How Bronte Business Owners Can Balance Low Tax and High Borrowing Power

Balancing low tax and high borrowing power as a Bronte business owner comes down to one thing: planning your taxable income 18–24 months before you buy, rather than after. Keep taxable income too low and banks won’t lend. Show enough stable income, keep your buffers, and you can still run a tax‑efficient business and buy in Bronte.

For most lenders, the income on your last two lodged tax returns is the truth. You need to decide now what story those returns will tell when you’re ready to borrow.

Balancing tax savings and bank-ready income starts with planning your story on paper.

1. Why low tax can quietly kill your borrowing power

Bronte sits in a high‑income, high‑property‑price pocket of Sydney. That means banks expect decent, stable income to support a typical Eastern Suburbs mortgage.

How lenders see your “low tax” strategy

Your accountant’s job is usually to minimise tax. Lenders do the opposite: they strip out anything that looks temporary or tax‑driven.

For a company, partnership or trust they typically look at:

• Net profit after adding back non‑cash items (e.g. depreciation)
• Your share of that profit, not just what you drew
• Two‑year average, with a bias to the lower or most recent year

If you’ve pushed profit down with heavy deductions, the bank just sees a weaker business and lower income.

Low tax vs borrowing power – simple comparison

*Illustrative only, assumes minimal other debt and standard APRA 3% buffer.

The extra tax can feel painful, but for many Bronte owners the additional borrowing capacity is the difference between a unit and a house, or no approval vs a clean yes.

2. Set your “bank income” target before you lodge

The practical move this week is to decide your target bank‑ready income before you or your accountant lodge the next return.

Step 1: Clarify the property move and timing

Ask yourself:

• When do I want to buy or refinance? (month and year)
• Rough budget? (e.g. $2.2m home in Bronte, $1.3m investment in Randwick)
• What deposit will I realistically have without draining business working capital?

Remember: using business working capital as a home deposit usually weakens your application and your business resilience (see /insights/buying-first-home-small-business-owner-timeline-traps).

Step 2: Reverse‑engineer the income you need

Work with a broker who understands complex income (see /insights/complex-income-trusts-companies-bonuses-foreign-currency-broker) to model:

1. Target purchase price
2. Realistic LVR (e.g. 80% to avoid LMI if possible)
3. Required annual income for that level of debt (including APRA’s 3% buffer)

Worked example – Bronte owner‑occupier

• Target property: $2.4m Bronte townhouse
• Deposit: $720k (30%), loan $1.68m
• Indicative P&I repayments at 6.0% over 30 years: ~$10,080/month
• Bank stress test at 9.0% (6% rate + 3% buffer): ~$13,500/month required capacity

Allowing for living costs and some other debts, most lenders will want combined assessable income around $260k–$300k to be comfortable with this loan.

If your last two returns show $140k because of aggressive deductions, you’re unlikely to get there, even if the business cashflow feels strong.

Lenders rely heavily on your last two tax returns to decide how much you can borrow.