Key Takeaways
- ATO debt does not automatically prevent home loan approval if it is properly managed or under a formal repayment arrangement.
- Most residential lenders do not directly check for ATO debt unless a default has been lodged with credit reporting agencies.
- If they fill out their application correctly and provide the right paperwork, sole traders and small business owners can still get a mortgage.
- When it comes to self-employed borrowers who owe taxes, specialist and non-bank lenders are more flexible.
- Low-doc loans can be a good choice.
- Lenders look at your whole financial situation, and a strong income can make them less concerned about your tax debt.
- If you have an ATO default or go to court, your options with regular lenders will be very limited, and you may need to use specialised lending solutions.
- When you utilise a mortgage broker like Dark Horse Financial, they can help you find lenders who are more willing to work with self-employed people who have tax problems.
Self-employment in Australia gives you a lot of freedom but a lot of people in this field have trouble with tax debt. Many sole traders and business owners want to know if they can still get a home loan even though they owe money to the ATO. The good news is that having ATO debt doesn’t always mean you can’t own a home.
Let’s look at how Australians who work for themselves can get a home loan even if they still owe money to the ATO. We’ll go over what lenders look for, how to get through the process smoothly, and why hiring a professional can make a big difference.
Understanding Self-Employed Home Loans
A self-employed home loan is for people who run their own business and make money that way, not as a PAYG employee. This includes small business owners, freelancers, contractors, and sole traders.
A self-employed mortgage is very possible, even with things like ATO debt to deal with, as long as you prepare and know what you’re doing.
Self-Employed Borrowers Ask: Can I Get a Home Loan If I Have ATO Debt?
Yes, it is possible to get a home loan with ATO debt. Not all lenders treat ATO debt the same way. In fact, most residential lenders do not check for ATO debt unless it has been escalated to the point of a credit default lodged on your file via CreditorWatch or Equifax or there’s a substantial debt on your balance sheet.
But if your tax debt has caused any of the following:
- a missed payment or court judgement,
- registration with a credit reporting agency,
- …or legal action by the ATO,
If this is the case, mainstream lenders are unlikely to approve your application.
There are still competitive home loan options for people who don’t have these credit problems, especially those who have an agreed-upon repayment plan with the ATO. These options include specialist lenders and non-bank lenders.
What Documents Do I Need for a Self-Employed Mortgage with ATO Debt?
Here’s what most lenders will ask for:
Full-Doc Loans Documentation:
- Business Financials
- ATO Notice of Assessment
- Other Loan Statements
- Credit Card Statements
- Savings Statements
Low-Doc Loans Documentation:
- Last 2 Business Activity Statements (BAS) or
- Accountant’s letter verifying income (if available)
How to Get a Mortgage When Self-Employed and Owing the ATO
Your home loan journey doesn’t have to end just because you owe the ATO money. Lenders know that a lot of Australians who own businesses owe taxes. Here’s how to plan your application:
1. Get Help From a Mortgage Broker Who Knows What They’re Doing.
If you have ATO debt and are self-employed, a broker who knows about home loans can help you find lenders who won’t automatically turn down your application. They can also help you write your application in a way that will give you the best chance of getting the funding you need.
We at Dark Horse Financial work closely with lenders who lend to self-employed people who owe taxes.
2. Improve Other Aspects of Your Application
A strong overall application can improve your chances of approval, whether you have ATO debt or not. Make sure that:
- Business income is steady or growing
- There are minimal other debts or liabilities
- You have complete and updated documents
3. Consider Specialist and Non-Bank Lenders
Non-bank lenders and specialist home loan providers are far more flexible with:
- Irregular income
- Recent business start-ups
- Incomplete tax returns
- ATO payment arrangements
Many of these lenders won’t check for ATO defaults unless they’ve been formally lodged with a credit reporting agency. That opens the door to better terms and a higher chance of approval.
Is ATO Debt a Deal Breaker for Getting a Mortgage as a Sole Trader?
Not necessarily. For sole traders and small business owners, ATO debt can be a manageable part of doing business, provided it’s not ignored.
Lenders want to see that you’re taking responsibility for your finances. As long as you’re servicing your debt and keeping your business solvent, many lenders will still consider your mortgage application or allow it to be consolidated into the loan.
Who Offers Self-Employed Home Loans for Applicants with Tax Issues?
There is a growing market of alternative and specialist lenders in Australia who cater to self-employed borrowers with outstanding tax debt. These lenders typically offer:
- Low doc loans without full financials
- Higher acceptance of ATO debt with payment plans
- Flexible credit assessments
- Competitive rates with risk-based pricing
At Dark Horse Financial, we have access to many of these lenders and understand which policies best suit borrowers with ATO debt.
How to Deal With ATO Debt as a Self-Employed Individual
There are many ways to deal with outstanding debt with the ATO. An option is an ATO payment plans, while some use their savings to pay off their obligations in one go. However, many business owners choose external financing, such as tax debt loans, which can often come with better rates and terms than payment plans from the ATO.
One way to deal with tax debt via a loan is through an equity release. You can consolidate multiple debts, including ATO debt, under the home loan. This allows you to purchase a home and deal with obligations to the ATO at the same time, while structuring the loan so your accountant can claim the interest related to the business ATO debt as an expense.
Find Home Loans for Self-Employed Borrowers With Tax Debt
We specialise in home loans for self-employed borrowers with tax debt and complicated financial situations. Our team understands the unique challenges you face and knows how to overcome them. Contact us today to discuss your home loan options.
Disclaimer: Loans and the benefits associated with them are only available to those who have been approved. The information provided on this page is general and does not consider your individual circumstances. It is not meant to serve as a substitute for professional advice, and you should not rely on it for any decisions. Always consult with a professional regarding finance, tax, and accounting matters before making any choices or taking action.
