What is an accountant letter?

Banks have few options to verify your income when you ask for credit. Employees typically use pay slips, PAYG summaries (now : Income statements), and tax returns, which cannot be falsified in most cases (as you are not in control of the information recorded on your pay slips, someone else prepares them). This is different if you are a company. You are the source of all figures, and you have the ability to manipulate them to acquire more money than you would otherwise.

Because banks are aware of this, they frequently need a declaration or letter from your accountant stating that the information you’re providing is correct.

This isn’t restricted to only confirming income levels; we’re frequently required to sign documents such as:

  • Your previous earnings are indicative of your future earnings;
  • You intend to use an asset for business purposes; (To exclude NCCP guidelines while accessing loans).
  • The loan will be used for business purposes; (to exclude NCCP guidelines, while accesing loans).
  • You’ve obtained independent financial guidance; and
  • That you have the financial means to repay the loan.

Low-doc loans give self-employed individuals the funds they need to realize their aspirations of home ownership, business ownership as well as asset ownerships.

Low-doc home loans, unlike standard mortgages, do not require the same amount of paperwork at the time of application. Low-doc home loan borrowers may be asked to furnish an accountant’s letter as proof of their self-declaration in addition to self-certifying their income.

Accountants’ letters, like bank statements and business activity statements (BAS), are a tool for self-employed borrowers to back up their income claims. When a broker or a bank requests alternative methods of verifying income streams, which is generally issued at higher than normal interest rates, it is safe to assume that your loan can no longer be approved using the low risk methods.

An accountant’s letter is a document that has been signed by a fully qualified accountant. The accountant verifies that a borrower’s self-declared income is correct and honest. In some instances the borrower is not required to self declare their income, instead the accountant’s letter alone is used to approve the loan. Such loans are known as no-doc loans.

The bank does minimal due diligence when an accountant’s letter is used, hence when something goes bad this falls back on the accountant having declared an income.

We understand that as an accounting practice it is our integral role to provide opinions, assess feasibility and verify information and we do that throughout the year issuing 100’s of letters each year, however every letter carried risk and also takes time.

We need to carefully assess whether what is requested by your financier is within:

  • Reason – Reasonableness
  • Scope – provided to you as a part of our service agreement.
  • Feasible – whether the objective you are looking to achieve is feasible.
  • Substantiating – whether we can substantiate the information we are looking to record on a letterhead and issue to you.

Purposes of Accountant Letter:

The following are some of the aims of many accountant’s letters:

  • business is trading at a profit
  • business not trading
  • One-off expenses
  • Change in income between financial years – due to a specific situation.
  • Change in income due to start-up expenses/Large expenses.
  • New business in the same industry as a previous job.
  • Contractor with no major expenses – allowing the use of gross income as net income.
  • Change in ABN / Business structure – beneficial interest not changing.
  • Family employees – all employees are family members.
  • Loan purpose confirmation – confirmation for business use or personal use.
  • Discretionary trust distributions – Confirmation of distributable income.
  • Complicated ownership structure – to confirm beneficial ownership belongs to a particular individual, if the banker/financial has difficulty understanding the structure of ownership.
  • Financial advice – in cases of guarantors guaranteeing a third party loan.

Requirements for an Accountant Letter

The accountant letter should be as follows:

  • On the letterhead of your accountant’s firm, containing contact information and the firm’s Australian Business Number (ABN).
  • Include information on any industry memberships or CPA certifications.
  • Include the name of the individual who signed the letter.
  • Include the name and company of the person to whom the letter is addressed (if applicable).
  • Confirm that the firm serves as the accountant for the person named in the letter.
  • To protect themselves against legal action, most accountants will require a disclaimer in the letter.

Most lenders will accept a faxed copy, but some will insist on keeping the original on file with your mortgage broker.

Fee for an accountant’s letter:

As you are now aware that there are risks, due diligence as well as time involved with issuing an accountant’s letter we also will charge a fee to cover the effort involved. Depending on the kind of letter requested, amount of information subjected to verification and time taken our fee will vary.



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