Having a tax debt can have a significant impact on your ability to borrow money from Australian big banks. When you apply for a loan, banks will assess your financial position and creditworthiness to determine whether you are a good candidate for a loan. If you have a tax debt, this can signal to the bank that you may have difficulty managing your finances and repaying your debts, which can negatively impact your ability to secure a loan.
Here are some of the ways in which having a tax debt can impact your borrowing with Australian big banks:
- Reduced creditworthiness: A tax debt can lower your creditworthiness, which is a measure of your ability to repay a loan. Banks use credit scores to assess your creditworthiness, and having a tax debt can lower your score, making it harder to secure a loan.
- Increased risk: Banks see tax debt as a sign of increased risk, which can make them more cautious about lending to you. If you have a tax debt, the bank may view you as a higher risk borrower, which can result in a higher interest rate or lower loan amount.
- Limited loan options: Some banks may have strict policies on lending to borrowers with tax debts. If you have a tax debt, you may find that your loan options are limited, or that you are only eligible for loans with higher interest rates or less favorable terms.
- Difficulty meeting serviceability requirements: When you apply for a loan, banks will assess your serviceability, which is your ability to meet your loan repayments. If you have a tax debt, this can impact your serviceability, making it harder to meet the bank’s requirements and secure a loan.
Having a tax debt can impact your borrowing with Australian big banks in a number of ways. It can lower your creditworthiness, increase your risk, limit your loan options, and make it harder to meet serviceability requirements. If you have a tax debt, it’s important to work with the ATO to resolve it as quickly as possible and provide evidence to the bank that you have a plan in place to repay it. This can help improve your chances of securing a loan and demonstrate to the bank that you are a responsible borrower.
If you are planning to borrow money, make sure you give your accountant as much notice as you can. They will also be the ones to give you advice around anything tax related.
By Carly Pitt