Serviceability

Hi Brains trust.

I'm wondering if you may be able to assist me in a Serviceability question, the answer may not be black and white, apologises in advance.

I am a trade contractor operating under a pty ltd structure with a sole employee (me)

My annualised turnover is 135k with little expenses (I only supply labour)

I have been offered a job which is PAYG and am curious as to what level of my income paid in a fin year is used to calculate serviceability.

If hypothetically, I paid my self 100k in the pty ltd structure what percentage of that amount would a lender use for serviceability?
Likewise if i was on a 100k PAYG structure would the percentage of income used be different?

These scenarios are all pre dependants/living costs etc.

I'm trying to weigh up the borrowing capabilities of 2 incomes (roughly the same amount) PAYG vs Pty Ltd.

Many Thanks for any information you could provide.

Ryan

 

As PAYG it is simple, if you earn $100K pa (base income, excluding super) then you can use 100% of this.

As self employed if you're a Pty Ltd you can use a combination of what you pay yourself and the company profit (plus some eligible add-backs like depreciation). Different lenders will assess differently but in the most part will want to look at 2 years financials/tax returns to average out the income. If the nett of this was $100k total income then it'd be exactly the same as the PAYG borrowing capacity.

There are obviously pro/cons for each structure!

 

When you own the company they will take your wage and share of the profit, they look at both you and the company

 

Big Thanks Morgs and Terry for your reply.

It sounds like if the company balance and EOFY was $0 and the income paid to be was 100k for several years, lenders would assess the serviceability at 100% of 100k

Likewise 100% of 100k as a PAYG employee.

I was thinking lenders may take only a % of a persons wage if they were the sole employee/director of a company as I am.

Thanks

 

Play your cards right and you could use both.

 

Under the company they will use whatever you've paid yourself as a director and also net profits in your company.

If youre PAYG they will use 100% of it.

Now, if operating under both structures then you could use both incomes.