Key Takeaways
- Low doc home loans are good for sole traders and business owners who don't have traditional income documentation.
- If you have ATO debt, you won't automatically be turned down for a low doc home loan unless the ATO has reported a default to credit reporting agencies.
- There are a lot of specialised lenders in Australia that will give self-employed people with tax debt low doc mortgages.
- When you apply for a low doc loan, you need to show proof of income through BAS, accountant declarations, or sometimes business bank statements.
- If you meet the lender's requirements, you can refinance to a low doc loan even if you owe money to the ATO.
- If you have unpaid tax debt or not, working with a mortgage broker like Dark Horse Financial can help you get approved.
Tax debt is a normal part of doing business for many Australians who are self employed, especially when their business is growing quickly or when there are downturns. If you’re in this situation and want to know, “Can I get a low doc home loan in Australia with ATO debt?” the answer is yes, in a lot of cases.
Many lenders know that self-employed borrowers have unique situations and can offer flexible solutions. If your ATO debt hasn’t been reported to your credit file, you still have a lot of good options.
What is a Low Doc Home Loan?
A low doc (or low documentation) home loan is for people who can’t provide the usual full set of income verification documents, like tax returns or pay pay slips. This happens a lot to people who are self employed, are sole traders, freelancers, or own small businesses. Low doc loans usually have higher interest rates and LVR limits, but they are flexible enough for many self employed borrowers.
Understanding ATO Debt and How It Affects Home Loan Applications
Many self-employed individuals and business owners have some form of outstanding tax debt to the ATO. While this debt might feel like a financial barrier, it doesn’t automatically disqualify you from getting a home loan.
The key factor is whether your ATO debt is visible to credit reporting agencies. If your tax debt is under control and a default hasn’t been disclosed to credit agencies, most specialist lenders won’t view it as a major risk.
Can You Get Approved with a Payment Plan in Place?
Yes, as mentioned earlier, lenders don’t see manageable tax debt as a deal breaker when you apply for home loans. Therefore, having a payment plan isn’t necessarily something that will disqualify you for a loan unless you cannot service both the loan and the payment plan with your current income.
How to Get Approved for a Home Loan with Tax Debt as a Sole Trader
If you’re a sole trader with ATO debt, applying for a home loan is the same as with any other self-employed individual. You’ll need to present the following:
- Last 2 Business Activity Statements (BAS)
- Accountant letter (if available)
Your tax debt won’t be a cause for concern if you’ve been managing it properly.
What Lenders Offer Low Doc Home Loans with ATO Debt?
Most lenders in Australia accept low doc applications with ATO debt or an ATO payment plan, and specialist lenders and non-bank institutions are more accommodating. These lenders understand that many self-employed borrowers manage ATO debt through formal arrangements.
Lenders who are most likely to consider your application include non-bank lenders and specialist home loan providers.
Each lender will assess risk differently, and working with a finance professional like Dark Horse Financial can improve your chances by matching you with the right lender.
Can I Refinance to a Low Doc Loan if I Have ATO Arrears?
If you meet the lender’s requirements, you can refinance. You might want to refinance to combine debts, lower your payments, or get to your equity. Here are some tips for getting a better deal on your refinancing:
- Make sure you can handle your ATO debt. If you haven’t already, set up a formal payment plan.
- Show that your finances are doing better. If you have better credit and finances, you may be able to get better rates and terms on your refinance.
- Increase equity in the property. Lenders are more likely to approve a refinance when the Loan-to-Value Ratio (LVR) is low.
You can also deal with your tax debt through a cash out refinance, helping you secure a property and deal with obligations to the ATO at the same time.
More Questions
Will ATO Debt Stop My Home Loan Approval?
In most cases, no. If your tax debt is being actively managed and hasn’t escalated, it won’t automatically disqualify you from getting a home loan.
Do I Need to Clear Tax Debt Before Applying for a Low Doc Loan?
Not always. If your tax debt has not been disclosed to credit reporting agencies, most lenders will not automatically reject your application. Many lenders, especially non-bank or specialist home loan lenders, don’t consider manageable tax debts as hindrances to approval.
How Can I Prove Income If I Have ATO Debt?
You’ll need to provide your last 2 Business Activity Statements (BAS) and an accountant’s letter, if available. Some lenders may also ask for your business bank statements.
Which Lenders Accept Low Doc Home Loans with ATO Payment Plans?
Most lenders will accept your application even with an ATO payment plan provided that your income can cover both the payment plan and the home loan.
In Summary
ATO debt doesn’t have to stop you from buying or refinancing a home. As long as the debt hasn’t been escalated to legal action or reported to credit reporting agencies, many self-employed Australians are approved for low doc home loans despite tax debt. The key is to demonstrate your capacity to repay the loan. By presenting the right documentation and showing you can repay the loan, you can be on your way to securing your dream home.
Disclaimer: Loans and their accompanying benefits are available only to those who qualify for them and have been approved. Though we put a lot of care into writing this article, the information presented within is general and doesn’t consider your unique situation. It is not meant to serve as a substitute for professional advice, and you should not rely on it solely for any major financial decisions. You should always consult with a professional when you’re dealing with finance, tax, and accounting matters.
Get Low Doc Home Loans for Self-Employed With Outstanding ATO Debt
Dark Horse Financial specialises in helping self-employed borrowers secure lending situations. If you have ATO debt and need a tailored lending solution, we’re here to help.
