Why do most lenders look for an ABN?
Low doc loans were designed to give self employed borrowers the ability to obtain a loan without verifying their income via tax returns.
People with their own businesses need this option because their tax returns may not be up to date or their financials may be too complex for lenders to assess.
People who are unemployed, are retired or who hold regular jobs 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 loan!
What if I don’t have an ABN?
Due to the introduction of the NCCP Act, the only ways to obtain a low doc loan with no ABN is through:
What is an ABN?
ABN stands for Australian Business Number and it identifies your business in all dealings with the tax office and other government bodies. Your ABN may be identical to your ACN (Australian Company Number) 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. Please note that an ABN is not the same as a TFN (Tax File Number). Even sole traders should have a separate ABN to their TFN.
What do most lenders require?
In addition to the normal 20% deposit and income declaration requirements, the majority of low doc lenders will need proof of a registered ABN of at least two years old which is listed for GST as well.
If you are declaring an income of $200,000 with your low doc loan and your ABN is not registered for GST then either you are lying about your income or breaching the ATO’s GST registration requirements!
Lenders like to see that your business has been trading for at least two years because younger businesses have less stable incomes and are at a higher risk of getting into financial trouble.
Are there any exceptions to ABN policy?
In certain circumstances, 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 but you decided to open your own business as a plumber, lenders may only need your ABN to be one year old.
If your business got restructured and was issued with a new ABN then you can usually show your old and new ABN as proof that your business is greater than two years old.
Professional share traders, other investors and trust beneficiaries often have significant incomes but cannot prove them to a bank. In these situations, banks can consider low doc loans without ABNs.
However, many of the lenders that do not require an ABN would decline your loan if you write on the application that you were a professional investor. In their view, you are not self employed and 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 in partnership then search for your own name. Companies should search for the company name, and trusts should search in the format of “The Trustee for 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.
What if I lie about being self employed to get a loan?
We do not recommend that you commit fraud to get your home loan approved. Aside from the moral and legal issues, you will stand a good chance of getting caught. The lender can often see who your employer is in the credit file and may look for your business name in Google, government registers or in the yellow pages.
Instead 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 if I don’t have an ABN?
Yes, most lenders that do not require an ABN will charge you a higher interest rate. However this varies depending on why you do not have an ABN and which lenders can consider your application.
Speak to a mortgage broker today
Enquire online or call us on 1300 889 743 and we will find the loan that is right for you! We have several no doc lenders that can assist professional investors and self employed borrowers without ABNs.