Company income/profits improve serviceability ?

I am coming up to the end of my first year of operation as a private company where I am the sole director/shareholder. My question is, when can my company profits be taken into account in my serviceability, if they can at all ? Or do I need to be taking the money from the company as a regular wage or dividend to have this help increase my serviceability ?

I also work a full-time job so just looking at how I can increase my serviceability further at some point with the company profits which I have not touched to date. I was planning to use the current profits sitting there for part of a deposit of an IP in the near future (<6 months), but more looking for how it works with serviceability.

 

Generally if you own it and are director then it's income can be used in serviceability, but you might need 2 years tax returns for the company generally

 

Terry is correct, generally you need 2 years financials. top of my head, ING and Firstmac don't use company profits in servicing.

Only lender that requires 1 year financials is ANZ but ABN needa to be registered for 18 months.

 

Thanks for responses guys. So would be looking at another 12 months and lender selection would be key, thank you. Usually would an average of the 2 years be used ? And what documentation would be required usually ? Just the 2 years of tax returns and a letter from accountant that you are trading profitably ?

 

Depends on which which lender you go to. Some happy to use the latest, some will average, some will use the lower +20% ( previous year)if there's a big variance, some will use the lowest if it's the latest year.

Tax returns and financials are needed.

 

Theres a few that do 1 year financials, not ANZ only. Most will need a little bit more history, and will need the company to be active for a bit longer.

In terms of the income that banks will consider for your application:
- Salaries paid to you
- Profit

I.e. if you make $500k, pay yourself $200k & $300k GP - then a $500k income figure will be used.

• Dividends from prior years will be excluded.
• Add-backs like 'depreciation', one-off car purchases, can be added.
• Government payments stripped out of income (cash flow boost, jobkeeper, etc).

Speak to a tax guy about how to get your money from your company to invest in property - movement of retained capital likely requires tax advice.

 

Suggest you engage the services of a decent mortgage broker now, so you can plan for what's best, serviceability wise, when the one year trading is completed. Not all lenders require 2 years of trading history.

 

For shelf companies set up to just purchase a property, I guess banks will need guarantees from directors? Then income assessment shifts to director's personal income?

 

Yes