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GST registration increases servicibility

Discussion in 'Property Finance' started by Pandabites, 6th Apr, 2016.

  1. Pandabites

    Pandabites Member

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    Was chatting to a few friends the other night about difficulty refinancing/releasing equity/new loans given APRA crackdown over recent months (given that income hasn't changed significantly so servicibility is somewhat shot)

    One suggested that by simply registering for GST (if self-employed/contractor or similar) for 12 months and then going down the loc-doc route, servicibility can potentially work as income with GST registration is considered to be at least $75,000.

    As I know next to nothing about this topic, is there anyone who may shed light on this? Surely it's not that simplistic, registering for GST brings about all kinds of paperwork and limitations to my mind, including quarterly BAS statements and so forth...

    Thoughts? And thanks in advance....
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Under the NCCP lenders must make reasonable attempts to verify borrowers incomes.

    If the NCCP doesn't apply, e.g company borrowers, then they don't have to be as reasonable...
     
  3. dboy_tomato

    dboy_tomato Well-Known Member

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    @Pandabites would you mind elaborating how being a GST registered will increase serviceability?

    The income is the same and at best you have the GST component which is only 10% more...
     
  4. Redom

    Redom Mortgage Broker Business Member

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    Going down the low-doc route gives you more flexible options to verify your income. Using that flexibility and lender choice (lenders have different methods of calculating your income), you may have scope to increase your serviceability.

    For example, if you have a solid 6 month period in business history, you take a 6 month BAS approach + 3 month banking credits and may end up showing higher amounts of income associated with a pick up in business.

    Obviously this is a little riskier for banks, and hence there's generally tighter credit conditions relative to standard resi loans (higher rates, larger deposits, etc).
     
  5. Pandabites

    Pandabites Member

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    Hi dboy...am really not sure as I was just seeking clarification on what I had been told. Am assuming the person who told me was of the opinion that being registered for GST equated with a $75k+ income so that's where servicibility would come in...

    However, as Terry mentioned lenders will still look for evidence of income to support and stricter controls/higher rates etc...will be applied as per Redom's post.....

    So one, from what I gather, can't simply register and expect increased servicibility automatically...
     
  6. Redom

    Redom Mortgage Broker Business Member

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    No its not an auto rise in serviceability.

    They'll verify income in normal methods (or via low doc methods) - they definitely won't auto assume a min income of 75k because of GST registration.
     
  7. D.T.

    D.T. Adelaide Property Manager Business Member

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    Having GST registration may give access to more methods than without it, though?
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    The main issue is that you cannot say you are earning $75,000 or more if you are not registered for GST, because you are required to register if your turnover is $75,000 or more.
     
  9. tobe

    tobe Well-Known Member

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    Being self employed, with an abn number and or gst registration is a pre requisite for most lenders who have low doc policies.
     
  10. dabbler

    dabbler Well-Known Member

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    There is exceptions where the ATO requires registration.


    To the OP, you have to pay loans back, you cannot increase borrowing for risky adventures then cry to 60 minutes etc when you can't pay trying to blame the banks for your decisions.

    Make sure you can 100% pay, talk to an accountant who you know well. Do not do what these other dirtbags do who end up on today tonight pointing the fingers everywhere else and playing the dumbass.