The real problem is legibility
A salaried applicant hands over two payslips and the assessment is obvious. Your file has to explain itself.
You hand over tax returns, financial statements and a structure that may involve a company and a trust — and the assessor has to work out what is actually available to service a loan.
Full doc or alt doc
Full doc
Two years of personal returns and notices of assessment, plus two years of business financials if you trade through an entity. Most lenders average the two years.
Alt doc
One year of financials, recent BAS, business bank statements, or a signed accountant’s declaration. For when you have traded under two years.
- Averaging cuts both ways. It protects you in a down year and holds you back in a strong one.
- Alt doc costs more. Expect a higher rate and often a lower proportion of the property value.
Add-backs — where the income usually is
Your taxable income is deliberately not your economic income. Good accounting reduces the former.
Add-backs are the adjustments a lender makes to get closer to what the business really generates. Commonly added back:
- Depreciation — a non-cash deduction, so it cuts taxable profit without cutting cash.
- Additional superannuation beyond the compulsory amount.
- One-off expenses that will not repeat.
- Interest on debt being refinanced as part of the transaction.
- Retained profits in a company you control and could reasonably access.
What to have ready
Getting these together before you apply avoids a stalled file halfway through.
- Two years of personal tax returns and notices of assessment.
- Two years of business financial statements, if you trade through an entity.
- Your last few BAS, and business and personal bank statements.
- Details of any business debt, leases or hire purchase.
- ABN and GST registration details, and your accountant’s contact details.
If your income has changed materially, prepare an interim profit and loss for the current year rather than waiting to be asked.