A self-employed refinance approved on six months of BAS
Getting a home loan without your latest tax return is possible when a lender will verify the income another way. Finance Craft refinanced $663,000 for a self-employed couple on six months of BAS, consolidating other debts and releasing renovation funds in the same restructure. The return that showed the real income simply was not lodged yet.
The situation
The clients were a couple with a young child. They wanted to refinance their home loan, roll a few other debts into it, and release extra funds to renovate. One of them is self-employed, and the business had grown: the latest financial year was well up on the one before.
The sticking point
The tax return proving that increase hadn't been completed yet. Most lenders verify self-employed income from lodged tax returns, so on paper the older returns understated what the business was actually earning. Waiting for the accountant to finalise the return meant months of delay. Applying on the old figures meant borrowing less than the business now supported.
What I did
I took the application to a specialist lender whose policy verifies self-employed income with six months of Business Activity Statements instead of a tax return. The BAS showed the business's current turnover, which reflected the real income position rather than last year's. A strong equity position helped too: at under 60% LVR, the lender had a comfortable security buffer.
The result
Approved quickly. The $663,000 loan paid out the old home loan, consolidated the other debts into a single repayment, and released the cashout for renovations. Consolidating the debts freed up their monthly cashflow straight away, and the renovations they'd been putting off are done.
How BAS income verification works
A Business Activity Statement is what a business lodges with the ATO, usually quarterly, reporting turnover and GST. Because BAS are lodged through the year, they show what a business is earning now, not what it earned in a financial year that ended months ago.
Worth saying plainly that this was the exception, not the rule. Most self-employed borrowers with two lodged years of returns qualify for an ordinary full doc loan at ordinary rates, which I cover on my self-employed home loans page. A small number of specialist lenders accept recent BAS as income evidence for self-employed borrowers. It's useful when tax returns are delayed, outdated, or don't reflect a business's current performance. Policies differ on how many months are needed and how the income is calculated, which is where lender selection matters.
Self-employed lending, answered
Often, yes. Specialist lenders can verify self-employed income using alternatives such as recent Business Activity Statements, accountant declarations or business bank statements. Each lender's policy is different, and the application still needs to fit the rest of their criteria.
Instead of assessing income from lodged tax returns, the lender uses recent Business Activity Statements, usually the last six or twelve months, to evidence what the business is currently earning. It's useful when tax returns are delayed, outdated, or don't reflect the business's current performance.
It usually reduces total monthly repayments, because home loan rates are lower than most personal debt. The trade-off is that debt spread over a long loan term can cost more interest overall unless you pay it down faster. Whether it suits you depends on your situation, which is exactly what I work through before recommending it.
Self-employed and hitting walls with the banks?
There's usually a lender whose policy fits. Tell Shane Howley, a mortgage broker based in Coogee, your situation and he'll tell you which one. More on self-employed home loans.
This case study describes a real loan I arranged, anonymised. Every situation is different and past results are not a guarantee of what a lender will approve for you. The information on this page is general in nature and does not take your objectives, financial situation or needs into account.