Marcus (name changed), a 29-year-old electrician, had been running his own business for 18 months. He had been renting in Prospect and wanted to buy his first home in the northern suburbs of Adelaide. His budget was around $550,000.
He had saved $120,000 - roughly 22% of his target purchase price. By any reasonable measure, he was in a strong position. But his bank told him he needed to wait until he had two full years of tax returns before they could assess his application.
Marcus had only lodged one year of tax returns, and his declared taxable income was $65,000 - significantly lower than his actual earning capacity. His accountant had legitimately claimed substantial deductions for his new work van, tools and business setup costs. These are normal first-year expenses for a trades business, but they made his on-paper income look much lower than reality.
His BAS statements told a different story. They showed annual GST turnover of $220,000, indicating a much stronger business than his tax return suggested. But his bank would only assess him on the $65,000 taxable income, which gave him a borrowing capacity of around $350,000 - well short of his target.
This is a common problem for self-employed borrowers in their first two years of business. Tax returns reflect what the ATO sees after deductions - not what the business actually earns. Alt doc and low doc lenders understand this distinction and use BAS statements, bank statements or accountant declarations to assess real income.
1. Reviewed Marcus's BAS statements, bank statements and single year of tax returns to understand the full income picture.
2. Identified that a BAS-verified alt doc loan was the strongest pathway - his $220,000 turnover gave him significantly higher assessable income than his tax return.
3. Compared alt doc lenders and found one that applied a 55% income margin to electrical trade businesses, giving Marcus an assessable income of $121,000.
4. Structured the application at 78% LVR (using his $120,000 deposit against a $550,000 purchase) which avoided LMI and qualified for the lender's best alt doc rate.
5. Prepared the income declaration and BAS documentation to meet the lender's specific requirements.
Marcus was approved for $430,000 at 6.8% (alt doc rate) - enough to purchase a 3-bedroom home in Clearview for $540,000. The rate was 0.9% above the full doc equivalent, but Lendology planned the refinance strategy from day one.
Once Marcus lodges his second year of tax returns (expected within 8 months of settlement), he can refinance to a full doc loan and save approximately $4,800 per year in interest. The alt doc loan was never intended to be permanent - it was the bridge that got him into the market now rather than waiting another year and risking being priced out.
He could have waited 6-12 months for his second year of tax returns, but property prices in his target area were rising and he risked being priced out. The alt doc loan let him buy now and refinance later.
First-year business owners often have high deductions for setup costs (vehicle, tools, equipment, insurance). These reduce taxable income but do not reduce actual earning capacity. BAS turnover reflects the real revenue before these deductions.
This case study was written at the time of approval. The refinance plan is structured for early 2027 once his second year of tax returns are lodged.
Book a chat with Jason or Steve. We will assess your situation honestly and tell you exactly what is possible.