Your latest completed year may tell a much better story than the year before. The business has grown, start-up costs have passed or a major contract is now established. Waiting for another financial year can feel unnecessary when the records already show the change.
Some lenders offer assessment using one year's income records. That is worth investigating, but two questions must stay separate: how long the business has operated, and how many years of evidence the lender needs.
One year of records is not one year in business
AMP's self-employed page describes using the most recent year's individual tax return and notice of assessment, plus a business tax return for the relevant entity. It retains a minimum two-year trading ABN requirement and can request financial statements if the returns are insufficient.
For an established business with a stronger recent year, that can be a useful route to assess. It does not establish that a business which started last year qualifies. Nor does it mean the highest figure on the latest return will automatically become accepted income.
If the problem is a recently registered ABN, use our short-business-history guide instead. The lending question is different.
Compare the one-year route with the full assessment
Westpac also publishes a one-year assessment option. Its starting documents include the latest business and personal tax returns, a personal notice of assessment and current business liabilities. Its stated qualification requirements include more than two full financial years of self-employment.
The same page notes that some applicants may be able to borrow more under the standard two-year assessment. Fewer documents should not be the only objective. If the business has a complex structure, more than one income source or expenses that need explanation, the fuller route may deserve consideration.
Ask for the proposed lender and assessment method before deciding which period makes the best case. The answer needs to be consistent with the business as it operates now.
A strong year still needs to make sense
Separate growth from events that will not repeat. A major new client, a one-off sale and the collection of an old debt can all improve a year's cash receipts for different reasons. The application should explain what changed and what supports ongoing earnings.
If costs have increased since year-end, make them visible too. A higher historical profit does not prove the same cash remains available after hiring staff, taking on equipment finance or expanding into new premises.
Current trading records can help explain the picture, even where the chosen route starts with completed tax documents. Our variable-income guide covers growth, seasonality and declines in more detail.
What if the latest return is not finished?
A current management report is not the same document as a lodged tax return. Ask whether the proposed one-year route can proceed with the records available, or whether a different assessment method is needed. Do not describe draft accounts as final or omit the most recent available information.
If waiting for completed records is practical, compare the consequences with applying through another suitable route now. Timing can affect a property purchase, but so can paying additional loan costs unnecessarily. Your accountant should advise on preparation and lodgement; the lending decision remains separate.
Make a specific comparison
Ask the broker to compare the suitable one-year and standard routes on accepted income, loan amount, rate, fees and features. Use the same borrowing purpose and term. A faster evidence route has value only if the loan also works for your plans.
Bring Flexdoc the latest completed returns, business start date and a short explanation of what changed. We can assess whether a latest-year approach is worth pursuing before you spend time assembling an application around it.
General information only. Your circumstances have not been assessed. Lending criteria, terms, fees and approval apply. Seek appropriate tax and legal advice.