Running your business through a company or a family trust is common, and often sensible for tax and asset protection. But it can make a home loan application more complicated. Your personal tax return might show a modest wage or distribution, while the real earning power sits inside the company or trust.

The good news is that many lenders can look past your personal return. Here’s how they typically assess directors and trust beneficiaries, and what you’ll need to have ready.

Why company and trust income is different

When you’re a PAYG employee, your payslip is your income. When you own the business, the lender wants to know two things: what you actually receive, and whether the business can keep paying it. That means looking at your personal finances and the company or trust’s finances together.

If you’re a company director

Lenders usually start with the wage or salary the company pays you. Depending on the lender, they may also consider:

• Dividends you’ve received from the company
• Retained profits left in the company, usually only if you control the company or own a large enough share. Where there are other unrelated shareholders, some lenders only count dividends actually paid to you.
• Add-backs, which are expenses that reduce the company’s profit on paper but don’t reflect cash going out, such as depreciation, or interest on debts that will be paid out by the new loan. Each lender has its own limits on what it accepts.
• Your share of the profit, based on your shareholding as shown in ASIC records

Lenders also make sure the company’s own debts are counted once and only once. Any business loan or equipment finance repayments still need to fit within the numbers.

If you earn through a family trust

Trust income is usually assessed through the distributions you receive as a beneficiary. Lenders generally look for:

• A consistent history of distributions to you, often over two years
• Distributions that match your personal tax return and that you can actually access. Amounts allocated to you but not paid aren’t always accepted.
• Who controls the trust. If you control the trustee and are an eligible beneficiary, some lenders will consider income the trust earns but hasn’t distributed.
• No double counting. Where a company and a trust are both involved, profit can flow from one to the other and then to you. Lenders trace it so the same dollar isn’t counted twice.

What about a strong latest year?

If your most recent year is much stronger than the year before, lenders treat it differently. Some average the two years, some cap how much of the increase they’ll accept, and some will use the latest year in full with a good explanation. If the business has grown recently, choosing the right lender can make a real difference to how much you can borrow.

Documents you’ll usually need

• Personal tax returns and ATO notices of assessment, typically for the last two years
• Company and/or trust tax returns and full financial statements (profit and loss and balance sheet)
• The trust deed, plus distribution minutes or statements
• ASIC records showing directors and shareholders of the company or corporate trustee
• Recent BAS and business bank statements if current trading differs from the last lodged year
• Details of all business and personal debts

If your latest returns aren’t lodged yet, a low-doc option using BAS or an accountant’s letter may be possible.

Watch out for director loans

Some business owners draw money from their company for personal use, including for a house deposit. Under the ATO’s Division 7A rules, a loan from a private company to a shareholder or their associate can be treated as an unfranked dividend unless it’s repaid or put on a complying loan agreement by the company’s lodgment day. Lenders may also ask about loans you owe the company, as the repayments can affect your borrowing. Talk to your accountant before using company money towards a purchase.

A typical scenario

Take a couple who run a building company owned by their family trust. Each pays themselves a modest wage, and the company retained a healthy profit last year, with a further amount distributed to the trust. Their bank only looked at their wages and offered far less than they needed. A lender that considers retained company profits and trust income, with depreciation added back, assessed the full picture across two years of returns, and the couple were able to borrow enough to upgrade their home.
This is an illustrative example only. Every situation, lender and outcome is different.

Frequently asked questions

Can the home loan be in my personal name if the income is in a company?

Yes, that’s the most common setup. The lender assesses the business income that supports you personally. Some lenders may also ask the company to provide a guarantee.

Can a trust buy the property instead?

Some lenders will lend to a trust, particularly for investment property. Policies, rates and documents differ, so get tax and legal advice on the structure first.

Do I need two years of company returns?

Many lenders want two years, but some accept one year for an established business, and low-doc options may work if returns aren’t lodged yet.

I recently restructured into a company. Does my history reset?

Not necessarily. If you can show the new entity runs the same business, many lenders will consider your trading history before the change.

Make sure your whole income is counted

Lender policies on retained profits, add-backs and trust income vary a lot, and the difference can be tens of thousands of dollars in borrowing power. We can review your structure with you and match you to lenders that will assess it properly.

General information only. This article doesn’t consider your objectives, financial situation or needs, and isn’t credit, tax or legal advice. Home loans are arranged by Stratium Finance Group Pty Ltd (ABN 65 696 556 804), Corporate Credit Representative 578600 of Yellow Brick Road Aggregation Pty Ltd, ACL 390261. All loans are subject to lender approval, terms, conditions, fees and charges.