Join Australia's most dynamic and respected property investment community

Finance for business owners with new ABN

Discussion in 'Property Finance' started by Mgs4, 11th Jul, 2015.

  1. Mgs4

    Mgs4 Member

    Joined:
    11th Jul, 2015
    Posts:
    15
    Location:
    Sydney
    All,



    Business owners typically provide tax returns for proof of income for property finance. If you then incorporate your business resulting in a new ABN, where the old ABN doesn't generate income are you able to get finance with new abn having just say 1 year of income history showing continuity of the same business?
     
  2. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,173
    Location:
    Adelaide, SA
    If you're doing a changeover of entity types it won't cause any material change, broker just notes the entity changes and the documents to reference it - so long as this is the same trading business in reality, not a completely new business type, entity and type of operation.
     
  3. Mgs4

    Mgs4 Member

    Joined:
    11th Jul, 2015
    Posts:
    15
    Location:
    Sydney
    How do you prove its the same business and entity? I thought banks typically check an ABN that it has been operational for at least two year
     
  4. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,173
    Location:
    Adelaide, SA
    If Joe Blows Mechanical (trading through disc trust) ends and then Joe Blows Mechanical (trading through a PTY LTD) with everything same other than entity, common sense applies. Previous entity docs are provided with current entities docs - simple.

    If Joe Blows Mechanical turns into Hildas Cake Supplies, it's clearly not just a transfer of entity type, but a completely new venture.
     
  5. Be Developer

    Be Developer Property Developer Business Member

    Joined:
    19th Jun, 2015
    Posts:
    1,078
    Location:
    Australia
    @Mgs4

    My brother had to wait for 2 years of tax returns to get funding.

    I have been recently advised that some lenders will lend on 1 year tax return.

    Best to speak to Broker/banker
     
  6. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,595
    Location:
    Adelaide, SA
    Way to read the question :)
     
  7. Mgs4

    Mgs4 Member

    Joined:
    11th Jul, 2015
    Posts:
    15
    Location:
    Sydney
    Thanks for the reply. How do banks treat pty ltd income, for an investor buying property in their own name. Eg the investor may have had a sole tradership with $100k income for FY1 then have $150k income in FY2 under the new pty ltd. Do banks apply a haircut for pty ltd income because the individual/director may not receive all that money personally as a dividend.

    Appreciate your feedback.
     
  8. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,173
    Location:
    Adelaide, SA
    For the most part, directors wages are added back into the net profit along with any other potential addbacks (above req'd super payments etc). This figure is used as the 'income'. Dividend distributions of the pty ltd isn't considered - multiple directorship for the company will however.

    Depending on the lender, they may only take only a max of 120% of the previous year, or 100% of the latest year - this is where a broker comes in to squeeze every last dollar out of the tax returns.
     
    Be Developer likes this.
  9. Be Developer

    Be Developer Property Developer Business Member

    Joined:
    19th Jun, 2015
    Posts:
    1,078
    Location:
    Australia
    Your way of trolling;)
     
  10. Mgs4

    Mgs4 Member

    Joined:
    11th Jul, 2015
    Posts:
    15
    Location:
    Sydney
    Thanks for that. Seems pretty reasonable, so they only adverse adjustments are for additional shareholders or directors. So if your main income comes from a pty ltd you are no worse off than if you got it from a sole trader-ship structure from a borrowing capacity perspective.