The changing face of the workforce continues to see more Australians be self-employed or operate in non-traditional wage structures. In fact, according to the Australian Banking Association (ABA) 2022 SME Lending Report, the number of self-employed people rose 10% to 1.55 million in the year to June 2022.
Traditionally, a loan for a self-employed applicant has been more complex and required
more documentation spanning a greater period. Fortunately, to align with this growth, more lenders now take a contemporary view of the self-employed individual.
For example, a minimum requirement would be to provide 2 (two) years of financial statements and tax returns, with the banks only using the average of the two to estimate borrowing capacity. In the past, this has made it harder for small business owners to secure a home loan.
Fortunately, we are seeing changes in lenders' views of these applications. While still a more complex process, they are acknowledging that this can take many different forms, from a day rate contractor all the way through to a beneficiary of a family trust.
Banks still have very specific and varied policies, and loans are largely assessed exactly as presented in the application. Hence, it’s essential to review this paperwork before it’s submitted to ensure the application is putting forward its best case for approval.
A few areas to be considered:
For your planning, here are a few ways to verify income depending on your self-employment structure. We will work with you on what’s most appropriate for your circumstances:
1. Average of the last two Notices of Assessment.
2. Most recent year’s lodged tax returns, supported by current year BAS statements to show the business is trading at the same levels.
3. Most recent payslip supporting the Director's salary for the last 6 months, supported by a letter from the accountant to confirm the company is trading profitably.
How can we help you?
Reach out, and let’s have a chat. We will discuss your business type and understand the appropriate path forward. Importantly, we wouldn’t recommend anything we wouldn’t do ourselves, so you can rest assured that we have your best interests at heart and will support you each step. When it comes to securing finance for your dream, that can make a world of difference.
Disclaimer:
Astute Financial Management Pty Ltd | ACN 093 587 010 | Australian Credit Licence 364253 | Davgan Insurance & Wealth Pty. Ltd. T/As Astute East Brisbane Corporate Authorised Representative (425641) of Alliance Wealth Pty Ltd | ABN 93 161 647 007 | AFSL 449221. www.centrepointalliance.com.au/aw | General Insurance provided by Astute Insurance Pty Ltd | ABN 59 622 582 236 | Authorised Representative of Ausure Pty Ltd ABN 94 096 971 854 AFSL 238433. Health Insurance products are underwritten by St Luke’s Medical and Hospital Benefits Association ACN 009 479 618 (St.LukesHealth), a registered private health insurer, [trading as Astute Simplicity Health] and members are introduced by Astute Financial Management Pty Ltd or related entities (collectively known as Astute) for which Astute receives a commission.
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