“Low doc” loans

“Low doc” loans require no proof of income such as group certificates, tax returns or business trading results. Instead, they rely on the borrower signing a Statutory Declaration stating their income.

The ATO has recently been comparing the income shown on Statutory Declarations with the income disclosed in the tax return of “low doc” borrowers. In a significant number of cases, the income disclosed to the lender is considerably higher than that declared to the ATO.

As such, these loans will be subject to wider reviews in the coming year. “Low doc” loans can be a useful tool for those who have previously not met lending criteria. But if entering into such an arrangement, you must ensure that income shown in both your tax return and loan documentation is accurate and consistent.

We suggest you seek our advice if considering a “low doc” loan to ensure the most suitable financial outcomes.

Published : 6 September 2005