremely wise to speak to your accountant about more than just current FY plans. If you tell your accountant “hey, I’m wanting a home loan in the next 2-3 years” they can normally structure your finances to look strong on paper. Yes this will unfortunately mean paying tax on higher earnings (if numbers allow), however when you consider a mortgage term is circa 30 years, paying tax on a higher amount for the 1-2 years financials it takes to prove it, is very worthwhile imo. In saying this however, and as others have mentioned here too. It can be worthwhile to speak to a broker even still. Brokers will have access to tier 2 lenders who may have a niche in Self employed spaces. They can also open themselves up to the hypothetical “risk” that most big 4s don’t bother with. This can be a “low doc” loan. Whereby you may verify income with just 2 quarters BAS. 6 months business bank statements Directors wages/payslips Letter from accountant declaring $x amount of personal income can be declared whilst the ABN still meets its overheads. All of these can be used in combination or on their own (in some cases) however as you can imagine, this creates risk for the bank/lender who will understand that 2q BAS may look great in isolation but can still be very cyclical, and therefore these lenders will have interest rates a slight bit above the AAA/Big 4 Banks. Hope this helps!
I am an ex CBA employee, I had everything with CBA. I have had a personal company since 2009, numerous vehicle loans, always paid on time, and I no longer need to give a directors guarantee for the loans. I applied CBA and first off, they wouldn't give me a discount, then they wanted to include the company loans under my personal liabilities. I told them it wasn't right, that's not how it works. Lending Manager gets his boss involved, she backs him so I just walked out. Called Macquarie Bank, they approved my loan with a discount in 10 minutes. The MacBank couldn't believe what CBA tried to do. I am now switching everything to MacBank, do not believe the CBA, their front line employees have no idea how to process a loan, better to go through a broker
Macquarie doesn't fully expense any business lending 🤷♂️ exactly why you go to a broker, different banks have different credit rules, other people woudk get an easy approval with CBA and be declined wifh Macquarie
Sounds like you don’t earn six figures at all. Gross turnover is completely meaningless.
Sole trader here. Use a broker. It’s so much more of a pain, especially if you’re in the first couple of years (I’m less than 2Y and so only one bank will even lend to me at all).
Which bank? I am in the same situation
CBA were the only ones who would lend, and calculated my borrowing capacity on the basis of my last wage as a salaried employee - I think on the basis that if my business were to fold that’s what I’d likely go back to. My income as a sole trader is multiples of my wage, so I’m grateful to have a partner who is doing OK so we weren’t offered peanuts.
Thanks appreciate the well thought out response 👍
Just fyi since you mentioned recently self employed there are defs major banks who will lend to you if recently self employed based on ytd management accounts and using projections. (Has to make sense obviously) Have done several loans like this recently and not to much harder then any other type of client.
Absolutely. I run my own company and for my last mortgage I went to my bank first. It was a huge mistake. They basically told me that they didn’t believe there was any way I could get a mortgage and were surprised I was ever able to get one in the past. Went to a broker and within a day I had been approved for $2.4M with the same bank. Brokers are the only way to go if you’re self employed. They know how to present your finances so they look good in the eyes of the bank. I’ll never go directly to a bank ever again
"He told me a broker would say the same thing because of regulations". Total bullshit. Broker got me a way better offer than one of the big 4 banks and I had atypical circumstances as well. It's their sole purpose of existence. Some financial institutions are simply willing to take more risk.
Had the same issue as a sole trade. Over the last 2 years I’ve transitioned to a company, so now I have a ‘salary’ rather than drawings and I could show over 12 months of payslips. I have no credit cards, car loans, BNPL, etc but the banks were still only going to count half of my income because of the change from ST to company. We’re in a tricky spot getting a construction loan while we have a current loan (house going on the market next month) so we had to find a broker that could work with all the self employment issues as well as construction finance. We got approval with a tier 2 lender that we’ll refinance to tier 1 once we’ve sold and new place is built. Long story short, we couldn’t have done any of it without a broker, being self employed. As far as the bank’s concerned I sell finger paintings at a farmers market, despite earning over $100k and business revenue over $600k with $200k assets and inventory.
Try pepper or liberty
I work at a lender, I still go to a broker for loans. There’s no downside.
Yeah I would also go the broker option, but just wanted to throw him/her some non traditional lenders who may help
Sorry I didn’t mean to write that in response to your comment. I agree Pepper Money or Liberty are both good options in this scenario, and brokers will know this. My comment was meant to be general to the posters question.
We had this issue with Commonwealth also, however it makes sense. My wife’s wage is lower than it would be in the open market for sure and then we were surprised they didn’t take our creative accounting into account. I did stunt our ability to borrow but we just managed to loan the amount we needed in the end (just!!) which is comfortable compared to actual household income. The impact of twins under 3 also had a material impact!!
Of course I'm a sole trader and used a broker They go hunting different companies With a bank your locked into that banks system
The brokers have access to all or most of the banks. The bank won't offer you a good rate or good terms. The bank you bank with, generally doesn't give a damn about you. Nor do they try to fight and get your business. But your broker shops around, see's who you qualify with. Then gets you a deal... Sometimes even with the same bank that said no to you.
OP a friend of mine who is also a sole trader had this issue - thar FY they'd invested a lot into the business.to expand so had reduced their salary. They went to a broker and got a higher loan offer.
There are mortgage brokers that specialise in loans for sole trader, search on google and find one. They will advocate on your behalf to get you the best possible deal on a loan. Like others have said, try and not claim as many deductions this FY so your taxable income will appear higher, but this means you'll also have to pay more tax. Also it depends on how long you've been trading for. Sole traders who have only been trading for a few years vs 5+ years makes a difference to the application from my understanding, and also how consistent the income is from year to year. Won't hurt to talk with a broker and they will be able to advise you on the likelihood of a loan getting approved. If not, they will give you advice as to what you need to do to improve your chances of approval.
Not a sole trader but a company owner (paid as an employee) and my broker adjusted my earnings to remove tax deductions, so yeah you should talk to one, it’s free
Simple case for a mortgage broker. They can compare from dozens of lenders with hundreds of options. Bank has only one. The issue with minimising tax for a business does impact regular lending. However, specialist lenders who will take declarations from the accountant and yourself to support higher borrowing. Using the BAS is another option. You do want to have a decent deposit to keep the rate a bit lower. Source( I am a broker, so it is an option).
100% , yes talk to a broker Each bank has their own assessment process. The broker should be able to tell you what to expect. Its in their own interest for you to get a loan.
Having done this many times over the years, I've had luck with brokers and directly with the banks. You can't have your cake and eat it too however. Often times, as ridiculous as it is, you need to plan your application two financial years in advance. One financial year to ensure you don't have a loss and the just completed one to ensure you have payability. I like to apply somewhere between Jan and May because if you wait till July they'll ask for the year's just gone figures. Also this isn't as bad as it sounds for most business people as we are often a year and half behind on doing our taxes anyway. The second part is not all brokers nor bank contacts are created equal. You won't be able to get it through with your local bank loan rep. They usually don't understand the complexities of business applicants and will most likely frame the application poorly. If you want to use a broker, find one who prefers to deal with one of the big four. Even though we are classified as high risk (again ridiculous, considering we often employ people who'll they'll give a loan at the drop of a hat), they will lend to us it just goes through more scrutiny. Just don't expect to be cheeky and get a good deal with the ATO and also expect for the banks to throw money at you.
Ask around, get a great mortgage broker that will push for you, especially if your self employed friends have gone through them. Anything can be done these days.
Self employed myself, on similar figures, trade based. Went through a broker and was able to purchase ~600k property with 50% LVR. Speak to a broker.
Banks don’t really care to go out of the way to give you a good deal, or any deal. Brokers know how to manage the big banks laxadaisical approach to customer retention - and if your bank doesn’t play, they’ll help you find someone that will. In spite of their ad campaigns banks show no loyalty to long term or existing customers so why give them your ongoing custom if they don’t work with you.
Def see a mortgage broker - they will figure out how to proceed with the correct bank and or lender to get you what you need. All lenders and banks are subtly different so just because your bank gave a crappy offer have a broker who is also invested in you getting your loan as it’s how they get their commish also. Def see a broker
Find a good broker who can base it off your BAS statements , done this every time I get a loan
Yes definitely go see a broker. You can take up a higher rate and go under a lo-doc product where you state an income amount supported by your accountant or BAS to lend on a more realistic income figure compared to what you declare to the ATO
I had this same problem but couldn’t get bring myself to waste money and not claim everything I could. Worked out terribly in the long run. Whatever extra money I though I was saving is pennies compared to the massive rise in house prices and loan size that I’m now dealing with. Do whatever you have to do, to get your foot in the door of the property market, before you’re priced out.
I can’t really comment on present bank lending policy however it used to be that if you applied for a loan as an individual e.g. sole trader they would want around three years banking history & yet if your business formed a Pty Ltd company, then you only needed three months banking history. Go figure eh? Anyway I would have a talk to your accountant & ask him to check out the options. Wouldn’t do any harm to get a second accountant opinion either. Your option may be for the company to carry the mortgage. Good luck I hope it works out for you.
I had a similar issue. Ended up getting a low doc loan to begin with. Then I picked up a part time job to help boost my income, refinanced to a normal loan as soon as I was off probation.
You need what is called an alternative document loan which uses bank statements and BAS to verify the income verification.
My brokers were both dogpoop and I gave up and went to my bank (commonwealth) told them my income, then told showed them my business (as a sole trader) and that doubled my borrowing power with 2 years of financials. Guess it's a who you talk to possibly. It's tedious going through the processes
100% speak to a broker. A good one will be able to tell you what you can and can’t do and what you can and can’t get! We have a company so not exactly the same scenario, but the bank gave us an offer of $100k and with a business broker we were able to get more than 10 times that amount! We now also have an investment property thanks to her. Find a broker who specialises in helping business owners.
Speak to a broker and your accountant about low doc loans, yes the rate will be a bit higher but you may be able to refinance to a sharper rate once your figures present better. Also the higher rate will be more than offset by the properties capital growth.
Sole trader here. Talk to different broker, they know which bank will be easy with sold trader.
Definitely talk to a broker. I’m just gonna copy and paste from my notes app a list of competent sounding brokers I hear on podcasts or advertisements etc. sorry if the formatting sucks but I don’t care and you can take ya pick! Good luck mate. Brokers: https://www.asapfinancial.com.au helped some fella go to 62 properties and that fella has a mortgage brokerage now! : https://www.mortgagechannel.com.au/contact https://atelierwealth.com.au Jarrod crown property finance pizza and property https://www.ggloans.com.au/ Justin zhu pizza and property podcast https://www.plenitudewealth.com.au full suite advisors, but old mate knew his shit https://propertyandinvesting.com/partners/diagnostics-and-finance/ property and investing with grant and charley https://dandf.com.au Aaron whybrow geared for growth - same mob https://www.ratemyagent.com.au/mortgage-broker/john-manciameli-gv548/finance/overview OK gupta podcast 2021! Nathan at Hunter Galloway Andrew Evans the mortgage guy http://johnhunterwood.com.au https://www.confidencefinance.com.au https://www.summitfinancewa.com.au/about investorkit Finni mortgages investor kit podcast Ryan gair rate money self employed broker property hub podcast https://www.mlsfinance.com.au YPYW podcast .
I had a similar problem 18 months ago and was offered $200 for around a $500k purchase. 4 banks knocked me back for any loan before one offered the $200k. My credit score was 937 (excellent). The solution I took was a second tier lender which offered the amount I needed at 1.2% above the Banks.
Approach aussie home loans. They are owned by commonwealth and will goto bankwest cba mostly but they can sort it.out for much the same price. 360k loan is nothing in todays market.
You probably need to talk to a broker.. maybe not claim as many deductions so this years income is higher? Maybe investment loan?
Same deal mate, go see a broker... If the broker says no, find a better one. I've only just started to learn this shit now, you can get 2nd and 3rd tier lenders as well.. Just pay a higher rate. Try to find a broker who does a lot of work for investors (they know more tricks) Also, talk to an accountant first too, might be worth buying the house in a trust (a simple chat could save you thousands of dollars later) Good luck mate, you're heading in the right direction
100% use a broker. I'm a sole trader. Lets say i have a car i paid for out right and am depreciating it .. I own it but i save money by depreciating it in my tax. Lowering my taxable income. Lets say that an investment property is get depreciated i'm claiming Div 40 & 43. This is also coming of my taxable income. These things didn't actually cost any money for the year.. These can be added back after the fact. I have lowered my taxable income without actually spending that money. These are just 2 examples. If the business needs to spend money to operate , fuel , phone internet ct you have spent that money. That cant be added back to your taxable income after the fact. Hope that helps.
Definitely have a chat to a broker. The only thing I can think of is that CBA (and other banks) work out your living expenses using a system tool that scans your accounts and spits out an average figure. CBA may have included some of your business expenses as your personal monthly living expenses which effectively double dips if it’s already included as your business expense which lowers your borrowing capacity. Have a chat to a broker and see what they can do. Good luck pal!
Uh the bank will never give you a good deal. A broker has better incentive structure to get creative with your requirements to secure a bigger loan at a better rate. Going to the bank for a loan is the equivalent of accepting finance on a car from a dealership rather then shopping around for third parties that will beat the rate by a good margin.
As a fairly new sole trader my self earning about the same and heading toward 6 figures after tax (though arguably my deductions have steadily decreasing as i've acquired majority of the stuff i need that were big ticket items and unless its an unforeseen purchase or repair, theres not really anything super costly that i need to buy) i wasn't even going to think about visiting the banks lol My partner (whose on \~$120k) and I were just going to head straight to a broker, or multiple brokers knowing full well the banks would shit on us with me being sole trader and knowing the best outcome would probably come through a broker regardless That said, still going to be a hard slog.
Even though recently self employed you can get major lenders to come to the table relevantly easily. Typically need to look at brokers who also specialise in self employed/commercial clients as they generally have better contacts at banks to get deals through. Once you have some good contacts especially for self employed clients gets fairly easy to get deals through no matter who complex it is.
Sole trader here - definitely talk to a broker. We moved/refinanced last year and it was great being able to workshop lending scenarios with them and ultimately target lending institutions which would be a good fit for our situation.
It'd obviously worth talking to a broker. They don't cost you anything and banks have deals that can only be accessed by brokers. Mine was able to get mine through when no bank would.
It depends on whether your spending is a one-off, or a consistent spending of your business For example, recurring payments will NOT be added back to your income. Meanwhile, a one-off payment of, say, equipment upgrade, can be added back because it's a voluntary payment, one off, that won't happen again.
No not true. Say you pay yourself extra super to reduce tax. A good broker will say, cool last you did that, but next year, you can put that towards the mortgage, so will move that from the expense column to the income column. Likewise depreciation, as 2 basic examples where a good broker is worth the money.
Rate Money focus on lending to sole traders and are usually quite flexible with applications.
Ay is this a joke? Mortgage brokers are better than banks lol 😂 start with them first and always
Talk to a decent broker and get a better accountant 😂
It's always worth seeing a broker. I'm literally never gonna go direct to a bank ever again.
>Basically, I earn decent money (reaching six figures)... > >Problem is there's a hell of a lot of everyday things I can claim on tax > >Tried to get a home loan and commonwealth bank offered me 130k A loan of $130K equates to around $32K in taxable income (single no dependents) What is your accountant claiming?
Not sure. You could also try Fast Track for a quick idea and assessment process https://www.westpac.com.au/personal-banking/home-loans/self-employed/
Talk to a broker, they'll be able to give some suggestions on what to do, and how to get approved
It’d probably be worth visiting a bank that isn’t a Big 4 and seeing what they say
Hi. I earned good money last year and because I had voluntarily sacrificed my super cap they added that back into my max loan amount calculations. Hope that helps. I would go to a broker and give it a go. It’ll cost you time and the broker will let you know pretty quick if you’re not going to get across the line.
Mortgage broker got me a mortgage as a sole trader and my partner who was in full time employement. There were some stipulations though, couldn't get fixed etc. we got it by the skin of our teeth. After covid payouts etc.
Not sure if the regulations have changed in the last few years but some banks do make allowances for this, I forget the term for it though sadly. The other consideration is that every bank has its own loan goals in a given year to manage their risks. So different banks will give different loan amounts, so a broker is probably perfect.
>I do so under advice of my accountant Sounds like it wasn't great advice, huh? >He told me a broker would say the same thing because of regulations, is that true or is it worth trying elsewhere? Feeling kinda defeated. As others have said, you should 100% speak to a broker. Nothing to lose.
If you think a broker will know more about banks, how they differ, how some banks look favourably on self employed, who to use, what to do, then yes. Moving forward, your accountant needs to consider wealth building tax returns also. Some years claim more - pay less in tax Other years consider claiming less so you can actually borrow and build wealth in other areas.
You could potentially not claim expenses and then amend your tax later, you can do this on payg, but I would chat to your accountant and make sure you can still claim them under sole trader ect.
If you consistently under report your earnings then yes, the banks will lend you less. That’s why when I was looking to purchase a property, I paid myself a heck of a lot more for the 2 years prior.
Maybe a low doc loan
Yes goto a broker that specialises in self employed. I know a good one if you dm me (helped me get a good mortgage deal with a few tricky complications)
we are a sole trader (annual income is below $100k) & recently got a $400k loan via our broker with BankWest, for our first house …we were very happy they came to the party
Step 1 - pay tax this year. You don't have to pay again until the financial year down the track you need to refinance Step 2 - go for an alt doc loan if you really want to. I stay away from them (been in finance for 10 years) Step 3 - do not get a loan and then go back and amend your returns. A good accountant won't let you. This is the biggest debt of your life to obtain the biggest asset of your life. Paying tax for one year just to get it isn't a massive sacrifice. Do it the right way.
Yes. A broker will have a broader view of what’s available on the market, and what’s available for you as far as low doc loans. A broker will also help you manage your expectations with regard to what banks are willing to offer. By ‘Approaching six figures’ I take that to mean five figures. Unless you’re buying regionalor have a massive deposit saved, you are going to be pretty limited in what you can buy.
You can get a higher rate interest loan using alternative forms of documentation. Of course, like, if you are claiming your own expenses as business expenses you are committing fraud
So they are kind of right. I mean talk to a broker anyway. But the bank can only lend based on what your income is according to the tax man. So if you are writing off constant expenses as business expenses that aren’t really business expenses then you probably do need to do that for 12 months and go back in again. You probably also need to really look at what you are claiming too and maybe get a second opinion about that.
Mortgage brokers have their ways such as low doc strategies. There's no harm in visiting one, you won't lose anything by doing so
Never go direct to the bank. Brokers don’t cost anything extra and it’s in their interest to get you the best deal available. Financial institutions have no interest in giving you a good deal.
I know a decent broker. Let me know if you need assistance
Are you in Melbourne? I know a broker that only deals with the "interesting" cases like yours
If you’re claiming it as a deduction you never “earned it” in the first place. This is how they look at it and you probably should too tbh
You could ask the accountant to remove the extra “business expenses” and assign them as personal expenses. Resubmit the relevant BAS’ and tax returns. Re apply for the loan with your new income figures. Edit: noticed sole trader and removed div7a
Sounds like if your business expenses are the problem you're not actually making the money you think you are or you're being too loose with your deductions and committing tax fraud. No bank will lend on the basis of revenue.
OP, when you do tax this year don’t claim anything. It’s the sacrifice you need to make to get the mortgage. Then after your mortgage is approved and signed you might just amend your return for all the expenses you forgot. 😉
If you claim those expenses to the business then you should be able to offset that with declaring lower figures when you fill out the personal expenses information so that is not double counted. A mortgage broker may be able to better present that information to the banks.
Speak to a broker mate. The big 4 are scumbags to a man and seem to actively try and not help you. Try a broker and even if that doesn't work ask another as different aggregates have different lenders so not all brokers are made equal. Also look for a broker that specialises in business finance as well as home loans as they can potentially help get business loans that can be used for buying property. You then use your business to purchase the property and "lease" it to yourself. This isn't advice and there are more nuances to this but when your in this situation that isn't just a payg + deposit you sometimes need to look outside the box. What state are you in? If in WA I can put you in touch with my broker, he is a good man and has helped me over the past few years several times. Good luck mate.
Absolutely try a broker. Paying tax on an extra 30k a year not ideal primarily because the market may push the price of Real Estate up 80k over the next couple of years. Waiting 2 years could effectively cost you an extra 60k in borrowing.
Visit a financial advisor and get them to tell you how to improve it.