Self employed or PAYG, which am I?

Hi everyone,

Found this forum this morning and have been glued all day, what a great community.

I was just wondering if one of the friendly finance gurus here could clear something up for me and point me in the right direction?

I am part of a family business held in a discretionary trust which I used to be a co director of alongside my now ex husband so was always deemed self employed.

Two years ago we separated and I moved back to Sydney with the kids whilst he stayed in Melbourne. Whilst we separated on a personal relationship terms we have always continued our business relationship which dates back to even before we married.

My role within the business has essentially not changed, however when we separated (divorce in the works) I agreed to give up my solitary share in the company (It's a 2 share company) and revert back to being a PAYG employee.

Now that I've settled, I'm really excited to build a portfolio in my name only, but a little confused whether I am still considered self employed or PAYG when applying for finance in the banks eyes? I am still technically married.

My income is not tied to the business anymore, however my title (account director) has never changed and I am still largely responsible for the day to day running of the business.

PAYG would definitely be easier to get finance as I have a good salary, but self employed would be complex to say the least as I know he (ex) hasnt done his tax returns for two years and also had a very bad year financially last year.

If anyone knows the answer to this that would be great. I'm not sure what checks are done these days but given I am still married on paper and still share my husbands surname which is also in part the company name I don't want to create any problems or look fraudulent.

Any pointers really appreciated x

V

 

Do you have consent orders for mutual split of assets? This would be best, though someone I know got through with a stat dec saying that the partner wouldnt come after you for anything further financially. This satisfies the banks that you're not about to lose half your assets right after they loan you out 6 figures of their money.

So presumably now you're still you're still doing the same role, aren't a director or shareholder, and are getting payslips. Sounds like PAYG to me.

 

You aren't payg until you are no longer a director or shareholder.

Being employed by family usually means a little more income evidence, salary deposits and or a letter from the company accountant.

Being married to a director is a little of both. I'd suggest showing the lender your financial settlement/divorce agreement. Even then they may still want to wait until the divorce is finalised or want to have a look at the company financials.

 

Sounds like PAYG to me too as long as you can show evidence you're a) no longer a director or beneficiary, b) not liable for any company debts and c) getting divorced.

I reckon you'll be needing your accountant or lawyer on board to provide letters at a minimum. Work with a broker who can run the scenario past the lender before submission - the last thing you want is to go to all the trouble of applying only to find they don't like the scenario.

 

there is not a yes or no answer. It will entirely depend if you can convince the lender.

Being a director doesn't necessarily mean you are self employed if you don't own more than a minority share of the business. I would put it in as paye and then argue the case if the issue arises. If you don't receive distributions from the trust or company but only a wage and are not a director it is unlikely to appear that you are self employed.

 

I'd definitely dry run this one before submitting - but I'd be quietly confident it should be able to be treated as PAYG.

If you can get the allied professionals to provide additional validation that will help significantly.

 

As long as you don't hold more than 10% ordinary share in the company you are considered payg regardless of your position.

And since you guys are now separated it doesn't matter anymore if he's still the business owner and pay you a salary.

Or to be safe the lender might also ask you to provide your most recent tax return lodgement as it will show how did you get paid.

 

Do you have a contract of employment stating salary etc.

 

Your credit file will likely show you as a past director so they will dig,

 

Lenders often seek a positive confirmation that the Directorship relationship has ceased. Often an accountants letter or similar. So lenders do searches for any Directorships and then seek to exclude those they know of. Sometimes a old company appears and it can a issue to get them to leave it.

I had a client recently where a employer issue three years ago came back to life. He was still a Director of a dormant inactive company....They needed it removed but he couldnt contact anyone etc... We ended up becoming ASIC agents and submitted Form 484 to resign him and then we did too. PITA.

 

Depends how far in the past!