Broker guide
Accountant Letter for a Home Loan: What Lenders Need
What an accountant letter must confirm for a self-employed home loan, who can sign it, and when a lender accepts it in place of tax returns.
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An accountant letter confirms facts about a self-employed client’s business and income for a home loan application. A lender can use it alongside tax returns or accept it through an alternative-documentation pathway. The lender’s criteria determine which role the letter can fill.
To obtain a usable letter, identify the lender’s required facts first and let the accountant decide what they can confirm from their records. An accountant’s statement about past income and a promise that the client can repay a loan carry different responsibilities.
What an Accountant Letter Confirms
An accountant letter identifies the client, the business and the financial records behind the income figure. Match its contents to the selected product’s requirements before asking the accountant to prepare it.
Settle the following information with the accountant.
- The client’s full name, business name and Australian Business Number (ABN).
- The period the business has traded and the length of the accountant’s relationship with the client.
- The period covered by the figures and whether the accountant prepared the relevant accounts.
- Which tax returns and business activity statements (BAS) have been lodged, where the lender requires that confirmation.
- The income or turnover figure requested, with its period and accounting basis clearly identified.
- The accountant’s qualifications, practice details, signature and the date of the letter.
Turnover is the business’s revenue before expenses. It doesn’t establish the owner’s income available for repayments. If the lender requests income after business expenses, a turnover-only letter leaves that question unanswered.
Pepper Money’s accountant form, for example, asks about accounts prepared and tax returns lodged. It separates gross taxable income from non-cash deductions. Those fields show why an unspecified annual “income” figure can cause a query.
An Example of Factual Letter Content
The following extracts show the information an accountant’s own letter can contain. They are an illustration of factual content, not a completed declaration for a client to obtain a signature on. The accountant must choose the wording and include only statements their records support.
To {lender name}, regarding {client name and business entity}.
We act as accountant for {client/entity}, trading as {business name}, ABN {number}. Our engagement commenced {engagement commencement}.
We prepared {specified accounts} for {reporting period} using {identified records}. Those accounts record turnover of {amount} and net profit of {amount}, calculated on {accounting basis}.
Our records show tax returns lodged for {tax years} and BAS lodged for {reporting periods}.
{Accountant name, qualification, registration or membership number, practice contact details, signature and date}.
The example contains no assessment of future repayments. An unsigned draft, an unexplained projection or an opinion that the client can afford the loan doesn’t supply verified historical income. Resolve missing figures and periods before lodging the evidence.
Who Can Sign the Letter
Use an accountant or registered tax agent whose credentials meet the lender’s requirements and who is independent of the borrower’s transaction. A borrower who is an accountant must still satisfy the lender’s independence rules.
Lenders can specify a registered tax agent, a Certified Practising Accountant or a Chartered Accountant. Other professional memberships can also be accepted. Pepper Money’s form lists CPA Australia, Chartered Accountants Australia and New Zealand and the Institute of Public Accountants, with a field for other membership.
Professional membership alone doesn’t establish that the accountant knows the client’s records. Pepper’s accompanying instructions require an appointment of at least 12 months and knowledge of the client’s last 12 months of earnings. Apply that condition to that form rather than treating it as a rule for every lender.
Give the accountant the lender’s actual form where one is required. Preserve the accountant’s qualifications and limitations when returning it to the lender. If the accountant cannot sign the form, establish whether another accepted evidence path is available before asking for a different letter.
When Lenders Accept It
A letter supports a full-documentation application when it explains a fact in the accounts or tax returns. It replaces the usual tax-return evidence only where the selected low-doc or alt-doc product accepts that verification method.
For a full-documentation file, a letter can explain a change in business structure or identify a non-recurring expense. The lender still applies its income assessment rules. A letter describing recent trading doesn’t automatically allow the broker to replace the tax-return income with a higher figure.
Pepper Money’s home-loan documentation requirements list an accountant’s letter as one alternative-documentation option, subject to eligibility. Its alternative path also requires a declaration of financial position and evidence of business registration. A loan with an accountant letter still needs the other application evidence, including identity and deposit information.
For the wider distinction between evidence paths, use the low doc home loans guide. General income assessment belongs in the self-employed home loan guide.
Obtain and Check the Lender’s Required Form
- Identify the product and accepted income-verification path. Record whether the letter supplements tax returns or is the selected alternative evidence.
- Obtain the lender’s form and instructions. Pepper Money’s accountant letter and completion guide shows the fields and qualifications in one published example.
- With the client’s authority, give the accountant the required facts and reporting periods. Ask the accountant to prepare the response from their records and explain any limitation.
- Compare the returned document with the application. The borrower, business entity and income period must match, and any difference between turnover and assessed income must be explained.
- Retain the signed evidence and resolve missing fields with the accountant or lender. The income figure used in the application must trace to an accepted document.
If the lender declines the wording, identify the exact unresolved fact. Ask whether financial statements, lodged BAS or business bank statements can meet the requirement under that product. Don’t remove an accountant’s limitation or alter their signed declaration yourself.
Accountant Liability and Client Declarations
Accountants limit loan declarations because a statement about a client’s ability to repay can involve regulated credit activity and expose the practice to liability. Supplying factual records has a different purpose from certifying future repayment capacity.
CPA Australia’s guidance on signing client declarations for loans warns that capacity-to-repay certificates can breach licensing requirements when the accountant lacks the appropriate authorisation. Its consumer credit guidance explains the registered tax agent exemption and its limits.
The Institute of Public Accountants’ declaration guidance also warns about liability and professional indemnity cover. It advises accountants to verify only information they have accessed and verified through their engagement.
Ask for records and facts the accountant can support. Specify the client, entity, reporting period and calculation the lender needs, then leave the accountant to determine their response. If the requested declaration goes beyond that scope, take the concern back to the lender and agree on acceptable evidence before the client pays for further work.
