Aaron Whybrow explains how Cash Flow Boost and JobKeeper payments on 2020 tax returns can hurt your chances of getting a loan. Banks see these as one-off grants, not real income, and may exclude them when calculating your profit. A $20,000 boost can wipe out your reported earnings.
Are you self employed and you're getting your 2020 tax returns in order ready to submit to the ATO and you also need to look at borrowing some money. Hey, it's Aaron from Diagnostics and Finance and I've been reviewing a lot of banks policies related to your 2020 tax returns. There's a couple of things that have happened in the last six months that have been added to your tax return that may or may not be able to be used depending on the bank's policy. One of those is the cash flow boost. The cash flow boost is sitting in the income side of your profit and loss statement. And is it ongoing, is it not ongoing is really what the bank's looking for. So if we take the example of a grant and you have a grant one year to the next, that grant can't be used as income. So it has to potentially come off your bottom line. The other thing that we found that are in the 2020 tax returns is Jobkeeper. Jobkeeper was part of the income stream and it sits in the profit and loss and is easily identifiable. So a lot of banks, even though you've come out of the post Covid period and your business is booming, there's income coming in and legitimately you should be able to go for a loan. You need to just double check how the bank is going to look at those two items. So if you got a cash flow boost of 20 grand and your net profit is 20 grand, there is a case to make that the bank will say you didn't make any profit. The other case scenario is with the Jobkeeper is that some banks may not have a policy right now, but others may. They may say it's a non recurring expense and it adds it back in and taxes it. So just be careful in regards to those two things in your 2020 tax return when you're trying to utilise any uplifting income, personal income, any of your net profit, make sure you use a professional when you're self employed and you're using your 2020 tax returns for lending purposes. Reach out to me if you don't have any idea or any clue. You think you can, but you need to have some assistance. It's Aaron here and we'll talk soon.
