Self-employed applications frequently turn on a letter from your accountant.
Confirmation that the business is trading and how long you have been self-employed, that your most recent figures are accurate, and sometimes that a particular expense was one-off. Lenders usually provide their own form.
Accountants will confirm facts they know but will not predict future income, so ask for what can be verified.
Part of the employment and income home loans guide.
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[Accounting firm letterhead]
[Date]
To whom it may concern
Re: [Full name of client] / [Business or entity name], ABN [ABN]
I confirm that this firm has prepared the financial statements and income tax returns for the above client for the financial years ended [30 June 20XX] and [30 June 20XX].
I confirm the following from my records:
1. The business has been trading continuously since [date], and the client has held ABN [ABN] since [date].
2. The client's ownership interest in the entity is [percentage]%.
3. Net profit before tax was:
Year ended [30 June 20XX]: $[Amount]
Year ended [30 June 20XX]: $[Amount]
4. The following non-recurring or non-cash items were included in the above figures:
Depreciation: $[Amount]
Interest on debts to be refinanced: $[Amount]
One-off expenses ([describe]): $[Amount]
5. To the best of my knowledge the business continues to trade in the ordinary course, and I am not aware of any matter that would materially affect its ability to do so.
This letter is provided at the client's request based on records held by this firm. It is not a guarantee of the client's future income or capacity to repay any facility, and no assurance engagement has been performed for this purpose.
Yours faithfully
_______________________________
[Name], [CA / CPA / IPA]
[Position]
[Contact phone and email]
Before you use this. Accountants will not sign statements about your ability to repay a loan, and lenders should not ask them to. If a lender requests a solvency or serviceability assurance, that is a conversation to have before your accountant is put in an awkward position. Many lenders issue their own accountant declaration form, which should be used where provided.
Charles Touma, Mortgage Broker.
Depreciation is a non-cash expense and most lenders return it to income. Interest on debts the new loan will clear can be added back because the cost disappears. Genuine one-off costs, an equipment purchase, a fit-out, a legal matter, may be added back with evidence.
Having your accountant itemise these in the letter saves an assessor guessing and saves you a round of questions.
Ask before the financial year is finalised where possible, because legitimate choices about depreciation, superannuation contributions and drawings all affect the assessable figure. Once returns are lodged, the options narrow to whichever lender reads them most generously. The accountants page covers that tension in detail.
Frequently yes, and it is usually modest. It is a professional letter based on their records and their name is on it. Asking for everything in one request rather than in three rounds keeps the cost and the goodwill in better shape.
No, and lenders should not ask. Accountants confirm facts from their records; assessing capacity to repay is the lender's job. If a form appears to request an assurance of serviceability, that is worth raising before your accountant is asked to sign it.
Some lenders specify the membership required, commonly CA, CPA or IPA, and others are broader. Where your accountant holds a different qualification it is worth confirming acceptability before the letter is prepared rather than after.
Not always. Full-doc applications with two years of complete financials often proceed without an accountant letter. It becomes valuable where add-backs need identifying, where the trading history needs confirming, or on alt-doc applications where the accountant declaration substitutes for full financials.
It can, particularly where it confirms the ABN registration date and continuous trading, because some lenders assess on one year of financials where the ABN has been held longer. It does not manufacture history, but it evidences the history that exists.
Charles can tell you exactly what the lender will ask for, so you request it once rather than three times.
Prefer a callback?Charles calls back within one business day.
General information only, not credit, legal or financial advice. This is a starting point, not a legal document. Lender requirements differ and change, and some lenders provide their own form that must be used instead. Confirm what your lender requires before relying on any template.
