Q&A

Despite having a profitable business, Lachlan has been knocked back for refinancing

There’s a way to beat the banks’ cookie-cutter process

Q My wife and I have been subscribers to Money magazine for over a decade. In that time I have read many letters and articles where you and your writers have encouraged people to shop around for a better deal on their home loans and generally try to avoid paying more than you have to.

We own our own business, which in 2020-21 generated more than $667,000 in revenue. This has risen steadily year on year from $383,000 in 2016-17. Earnings before interest and taxes (EBIT) has grown from $148,000 to $326,000 in the same time.

We have always engaged our (fairly expensive) accountant and have managed to keep our personal tax liability in a reasonably favourable range with the use of various company and trust structures on his advice, as well as making use of government asset depreciation allowances during Covid.

With interest rates rising sharply in recent months, we applied to refinance our home loan and investment loans to a better interest rate. Our applications were rejected on the basis that we don’t meet the serviceability requirements. I suspect that they take a few key numbers from our financials and plug them into a basic formula to get a yes or no.

I have spoken to the lenders to reiterate that our financial structure is such that the number on the bottom line of our tax return doesn’t necessarily have the same meaning that it might in the case of a simple wage earner, with respect to our ability to service our loans.

The response has been that we still need to show more taxable income on our tax returns to he able