What makes me self employed

Discussion in 'Loans & Mortgage Brokers' started by Grandstream, 15th Aug, 2019.

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  1. AJP

    AJP Well-Known Member

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    @Marty McDonald, Public listed companies are another ball game though, not sure how often anyone would see the likes of these individuals crossing their desk?

    @Terry_w , that's odd re: your third example, I suppose it's always best to go down the path of least resistance

    And yes the Veda report is accessible for private companies, they will order it to show directorship and shareholding (among other things), My rationale is that if you have the executive authority and have a stake in a private company(i.e receive dividends from the executive decisions you make) then you should be classed as self employed

    Some credit analysts (i did) would also do a personal name browse on veda to determine what roles they held with other entities to capture the entire picture

    I've seen one example where a husband was a director of his company and he allocated 99% of the shares to his wife, still ran through as self employed. The implication here is that if he went for a resi loan under his individual name, he would only be able to use 1% of the EBITDA that was derived from the company

    Is that the right/universal approach? Not sure... but i imagine there needs to be some sort of standard when assessing these types of scenarios

    Interested to hear your guys thoughts on that
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Adding in serviceability considerations it would be best to get a higher salary and less of the other incentives.
     
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  3. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    I have a client who is a Director of a large listed company. He is also a shareholder. BUT

    1. Public companies only report top 20 shareholders to ASIC so there is no public record of his shareholding excepting in the annual report for the company.
    2. Lender requires a complicated letter from the company which basically indicates that the Director has no personal guarantees etc in his capacity as Company Director and that it outlines his remuneration eg Salary, bonus, Employee Share Scheme, Executive share scheme, super etc. The company Secretary does this.

    For the average Mary or Jeo who gets PAYG from a company for which he is a Director and may have a direct or indirect shareholding most lenders count that as self employed and will want to assess the entity income and its activities. Sometimes this can pose a concern when its contractor income v's basic PAYG especially where a shortfall could be apparent. Often the lender wll require a accountants etter and a estimate of tax liability and seek evidence as to how is will / has been paid.

    Another trigger is Dividend income directly (or indirectly through a trust). In some cases a lender will count it as income and allow it in servicing and in other cases not. Some lenders may scale it back and others just accept whats in the tax return - which grosses it up !!

    I have seen cases where a lender will agree to lend to ANY entity if the "key" person is Director and they give a guarantee. (Often wealthy persons)
     
    AJP likes this.
  4. Redwing

    Redwing Well-Known Member

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    9th Jun, 2006
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    4,648
    Location:
    WA
    Read this recently..

    Employee or Contractor

    The ATO have recently released an article advising there is no one deciding factor that makes a worker an employee or contractor for tax and super purposes. As an employer, it's a decision you can only make accurately when you review the whole working arrangement.

    The only way to get to the right answer is to ask the right questions. Answer these six questions before you hire a worker:

    1. Ability to subcontract/delegate: can they pay someone else to do the work?
    2. Basis of payment: are they paid based on an agreed quote they provided?
    3. Equipment, tools and other assets: do they provide their own tools and equipment needed to get the job done?
    4. Commercial risks: are they legally responsible for their work and liable for fixing mistakes or defects?
    5. Control over the work: do they decide how the work gets done subject to specific terms in the contract or agreement?
    6. Independence: do they operate their own business independently of your business?
    If the answer is no to some or all of these questions, you need to seek further information and advice before treating your worker as a contractor.