As the crisp autumn air settles, the month of June heralds a crucial time for self-employed individuals: tax time. With the FY23 (ie. The financial year from 1 July 2022 to 30 June 2023) is now due, this period is not just about settling accounts with the ATO, but it’s also a pivotal moment for you if you’re self-employed and are looking to secure a new home or investment loan, or refinancing your current ones for a better deal. Here’s what self-employed borrowers need to know on how to navigate the mortgage landscape during this key period.
The Importance of Your Latest Financials
When you apply for a home loan as a self-employed borrower, most banks require a comprehensive view of your most recent financial situation on a full financial year basis. This means providing both personal and business documents, including your most recent tax returns. With the FY23 tax return now due, banks are now using this latest full year numbers available to assess your borrowing capacity.
For most banks, this means you’ll need to present two consecutive years of financial statements – FY22 and FY23. However, there are options for those who have stronger recent performance or shorter business histories.
Options for Shorter Business Histories
If your business has been in operation for less than two full financial years, or if your FY22 performance was significantly lower than FY23, you have a couple of strategies:
- Wait Until July 2024: By waiting about 1-2 more months until after July 1, 2024, you’ll have the option to use your FY23 AND the completed FY24 financials. This can help you demonstrate a more robust and recent performance, potentially increasing your loan capacity.
- Seek Out Flexible Lenders: Some banks are willing to consider just the latest year’s financials, meaning they’ll focus solely on your FY23 return. This can be particularly beneficial if your recent performance is strong and reflective of your current earning potential.
Leveraging Your Business Structure
If your business operates as a company or trust and you receive a regular salary as a director, you may have additional options. Certain banks now accept directors’ salary details only for servicing, providing the business is running profitably and meets other certain criterias. This can simplify the application process greatly by just using your steady income stream.
Navigating Tax Time to Support Your Home Loan Needs too
Tax time can be an overwhelming period for business owners in its own right. But if a new home loan application is also on the cards for you within the next 12 months, it’s worth having a closer look at your recent numbers to unlock more opportunities to secure better home loan deals out there. Whether you choose to wait for more complete financial records or seek out lenders who are flexible with their requirements, there are paths available to secure the home loan you need. At Navanti Finance, we’re here to support you every step of the way, ensuring you have the resources and advice to make the best decision for your future.
Feel free to reach out and get connected with our community. Here’s to a successful tax time and the new home that awaits you!
