I need some advice from some of the brokers floating around here.
Heres a rundown of my current situation.
Self employed with a business partner.
Have an IP with business partner, worth about $650,000 with about $420,000 owing, almost neutrally geared at present rates.
I have a vacant block of land, worth about $180,000, owing $80,000.
I have a seperate debt of $60,000 which i need to pay off.
About $6000 in savings account.
There are various other assets, Car, Boat, Motorbike, Tools and equipment etc.. totaling about $55,000
Assets total about $566,000
Debt about $350,000
I want to borrow $160,000 to build on the block and a further $60,000 to pay off debt, $220,000 total to borrow
I expect the value of the completed house to be $450,000 (Conservatively)
My position at this point should be as follows
Assets $836,000
Debt $570,000
I started the footings on the block just before I purchased the IP so I should still get the FHOG in Victoria. After the minimum owner occupation period I will put a tenant in the new home at about $375 pw, Although the bank cant include this due to the FHOG aspect of my application. Cant be an IP and first home.
The main question I have is, How much income should I show on my 08-09 tax return to be able to qualify for the $220,000 loan?
As I am self employed I must show tax returns not just pay slips. Much of the last tax years income wasn't received untill July so I want to know how much I should drag back into June, without going to far and paying tax now instead of next year.
Hi Jazz
Not quiet as clear cut as all that as there is a lot of soft data which has not been provided ie. marital postion, dependants, property location , other liabilities (credit cards limits) etc etc etc.
However in saying all of that assuming your net taxable income for the 2008/2009 financial year was around $90K (Subject to the above then you shouldnt be a million miles away).
Some lenders will want to take an average over the last 2 years incomes but should get away with 08/09 figures with others.
Richard Taylor | Australia's leading private lender
Thanks for the quick response Richard,
You are right, I should have provided more details.
Not married
No dependants
No credit defaults
Have one credit card with $1000 owing, $5000 limit (Thinking I might cancel this card or reduce limit prior to loan application)
The new property is located in Airport West, about 8km from the CBD in melbourne with excellent access to transport, schools, shops etc. Good rental demand. In summary an excellent IP location.Which lenders will take just the 08-09 figures? My income can vary alot over different years.
Thanks for your help
Jazz77,
I could be wrong, however I thought if you are reporting on an Accrual basis it is taxed on Invoice date and if like many SME's you are reporting on a Cash basis, income is based on Paid date.
I'm no tax attorney, however the concept of shifting this bookwork around sounds alarmingly illegal to me and you should seek professional taxation advice if you haven't done so already. Make sure you properly explain what you want to do and get it their response in writing to make sure they are the ones going to jail, not you.
Richard, I take it that by offering stated income amounts to Jazz77 you are okay with this / have recommended it before / have done it yourself?
Michael
Sorry i cant see that I made any reference to how Jazz account for his income merely what net Taxable income he would need to be showing in his Personal return to qualify for the sort of loan he was enquiring about.
I certainly wouldn't be providing him any Accountancy advice and agree with you that he needs to confirm with his Tax Accountant to ensure that the Annual Return represents a true and accurate picture of his affairs for the year.
Richard Taylor | Australia's leading private lender
Michael,
I appreciate your advice.
But,…
Adjustments would just involve changing the date of invoices to more accurately represent when the work was done, rather than when the invoice was issued. In my industry income over each period can vary alot depending on many factors, including billing cycles.
Also would the ATO really be concerned with tax being paid 12 months EARLIER?As for the advice anyone may give me, Isn't the whole forum system based on people comparing their thoughts and ideas for free, without complete strangers being sued if it doesn't work out, If this happened wouldn't the whole forum system collapse?
Anyway….any answers to my question???
Also how do banks compare the income of someone who has already paid for their car, phone, rego, fuel, insurance etc..through the busines, leaving mostly disposable personal income. With someone who has to pay for all these things out of their total income. Is there a set amount used to factor in these sort of expenses.
Lenders use a Living Expense Allowance which varies depending on your marital status and whether you have dependants.
In most cases the scale is based on either the Henderson Poverty Index (HPI) or (the higher) Household Expenditure Survey (HES) data from the Australian Bureau of Statistics.
Richard Taylor | Australia's leading private lender
Jazz,
The banks would also want to see your Business Financials, there are certain add backs that they may be able to look at such as Interest Paid, Depreciation etc that are included in your P&L.
When you run an SME it's not always black and white as to the income streams for serviceability of your loan. As you would be aware they would also take into account your existing debt levels that you currently have as well as your rental income for your IP.
I agree with Michael, you need to get an accountant to give you advise on how to best structure your income levels and your accountant should be aware that your intending on borrowing money in the short term period.
I hope this helps out a little.
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