ACCOUNTANTS LETTERS & DECLARATIONS
When you request credit, banks have few choices for confirming your income. Pay stubs, PAYG summaries (now called income statements) and tax returns are the most common documents used by employees, and they are often impossible to forge .If you’re a business, this is different. All numbers come from you, and you have the power to use that power to your advantage to get more money than you otherwise would. Banks usually need a statement or declaration from your accountant certifying that the information you’re supplying is accurate because they are aware of this and require it frequently.
Not only are our income levels verified, but we also regularly have to sign paperwork like:
Your previous earnings are indicative of your future earnings;
- You want to use a resource for your business; (To exclude NCCP guidelines while accessing loans).
- The financing will be applied to commercial purposes; (to exclude NCCP guidelines, while accessing loans).
- You’ve gotten impartial financial advice; and
- That you have the financial means to repay the loan.
Low-doc loans provide self-employed people with the money they need to fulfill their dreams of asset, business, and house ownership.
In contrast to conventional mortgages, low-doc home loans don’t demand as much documentation when applying. Borrowers of low-doc home loans might be required to provide an accountant’s letter as evidence of their self-declaration in addition to self-certifying their income.
In order to support their claims of income, self-employed borrowers can use accountants’ letters, bank statements, and business activity statements (BAS). It is reasonable to assume that your loan can no longer be granted through the standard procedures if a broker or bank demands alternative methods of validating revenue streams, which are typically issued at higher than usual interest rates.
A document that has been signed by a certified public accountant is known as an accountant’s letter. The accountant confirms the accuracy and truthfulness of the borrower’s self-reported income. In other cases, the borrower’s self-declaration of income is not necessary; the loan approval is instead based only on the accountant’s letter. These loans are referred to as no-doc loans.
When an accountant’s letter is employed, the bank performs very little due diligence; as a result, when something goes wrong, the accountant’s declaration of income is blamed.
We recognize that as an accounting firm, it is essential for us to offer opinions, evaluate the viability of ideas, and confirm information. We do this constantly throughout the year by sending out hundreds of letters, but each letter came with risk.
We must carefully evaluate if the request made by your financier falls under:
- Justification – Reasonability
The scope is something we give you as part of our service contract.
- Feasible – Determine whether the goal you’re trying to achieve is doable.
- Substantiating: Whether we can back up the facts we want to put on a letterhead and send your way.
Accounting Letter’s Objectives:
Numerous accountant’s letters have the following objectives, to name a few:
- Sales are profitable for the company.
- Speculative costs
- A specific circumstance-related change in revenue between fiscal years.
- An alteration in income as a result of startup costs or significant expenses.
- Launching a new company in a related field.
- An independent contractor with minimal out-of-pocket costs who can use gross income in place of net income.
- Modifications to the business structure or ABN, but not the beneficial interest.
- Employees who are also family members — all employees are relatives.
- A statement of the intended use of the loan, either commercial or private.
- Discretionary trust distributions: Verification of distributable revenue.
If the banking or financier is having trouble comprehending the ownership structure, a complicated ownership structure may be used to confirm that the beneficial ownership actually belongs to a specific person.
Requirements for an Accountant Letter
The letter to the accountant should read as follows:
- On letterhead bearing your accountant’s business information, including its Australian Business Number; (ABN).
- Be sure to mention any professional affiliations or CPA certificates.
- State who signed the letter and include their name.
- Make sure to include the recipient’s name, title, and business (if applicable).
- Verify that the company acts as the letter’s stated recipient’s accountant.
- The majority of accountants will want a disclaimer in the letter in order to safeguard themselves against legal action.
The majority of lenders will accept a faxed copy, but some will request that your mortgage broker keep the original on file.
Cost of an accountant’s letter:
Since you are now aware that issuing an accountant’s letter entails risks, due diligence, and time, we will additionally charge a fee to cover the associated costs. Our charge will vary depending on the type of letter required, the quantity of information subjected to verification, and the amount of time required.