How to improve serviceability

Hi all,
We have 3IPs and a PPOR. For the Year 2009-10 my taxable income was $124K. Last year tax refund was @15K and this year it is @16K.
I read somewhere that I can ask my employer to cut less tax every month and pay me $$$ more (16000/12=1333). So, it will show in my bank statement that I have got more income and I can get one more loan.
Any body has done it before? please guide me how to do it.
Thanks.
 
But you would still owe the same amount of tax and would just end up with a debt with the ATO.

Most financial institutions will ask for your 'gross' income anyway - even if they ask for your net as well. So they can figure out how much tax you would owe anyway and no doubt they would be questioning you if you are paying much less. We find this is the case even just with DH's salary packaging and his tax free money from army reserves (it is amazing how much depth of explaination you sometimes need to go into just to explain legitimate things.

What you are suggesting would appear to be in that very dark grey area bordering on fraud....
 
I can see what he is asking. He wants the banks to take into account his negative gearing tax benefit into account. Banks do generally ask what the gross salary is, plus all the other usual stuff, rent income, loan repayments etc. But if someone is getting $16K refund due to the negatively geared properties then it really is extra cash flow not already taken into account.

I recently brought this up with my bank during getting finance for second IP. The first IP with depreciation resulted in a tax refund of $5K. I put together a spreadsheet for the bank of all my incomings and outgoings, budget etc. and estimated tax refund. He did take notice of the $5K refund, and when I got the official documents I noticed my income was higher than my net salary I get each month, I pressume because he included the $400/month I was effectively getting as a tax refund (even though I got it all in one go at the end of the year).

To answer your question about getting access to it now vsdabhi instead of waiting until you lodge your tax return, it is a PAYG Withholding Variation form that you want to complete. It's available from the ATO website.
 
Ok, so we are just talking about an income tax variation here based on negative gearing - sorry my misunderstanding. If it makes much difference to your cashflow and will actually increase your servicibility, then go for it. That is just allowing for legitimate deductions.
 
.... He did take notice of the $5K refund, and when I got the official documents I noticed my income was higher than my net salary I get each month, I pressume because he included the $400/month I was effectively getting as a tax refund (even though I got it all in one go at the end of the year).....
.

No, this is because your Lending Officer fudged your figures!
 
Hi all,
We have 3IPs and a PPOR. For the Year 2009-10 my taxable income was $124K. Last year tax refund was @15K and this year it is @16K.
I read somewhere that I can ask my employer to cut less tax every month and pay me $$$ more (16000/12=1333). So, it will show in my bank statement that I have got more income and I can get one more loan.
Any body has done it before? please guide me how to do it.
Thanks.

Hi vsdabhi

Sorry, but your Gross Income is all that lenders are interested in

Some lenders will automatically calculate a 'generic' negative gearing benefit and use it in servicing, but this is reducing liability rather than increasing income.

If you earn >$124,000 per annum, you are a very high income earner, but if your lender applies a Debt Servicing Ratio based on a percentage of your 'after tax, after expenses' disposable income, then for your new loans it is time to change (not refinance, just put the new loans) to a lender which calculates $1 surplus each month.

No doubt you have already discussed this with your Broker.

DSR lenders are great when the income is low - it is almost impossible to over commit yourself using their forumula

But when, like yourself, you are a high income household, the lender which will be your friend is the one which uses a different model

However, the 221D PAYG Withholding Tax Variation can certainly help with cash flow. No business would wait 15 months for payment, so why would you wait until, say, September, 2011 for expenses incurred and rebate due to you in July, 2010?

If you can get the rebate each month as you go along, it makes much more financial sense than waiting for eroded value dollars a year or more later

cheers
Kristine
 
some lenders will accept 3 months bank statements showing the net income being deposited as evidence of income, your method would actually work in increasing ur serviceability with them
 
DSR lenders are great when the income is low - it is almost impossible to over commit yourself using their forumula

Hi Katrina

What other models exist beside the DSR? What are the advantages of DSR over these other servicing models?

I have a spreadsheet from CBA my old broker gave me and that calculates the DSR that I use whenever i want a quick calc on how much lenders could lend me . I had thought that all lenders used something similar to this to calculate servicability?

thanks
 
Hi Katrina

What other models exist beside the DSR? What are the advantages of DSR over these other servicing models?

I have a spreadsheet from CBA my old broker gave me and that calculates the DSR that I use whenever i want a quick calc on how much lenders could lend me . I had thought that all lenders used something similar to this to calculate servicability?

thanks

They all do use something similar, I used to have a Bankwest spreadsheet from when I worked there for a while. The banks all calculate things slightly differently - different percentages of income, different allocations for expenses etc. This is why it's good to use a broker that understands your circumstances to select the right lender for you.
 
Hi VS

its not obvious from your post if YOU personally have an issue with servicing the loans, OR, of you are having trouble obtaining another loan for another IP.

I guess its the latter, if thats the case, id simply pick up the phone and speak with an independent mortgage broker and see what lender and structure options you have.

properly structred and timed, the same income can provide up to 2 x the serviceability with structured lending than with plain old single bank attitude

ta
rolf
 
Thanks everybody.........

Thank you Biggle, your advice is very helpful.
Zezza: Very true, Why we let ATO have our money for 12-14 months. Thanks.
Kristine: You solved my actual problem by providing the name and form number.
And Thanks Bigtone, D Money and Rolf for help.
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