2019-05-01 Money Australia

M

ore than one million Aus-
tralians are swapping the
9-to-5 grind for the free-
dom of the gig economy,
picking up work from a
variety of freelance jobs – from driving for
Uber to designing websites. Add a further
1.27 million people running single-operator
businesses and it’s easy to see how the world
of work has changed.
Like all self-employment, the gig economy
can be rewarding from both a lifestyle and
financial perspective. The downside can
come when you want to buy a home.
“Generally speaking, it has always been
more challenging for self-employed workers
to secure a home loan, as it can be difficult to
demonstrate a stable income and continuity
of employment,” says Susan Mitchell, CEO
of Mortgage Choice.
A 2017 report by non-bank lender Pepper
Money found that 26% of Australians who had
been knocked back for a loan were refused

because they were self-employed or worked

part time. The thing is that working for yourself

doesn’t have to spell the end of home-buying

dreams. It just means you may need to take a

few extra steps to become home-loan ready.

Phil Gallagher, mortgage broker with Aus-

sie Belmont in the Lake Macquarie region

in NSW, says that around one in three of his

home-buying customers is self-employed. The

good news, according to Gallagher, is that

self-employed borrowers can usually access

the same loans and lenders as home buyers

working for an employer – often with a deposit

as low as 5% – as long as they meet all the

usual income and affordability requirements.

That said, Gallagher recommends follow-

ing three key rules of thumb: “Have your tax

returns up to date, show that you’re earning

a profit and keep things simple.”

Stay on top of tax returns

Without a regular payslip, lenders rely on formal

tax assessments to confirm a self-employed

borrower’s income. “If you are self-employed,

a freelancer or a contract/temporary worker,

you need to be able to demonstrate a history

of income by way of your tax returns,” says

Mitchell. Two years of tax assessments are

preferable but Mitchell says that as an absolute

minimum “lenders require a borrower’s most

recent full tax return and notice of assessment”.

The catch with tax returns is that it can be

tempting to downplay income. As Gallagher

points out, banks want to see that a business

is profitable, yet accountants and tax profes-

sionals can focus on tax minimisation.

Mitchell cautions that if you’ve structured

your business and your financials to minimise

tax, it can be difficult to qualify for a home

loan. Put simply, the lower your taxable income,

the lower your borrowing capacity will be.

Trying to convince a lender that you really

earn more isn’t the answer. Not only is it the

equivalent of admitting you fudged your tax

return, it can also flag you for a tax audit.

Having a lifestyle that’s out of sync with

There are three key rules to follow to

get a mortgage when you don’t have

a traditional work pattern

Hit a

home

run

STORY NICOLA FIELD

MY MONEY HOME LOANS