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Alternative Income Verification

Some self employed people aren’t sure if they should apply for a low doc loan or not.

If your business is profitable, then often it is a question of how you can actually prove it.

There are some methods of assessing your income which are not really full doc or low doc.

See below for the full list of ways that you can prove your business income.

One year's tax returns

Some of our lenders do not need two years tax returns or financial statements.

This is great news for people who have a new business which had a low profit in the first year or for businesses which had a one off bad year.

You will need to provide:

  • The last years’ financial statements (Profit & loss and balance sheet).
  • The last years’ business tax returns.
  • The last years’ personal tax returns.
  • The last years’ notices of assessment.

Old tax returns

How does it work?

Is the last tax return that you lodged some time ago? Out of date tax returns can be accepted by some of our lenders.

As a general rule you must meet the following criteria:

  • Your old tax returns must show a high income.
  • You must show two years returns & financial statements.
  • Your tax return must be no more than two years old (see below).
  • You can borrow up to 90% of the property value.

Which lender can accept old tax returns for your business? Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will see if we can use your old tax returns.

How old can my tax returns be?

Your latest tax return must be from the financial year that ended no more than two years ago.

For example the 2012/2013 financial year ended on the 30/6/2013. So we can accept your 2011/2012 and 2012/2013 tax returns as evidence of your income until the 1/7/2015!

What if my old tax returns don’t show a good income?

We can sometimes use an old tax return combined with 12 months BAS to prove your income.

The lender will use your old tax return to work out the profit margin for your business.

They then use the turnover from your BAS and apply this profit margin to work out your current profit. With this method you can borrow up to 90% of the property value.

Who can use this method?

This is ideal for someone who has a good income, however they have not completed their most recent tax return.

How much can I borrow?

This is a full doc loan, otherwise known as a normal loan. You can borrow up to 90% of the property value and you can obtain discounted interest rates with one of our lenders.

Self employed contractors

How does it work?

Are you a self employed contractor? This means that you meet the following criteria:

  • You do not provide materials, only your labour.
  • You do not have employees.
  • You work for one main company only.
  • You can provide invoices and bank statements to verify your income.
  • You are borrowing no more than 90% of the property value.

In this case then we may be able to accept your income with just your invoices and bank statements as evidence of your income. Please refer to our contractor loan page for more information.

Financials, without tax returns

Yes some of our lenders will accept two years financial statements without tax returns. Of course there are some conditions:

  • Two years financial statements are required.
  • Borrow up to 80% of the property value.
  • This is a full doc loan, not a low doc loan, so the rate is competitive.
  • The financial statements must be accountant prepared and not a draft.
  • You do not need to provide tax returns or a notice of assessment.

This is a great option for someone who is delaying the lodgement of their tax return. Many business owners complete their financials soon after the end of the financial year but refrain from lodging their tax return so that they don’t need to pay a large tax bill right away.

The income from your last job

How does it work?

Have you just started your new business? If so then one of our lenders may be able to use the income from your most recent job.

As a general rule you must meet the following criteria:

  • Your business must be in the same line of work as your last job.
  • Your business must be less than 18 months old.
  • You must show that your business is currently trading.
  • Ideally, your business should be in a service industry with low expenses.
  • You must be borrowing less than 80% of the value of your property.

The idea behind this method of verifying your income is that you are already experienced in this line of work and you could always go back to working for someone else if your business didn’t make much money.

Did you have a high paying job before you started your business? Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will see if we can help you get approved.

Is this a low doc or full doc loan?

Since you are not providing current income evidence for your business, this is considered to be a low doc loan.

Who can use this method?

This is ideal for a professional such as an accountant, lawyer, or other white collar worker who has gone out and started their own business.

How much can I borrow?

You can borrow a maximum of 80% of the property value.

No income evidence

If you cannot prove your income at all then you can consider applying for a no doc loan. This is only available for loans that are not regulated by the NCCP act.

Please refer to our no doc page for the full qualifying criteria.

Apply for a home loan

As you can see there are a huge number of methods that you can use to verify your income!

Please call us on 1300 889 743 or enquire on our website and one of our mortgage brokers will assess your situation and find the best solution for you to get approved for your mortgage.

Income forecasts

How does it work?

Are you investing in your business to achieve a high rate of growth? If so then you may be able to provide a forecast of your future income.

As a general rule you must meet the following criteria:

  • Your tax returns must show a profit.
  • You must be borrowing for business purposes (i.e. releasing equity as a business loan).
  • You must provide an accountant prepared or verified profit forecast.
  • You have real estate as security for your loan.

Which lender can accept a projected income for your business loan? Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will see if we can help you.

Who can use this method?

This is only available to people who are borrowing for business purposes. This is ideal for someone who already owns a property and wants to release their equity to use for their business.

How much can I borrow?

This is a commercial loan, as such commercial interest rates will apply. Normally you can borrow up to 80% of the value of your property, however in same cases our banks will consider up to 100% of the value of your property.

Next year's tax returns

How does it work?

Do you have a cash based business with a good income? Have you considered paying your full tax for one financial year? By doing so we can then use this income to get a loan.

As a general rule you must meet the following criteria:

  • Your business must be over 24 months old.
  • Your next tax return must show a good income.
  • You can borrow up to 90% of the property value.

Some lenders only require tax returns for one year to prove your income. If you declare your real income for one year on your tax return then we can help you to get approved.

Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will discuss the income evidence that you can provide.

Interim financial statements

How does it work?

Do you use MYOB, Quickbooks or a bookkeeper? If so then you may be able to provide interim financial statements as evidence of your self employed income.

As a general rule you must meet the following criteria:

  • Your interim financials must show a high income.
  • Your accountant or bookkeeper must sign off that the financials are true and correct.
  • You must provide an additional document to support your interim financials.
  • If you also provide BAS statements you can borrow up to 70% of the property value.
  • If you also provide old tax returns you can borrow up to 80% of the property value.

This method has no hard and fast rules. Our goal is to try to get the lender to accept your interim financial statements instead of your previous years’ tax returns. To do this we may also show a range of other documents.

Which lender can help with this method? Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will see if this option will work for you.

Who can use this method?

This is ideal for someone who has had the turnover of their business increase since the end of the last financial year.

By showing the current figures for your business we can sometimes get one of our banks to consider your current income instead of your historic income.

How much can I borrow?

This is a full doc loan, otherwise known as a normal loan. You can borrow up to 80% of the property value and you can obtain discounted interest rates.

Normal income verification

The normal way for a self employed person to verify their income to a bank for a full doc loan is to provide:

  • The last two years’ financial statements (Profit & loss and balance sheet).
  • The last two years’ business tax returns.
  • The last two years’ personal tax returns.
  • The last two years’ notices of assessment.

All lenders will accept the above information as full evidence of your income. However this doesn’t work for every self employed person.

What if your tax returns aren’t up to date? What if your income has changed since your last tax return was lodged?

The good news is there are other ways to prove your income.

Low doc income verification

With a low doc loan you still need to provide some evidence of your income due to the NCCP Act.

However banks are much more lenient, and will use the income that you declare to them along with one of the below documents:

Can you verify your income using one of these methods? If so then please call us on 1300 889 743 or enquire online and one of our mortgage brokers will go through the low doc options available to you.

Adding back expenses

How does it work?

You provide your two years’ tax returns as you would for a normal loan, however you provide evidence of expenses that the lender should add back to your taxable income.

This increases your taxable income, allowing you to qualify for a loan with full income evidence!

We can add back the following expenses:

  • Extra superannuation contributions.
  • Losses carried forward from prior years.
  • Negative gearing deductions from your investment properties.
  • One off expenses such as moving your business or a lawsuit.
  • Trust distributions to family members for tax purposes.
  • Depreciation.

Not every lender can use these “add backs”. Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will go through your financials to see if this is an option for you.

Who can use this method?

This is particularly useful for people who have a business that has significant depreciation. For example a trucking company, video store or any business with a large amount of depreciable assets can use this method.

However any business that has a good income yet has had some major expenses in the previous year can consider this option.

How much can I borrow?

This is a full doc loan, otherwise known as a normal loan. You can borrow up to 95% and you can obtain discounted interest rates.

  • V Woolf

    Hi, I’m a self-employed contractor for a miner based in Perth. Will my bank statements suffice as my income or do I have to provide other docs as well?

  • Hi V Woolf,

    As a self-employed contractor, you may need to have been in your current role for at least two years before a lender can approve your loan. If you have been contracting for two or more years the lenders may ask you to provide invoices and bank statements as evidence of your income.

    However if you have been self-employed for less than two years then you may need to prove your current income with your invoices as well as your income in previous job.

  • Amy1988

    Hello. I bought a tobacconist (existing business) for $300,000 and it has a monthly turnover of $150,000. The profit is small though but I pay myself and my husband a salary. My husband has worked at a tobacconist before and as for me, I had a good job before I was running a tobacconist.

    I’d like to buy a house in Melbourne for around $1.1m and borrow 80% LVR. I spoke to a broker in Melbourne but they didn’t get it. Can you help?

  • Hey Amy,

    Yes, we can help with this but it’s usually on a case by case basis. We’ve got both low doc and full doc (normal loan) options available. It just depends on what documents you can provide. Make an overwhelming case and we’ll put the scenario over to our lenders. The best documents to provide are:
    – Tax returns / financials from the previous owner.
    – Financial statements from XERO / MYOB for the last 3 months.
    – Accountant’s letter to confirm your salaries and the profitability of the business.
    – Evidence of your prior jobs (payslips are fine).
    – Any other evidence to show you’re a good borrower e.g. rental history, repayment history on loans or genuine savings.

    We love a challenge! Give us a call on 1300 889 743 and we’ll see what we can do.

  • Kanye East

    I would like to refinance and pay out my other debts but my situation is a bit complicated. I have another property – a factory, which I am renting out. Also, I earn an income from other job but only do a few hours a week. On my tax return I have around $55,000 in gross income. Because of the deduction from the factory/interest, depreciation, etc., my income is next to nothing. Could I still refinance? It would be only in my name.

  • Hi Kanye,

    Yes, we can add back the deductions on your tax return so the lenders use your full income. Also, there are no doc options for the loan on the factory as well. Some lenders can even accept one year’s interest paid in advance as ‘passing serviceability’. That means if you have lots of equity, it’s very easy to get the factory loan approved and the rates should be good as well. For your home loan, we may consider a low doc or full doc option depending on your income / tax returns. We love a challenge! Usually, if you can afford the loan and have a legitimate income then we can find a lender that can help. Give us a call on 1300 889 743.