When Bronte Small‑Business Owners Should Lodge Tax Returns For A Home Loan

A pattern I see every year: a Bronte café owner finally gets their tax up to date in June, proudly lodges two low‑profit years to keep tax down… then calls me in July wanting to buy a $2.2m semi. On paper they can afford the repayments. On lodged returns, they can’t borrow anywhere near enough.

For Bronte small‑business owners, the timing of your tax returns can increase or cut your borrowing power by hundreds of thousands of dollars. Lenders mainly use your last two years of lodged taxable income, so rushing a low year can lock in a weaker story for up to 24 months.

In plain English: if you’re planning a home purchase or refinance in the next 6–18 months, you should decide your tax‑lodging timetable and your loan application timetable together, not separately.

In this article I’ll walk through how I sequence tax returns and home loan applications for self‑employed Bronte clients, and what you can do this week to avoid accidentally sabotaging your own approval.

For Bronte small‑business owners, tax lodgement dates are lending decisions, not just compliance deadlines.

How lenders actually read your tax returns

The two‑year rule that catches Bronte business owners

Most mainstream lenders want at least two full years of self‑employed income with lodged tax returns before they’ll treat you as a standard borrower. They usually:

1. Look at your last two years’ taxable income (sometimes your business financials too).
2. Apply their own adjustments (e.g. add back some non‑cash expenses, remove unusual one‑offs).
3. Either use the lower year, or an average, or a shaded average if income is rising.

APRA also expects lenders to apply a buffer of at least 3% above the actual rate when testing your repayments. So the income that makes it through their credit policy is critical.

If your 2024 year shows $210k taxable income, and your 2025 year (not yet lodged) will show $320k, there is a massive difference between:

• Applying before lodging 2025 (using 2023–2024 numbers), and
• Applying after lodging 2025 (using 2024–2025 numbers).

Get the sequencing wrong and you can easily lose $300k+ of borrowing power in Bronte’s price brackets.

For more on how this assessment works, I’ve broken it down in detail in Working Out Your Bronte Borrowing Power as a Small Business Owner.

Worked example: same person, different timing, different loan

Let’s keep it simple and assume a lender uses a straight two‑year average.

• FY24 taxable income (already lodged): $200,000
• FY25 draft accounts (not yet lodged): $320,000

Scenario A – you lodge FY25 now and then apply:

• Assessed income ≈ ($200k + $320k) / 2 = $260,000

Scenario B – you delay lodging FY25, apply now on FY23–24:

• Let’s say FY23 lodged taxable income was $240,000
• Assessed income ≈ ($240k + $200k) / 2 = $220,000

On the surface, Scenario A looks better – higher average income. But if FY23 was a dud year (say $150k), lodging FY25 might be what finally lets you escape that low year dragging your average down.

The point isn’t which scenario is always better, it’s that the decision is material — and permanent once you hit “lodge”. You should run the numbers before you commit either way.

The mistake I see most: tax saved, home loan destroyed

Optimising tax in isolation can backfire

Many small‑business owners near Bronte work with great accountants whose job is, understandably, to minimise tax within the rules.

Common strategies include:

• Maximising deductible super contributions
• Bringing forward expenses into June
• Writing down stock or equipment
• Making trust distributions to lower‑income family members

All valid from a tax perspective. But for home loans, they can make your taxable income — the number lenders rely on — look anaemic.

I’ve seen clients “save” $15,000 in tax and lose $400,000+ in borrowing capacity for two years.

How this plays out for a Bronte purchase

Say you run a local creative agency and want to buy a $2.4m Bronte apartment.

You’ve got a 20% deposit plus costs, so the loan you need is around $1.9m.

At an assessed interest rate of around 8% P&I (actual rate say 5% + 3% buffer) over 30 years, the monthly test repayment is around $13,930.

If the lender needs your total household income to be at least, say, $290k to pass serviceability with your living costs and other debts, then lodging a year at $210k instead of $290k can immediately put the property out of reach — even if in real life you’re taking much more out of the business.

That’s why, for self‑employed and professional clients around Bronte, I often say: “You don’t have an income problem, you have a documentation and timing problem.”

For broader strategies on using your professional status safely, have a look at Self‑Employed in Bronte: Using Your Professional Status Without Overstretching.