Hi everyone,
I am currently in PAYG employment however have a good opportunity to partner up with an existing business owner to run a business in my industry. The business is profitable and has been running over two years. This will likely give me higher income with room for further increases.
Whilst I will obtain some advice, I envisage that the structure would involve myself creating my own entity and dealing with my business partners entity through contracts to ensure each party is protected.
My issue is that I do not want to stop myself from obtaining finance for future property purchases as if this were the case I would prefer to stay in PAYG employment.
Does anyone know of any strategies on how to be still eligible to obtain loans without providing two years business tax returns? Could I use the above structure but become an ’employee’ of my business partner so I am still considered PAYG with a consistent income?
Thanks in advance for your comments.
Plummer
Simon Plummer | SP
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The only way I can think of is to stay with your job while doing business on the side for a few years.
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
Thanks for your comment Terry.
Another option I thought of would be to buy in to my business partners entity (50% share) which will of course provide me with two years of tax returns.
If this were to occur, would a lender consider 50% of the after tax profits to be my net income? Or is there a more complex way of calculating?
Simon Plummer | SP
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Hi Plummer,
Given that the business you are purchasing into is an existing entity it would be likely that you are able to use its existing net cash-flows to service a possible loan. Note, however, that you are also bringing potential contingent liabilities to the table that may impact upon your serviceability (borrowing capacity) dependent on the legal structure of that buy-in and its existing debt portfolio.
It is also worth noting, when calculating the ability of the existing cash flow to service new debt, one needs to reflect upon the historical stability of that cash flow (in other words, it has been on a steady and tight upwards trend over the past few years). If it is not stable, any potential lender will attribute a degree of impairment (or hurdle) to their calculations of serviceability.
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Hope this helps.
Kind regards,
Andrew
andrewnell | Naritas Finance
https://www.naritas.com.au
Email Me | Phone MeYou need to think about your Medium term and Long term goals. You mentioned you get a higher income by going into business…
You need to consider you when you are proposing to buy and put a plan together so you make the transition and still achieving your goals.DaOne | Oras Finance - Your Local Mortgage Broker
http://www.ihomeloans.net.au/
Email MeHelp you make your dreams come true: https://www.youtube.com/watch?v=sB3KpKX4UsI
Thanks for your comments guys.
I think it might be best to get some structuring advice on this one. Once we have a structure which protects both of our interests then I’ll be able to clearly see the options with regard to future finance.
The majority of my wealth accumulation is coming from property so if the venture compromises this then it may not be worth proceeding.
As Terry mentioned maybe it would have to be a side venture initially.
Simon Plummer | SP
https://www.sp.com.au
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Hi Plummer
Sorry i have to disagree with what has been said.
I can think of a couple of lenders who would take your past PAYG income into consideration even though you maybe deemed as self employed.
I have just settled a deal for another forum client in the same position.
Left employment 6 months ago to go self employed and only had 2 BAS with accompanying Bank statements.
Lender agreed with us that as it was in the same line of work we could run off his last Payment Summary and approved the deal.Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Richard,
Quite interesting I must say. To complicate things a little more I have been a non-resident for the past two years while working overseas so this may hinder also. These things seem to stack up negatively and it becomes harder and harder to obtain finance.
Good fun trying though!
Simon Plummer | SP
https://www.sp.com.au
Email Me | Phone MeSP
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