Submitting self-employed applications

The below list is our current acceptable professional services:

• Accountant – CA ANZ, CPA or CFA qualified
• Actuary – FIAA qualified
• Architect – registered with relevant State’s practitioner’s board
• Engineer – Member of Engineers Australia
• Lawyer – Law Society Practising Certificate
• Medical professional
• Optometrist – registered with Optometry Board of Australia
• Pharmacist – registered with Pharmacy Board of Australia
• Psychologist – registered with Psychology Board of Australia
• Podiatrist – registered with Podiatry Board of Australia
• Veterinary practitioner – registered with relevant State practitioner’s board.

The financial statements that should be provided for self-employed, company and trust income, include:

• Business tax returns or account prepared profit & loss and balance sheet statements for the most recent 2 years (only the recent statements are required if they show 2 years’ performance for the entity), and
• Personal tax returns for the most recent 2 financial years and the most recent ATO assessment notice of the directors who are applicants.
  • Where the ATO notice of assessment isn’t available, an accountant’s confirmation of lodgement is acceptable.                          

Draft tax returns for the most recent year can be considered where the returns are pending lodgement, subject to an accountant’s letter or email confirming there will be no changes when lodged.

Cash flow projections or any other projections aren’t acceptable.

From 1 April each year, the prior year accountant-prepared financials are required for assessing all self-employed applicants. There’s a grace period of 2 weeks to allow for pipeline applications, however, after 15 April, loan applications will require the prior year’s financials for servicing.

Prior to 1 April each year, and where the prior year’s financials aren’t available, BAS statements or accountant prepared interim statements would need to be provided to calculate the annualised income for the current financial year.

Also note:

• There may be scenarios before 1 April where our Credit Team will request the prior year’s financial to confirm consistency of income. This can be requested at any time.
• We can consider most recent financial year's draft tax returns with the support of an accountant’s letter or email confirming the figures are final and won’t change prior to lodgement.

Year-to-date Business Activity Statements (BAS) may be required to confirm recent income for a business entity. They’ll typically be requested when:

• there is more than 20% decrease in income and cash out is requested.
• you want to use the most recent year’s income and can provide 6 months BAS to support the application.

The most recent Business Activity Statement is typically from the 30th day following most quarters. Also, BASs provided need to cover all periods from the most recent financial statements through until the end of the most recent quarter for the entity.

For example, if BASs are required and financial statements are as at 30 June 20XX (the prior year):

• On 1 November, BASs are required from 1 July (prior year) to 30 September, and
• On 30 April, BASs are required from 1 July (prior year) to 31 March (current year).

Accountant-prepared interim financials can also be provided in lieu of Business Activity Statements to support the relevant income level.

In the worksheet, put the full net profit or loss of the business entity. At the bottom of the worksheet, you’ll be required to input the portion of ownership by each applicant, which will distribute the income accordingly.

Profit should be used for servicing rather than franked dividends, franking credits and distributions to avoid duplicating income, except if a minority shareholder (<50%). Dividends will be evident on an applicant’s individual income tax return.

Non-recurring income includes income that isn’t ongoing, including a sale of an asset or a government subsidy. Once entered into the calculator, it will be removed from the income considered for that year.

The below table outlines allowable addbacks for self-employed applicants. Advertising, car maintenance and training shouldn't be added back.

The calculator will automatically apply the income for serviceability, which uses the lower of current year or up to 120%, if business income is increasing year on year.

• If business income is in an upward trend, we can use a maximum income of 120% of the previous year, not exceeding the highest year. The calculator will automatically consider the recent year in isolation (i.e. the higher income year).
  • Additional documentation required: The increase in income needs to be supported via year-to-date BAS for a minimum period of 6 months showing >=90% annualised income.

If you wish to use the Average net available income across the two years to support servicing, you’ll need to speak to your BDM and in most instances, provide updated BAS. How this approach works:

• If business income is in a downward trend, the income to be used is the most recent year in isolation. Year-to-date BAS to be provided, supporting revenue in line with the most recent year (i.e. >=90% annualised). Scenarios include:
  • The most recent year's income has decreased by more than 20% of the previous year, and
  • Cash out/equity release for any purpose is being applied for on top of the refinancing of existing debt(s) plus a $5,000 allowance for costs. Note, this doesn’t apply where a deposit is being generated for a related purchase application submitted with Macquarie
    

For self-employed contract workers

If your customer has been contracting for less that 2 years and the ATO income statement or PAYG summary(s) from the prior year needs to be used:

• In an upward trend, when self-employed income is greater than previous PAYG employment, a maximum 120% of the PAYG income can be used, so long as this doesn’t exceed the self-employed income.
• In a downward trend, when self-employed income is less than PAYG summary, there are no adjustments to be made. Income needs to be input as the lower of the two documents.

You’ll need to reflect the ownership rights of each applicant and enter the percentage under each applicant. This will distribute the income to the relevant applicants.

To distribute income to an applicant, they must be a shareholder. If an applicant isn’t a shareholder but works for the self-employed entity as an employee, their income should be captured as PAYG.

The rental income received is to be included in the rental income section of the serviceability calculator as a separate applicant to ensure the appropriate shadings and applicant tax brackets are applied. It shouldn’t be included in the borrower’s self-employed income.

Where there are multiple entities to consider for a self-employed applicant, you’ll need to complete a worksheet for each entity and create a copy (i.e. take a screenshot) of each version. Once you’ve completed all entities, you’ll need to overwrite the ‘self-employed income’ field for each applicant with the aggregated net position of all entities.

Where an applicant has less than 25% ownership in an entity and they’re not a majority shareholder, we may be able to treat the applicant as PAYG if only using the salary for servicing. Contact your BDM to discuss this scenario.