Hi all,
I was wanting to know what the banks thoughts are in regard to Tax Variation. It technically creates more cash flow per week. Can this increase your lending?Or do they realise you will get X amount of dollars back in a lump sum once you get your tax return. So a tax variation would not matter.
Many lenders do add back the Tax adjustment made as a result of the negative gearing effect of the interest cost being greater than your net rent however do not take into consideration any adjustment made for Depreciation or Capital Allowance.
Other lenders do not add this back into the equasion.
Just a matter of getting the right mix to keep your serviceability going.
Richard Taylor | Australia's leading private lender
On the bottom of your payslip for the fornight it would be technically more so possibly more fabourable?
Lenders work off your Gross income not your net and then work out the Tax and Medicare deductions themselves.
Your income and expenses are then adjusted accordingly.
Richard Taylor | Australia's leading private lender
Fredo,
In most cases banks work off gross income however bank managers can usually accept your net pay if it is deposited in to your account (only if it is deposited into their bank). This history will enable the banker to approve future loans without payslips. They will put the net figure though a calculator which will estabish what your gross annual income should be. You could say they work off an estimate of your gross income worked out via your net in the statements…
With this in mind you can apply to the ATO for a variation to your withholding rate (google: ato varying your payg witholding). If your depreciation is significant enough you can pay less tax each pay as opposed to getting the tax rebate at the end of the year. This is the only real way to get deprecition in to servicing.
Hope it makes sense. This is standard practice for larger clients e.g. Clients $5m plus. The other option is to work off full tax returns that itemise the deprecition. If the deal is strong credit will accept add back of depreciation.
Tax variations won't assist with the banks as most have their own forumulars and take this information into account anyway.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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