Why do most lenders want me to have an ABN?

Low doc loans were designed to give self employed borrowers the ability to obtain a loan without verifying their income using tax returns. People with their own business need this option because their tax returns may not be up to date or their financials may be too complex for lenders to assess.

On the other hand anyone with a normal job, no job or who is retired would have fewer legitimate reasons to use a low doc loan and so are not preferred by lenders. This is why many lenders ask you to provide your ABN, otherwise everyone could just say that they are self employed in order to obtain a low doc!

What is an ABN?

ABN is short for Australian Business Number and identifies your business in all dealings with the tax office and other government bodies. Your ABN may be identical to your ACN issued by ASIC (if applicable) with two additional digits tagged on the front.

Your ABN can be registered for GST and PAYG tax withholdings as well as other taxes such as luxury taxes. Your ABN is not the same as your Tax File Number (TFN), even sole traders will have a separate ABN to their TFN.

What do most lenders require?

In addition to the normal 20% deposit & income declaration requirements, the majority of low doc lenders will need proof that you have an ABN that was registered at least two years ago and that is registered for GST. Obviously if you are declaring an income of $200,000 with your low doc loan and your ABN is not registered for GST then you are either lying about your income or in breach of the ATO’s GST registration requirements!

Lenders like to see that your business has been trading at least two years because younger businesses have less stable incomes and are at a higher risk of going bust.

Which lenders do not need an ABN for a low doc loan?

No ABN? No worries! One of the major banks, several smaller banks and non-banks all do not need an ABN to approve your low doc loan. Their belief is that if you state on the application form that you are self employed then that is all the proof that they need to see.

The list of lenders that will approve no ABN low docs changes constantly as mortgage insurer and lender polices change. Just give us a call and we’ll find a suitable lender for you.

Is there another way I can prove that I am self employed?

Yes, some lenders that need proof that you are self employed will accept an accountant’s letter confirming you have been in business for at least two years and the reason why you do not have an ABN.

Exceptions to ABN policy

There are some situations where lenders may waive their normal policy of proving that you have had an ABN registered for at least two years. For example if you were employed by a plumber than decided to open your own business as a plumber then lenders may only need your ABN to be one year old. If your business restructured and was issued a new ABN then you can usually just show your old and new ABN as proof that your business is greater than two years old.

Professional share traders, other investors & trust beneficiaries often have significant incomes but cannot prove them to a bank. In these cases banks can consider low doc loans without ABNs.

Funnily enough, many of the lenders that do not require an ABN would decline your loan if you wrote on the application form that you were a professional investor! In their view you are not self employed so do not meet their low doc lending policy!

How can I find out what my ABN is or if I have one?

You can visit the government’s ABN Lookup website to search for your ABN. If you are a sole trader or partnership then search for your own name. Companies should search for the company name and trusts should search in the format of “The Trustee of the ABC Trust” as opposed to searching for the name of the trustee.

How can I apply for an ABN?

You can apply for an ABN at the Australian Business Register.

Can’t I just lie about being self employed to get a loan?

We don’t recommend that you lie about being self employed just to get a low doc loan. Aside from the moral and legal issues you also will have a good chance of getting caught. The lender can often see who your employer is on your credit file and may look for your business name in google or in the yellow pages.

There are PAYG low doc loans and other types of specialist low doc loans that can help you if you do not have an ABN and are not self employed.

Will I pay a higher interest rate because I don’t have an ABN?

No, most lenders that do not require an ABN will not charge you a higher interest rate than the rest of the market. In some cases such as with non-conforming loans for people with defaults and poor credit histories you will end up paying a higher interest rate because there are fewer lenders to compete for your loan.

How can I apply for a no ABN low doc loan?

Enquire online or call us and we’ll find the loan that is right for you! We have several lenders that can assist professional investors and self employed borrowers without ABNs.