Reading Tax Returns for Self Employed Borrowers
Tax returns are the primary income document for self employed borrowers. Reading them carefully, understanding the structure, and identifying legitimate add backs shapes how well the file presents at credit.
Matching the tax return to the notice of assessment
The most important cross check is between the tax return and the matching ATO notice of assessment. Taxable income on the return should match the NOA exactly. Any difference means either the return is not the lodged version or the NOA is from a different year. Both the tax return and the NOA need to be collected for each year required.
Reading a sole trader schedule
Sole traders report business income through the business and professional items schedule on the individual tax return. Start with total business income, then work through the deductions to arrive at net profit. Note any depreciation, interest expenses on refinanced debts, or one off expenses that may qualify as add backs at specific lenders.
Working through a company tax return
Company returns need to be read alongside the director personal return. The company shows its own net profit, dividends paid, and director salaries. The director personal return shows the salary received and any dividends declared. Lenders typically combine the director salary with the share of company net profit available to the director for serviceability.
Common add backs and how to document them
Legitimate add backs include depreciation, amortisation, interest on loans being refinanced, one off non recurring expenses, director or owner salaries above market rates, and superannuation contributions above the statutory minimum. Each add back needs to be clearly visible in the return or supporting financial statements so the assessor can verify it.
Key takeaways
- ✓Always collect both the tax return and the matching NOA
- ✓Match taxable income on the return exactly to the NOA
- ✓For companies, combine director salary and profit share correctly
- ✓Document every add back with the specific line item from the return
- ✓Know each lender add back rules before choosing where to lodge
How QualifyMate helps
QualifyMate extracts the key fields from sole trader, company, and trust returns and lines them up with the matching notice of assessment, giving brokers a clean income picture they can use as the starting point for self employed assessments.
Key terms
Self Employed Income
Business income earned by borrowers operating under an ABN as sole traders, through a company, or via a trust structure.
ABN Income
Income earned by a sole trader, partnership, company, or trust operating under an Australian Business Number.
Notice of Assessment (NOA)
A statement issued by the Australian Taxation Office confirming the income declared on a lodged tax return and the tax assessed.
Related guides
Reading ATO Notices of Assessment
How to review Australian Notices of Assessment for home loan applications. What the document confirms and how to spot outstanding ATO debts.
Verifying Self Employed Income for Home Loan Applications
A workflow for verifying self employed income on mortgage files. Documents to collect, structures to understand, and assessments to run.
Reviewing Profit and Loss Statements for Self Employed Borrowers
How to read profit and loss statements for self employed home loan applications. Revenue, expenses, add backs, and interim financials.
Reviewing Business Activity Statements
How to read BAS documents for self employed home loan applications. Turnover trends, GST remittance, and cash flow signals.
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