Quick answer
Low taxable income doesn't automatically stop a business loan, because lenders assess adjusted profit, not just the tax figure. Non-cash and one-off deductions — depreciation, instant asset write-offs, extra director super, interest on debt being refinanced — can often be added back. Income actually paid away, such as trust distributions to other family members, usually can't. Ask your accountant to schedule the add-backs, and raise borrowing plans before year-end tax planning.
Key points
- Lenders start from net profit, then add back non-cash and genuinely one-off deductions.
- Depreciation and instant asset write-offs are the most widely accepted add-backs.
- Income distributed to someone else in a trust is generally gone for servicing purposes.
- A one-page add-back schedule from your accountant does more than any verbal explanation.
- If you plan to borrow in the next year, say so at your pre-30 June tax planning meeting.
It’s one of the most common conversations in business lending. An owner runs a busy, healthy business. Their accountant does a great job at tax time. Then the owner applies for a loan and hears that the income on the tax return is “too low to service”.
Both things are true at once. Tax planning is designed to keep taxable income as low as the law allows. Lending assessment wants to see as much capacity to repay as possible. The two pull in opposite directions — but they aren’t irreconcilable. This guide explains how lenders bridge the gap, where they won’t, and how owners and accountants can plan for both.
Why does a low taxable income worry a lender?
A lender’s core question for any unsecured or cash flow facility is servicing: after the business pays its costs and existing debts, is there enough left over to meet new repayments with a buffer? The most authoritative evidence of profit is a lodged tax return, because it’s been reported to the ATO. If the return shows $60k of net profit, that’s the starting point — even if everyone involved knows the business is stronger than that.
The good news is that lenders don’t stop at the bottom line. Most work from net profit and then make adjustments. Our page on how lenders link profit to servicing explains the mechanics. This guide focuses on the specific tax strategies that shrink the bottom line, and how each one is likely to be read.
Which tax strategies do lenders look through?
Some deductions reduce taxable income without any money leaving the business that year, or represent costs that won’t repeat. These are the classic add-backs.
| Tax strategy | Effect on taxable income | How lenders commonly treat it |
|---|---|---|
| Depreciation on equipment, vehicles and fit-outs | Lowers profit with no cash going out that year | Widely added back |
| Instant asset write-off on assets under $20,000 | Whole cost deducted in one year | Often added back; any finance repayments still counted |
| Interest on a loan that the new facility will replace | Cost disappears once refinanced | Often added back, with loan statements as proof |
| Owner’s super contributions above the compulsory amount | Discretionary and adjustable | Sometimes added back, case by case |
| Genuine one-off costs (a legal matter, a relocation, a major repair) | One-year spike in expenses | Considered with an explanation and invoices |
| Prepaying next year’s expenses before 30 June | Pulls costs into this year | May be considered if clearly shown as a prepayment |
The instant asset write-off is a particularly common reason for a sharp dip in profit. The ATO confirms that from 1 July 2026, the $20,000 instant asset write-off is permanent for small businesses with aggregated turnover under $10 million, and the limit applies per asset. Assets costing $20,000 or more can go into the small business pool, depreciated at 15% in the first year and 30% each year after. A business that buys several assets in a year can wipe a large slice off its taxable profit — and that’s exactly the kind of deduction a lender expects to add back.
Director super is a similar story. The ATO’s contributions caps page shows the general concessional cap is $32,500 from 1 July 2026, up from $30,000 in 2025–26, and eligible people can carry forward unused cap amounts from earlier years. An owner who tops up their super to the cap through the business has made a choice, not incurred a fixed cost. Many lenders will consider adding back the portion above the compulsory super guarantee — but only if it’s spelled out.
Which strategies usually stay in the numbers?
Other planning moves don’t just reduce taxable income on paper — they genuinely move income away from the business or the borrower. Lenders generally won’t reverse these.
- Trust distributions to other people. If the family trust distributes income to an adult child at university or a parent in retirement, that money belongs to them. Unless they’re part of the application, a lender usually won’t count it towards your servicing.
- Wages paid to family members. If a spouse is genuinely on the payroll, the wage is a real business cost. It may help the household picture if the spouse is a co-borrower, but it won’t be added back to the business.
- Profit retained in a separate entity. Income distributed to a company in the group may sit outside the borrower. Some lenders will look at the whole group if every entity is part of the deal; many won’t by default.
- Reduced owner salary with large drawings. A low wage paired with irregular drawings is confusing rather than helpful. Lenders prefer a clear, regular pattern.
Our page on company and trust documents explains how lenders map the structure, including who needs to sign and guarantee.
How should my accountant present the add-backs?
The difference between an add-back being accepted and ignored is often presentation. A lender’s credit assessor can’t ring your accountant’s memory. They need it on paper.
A strong add-back schedule is one page and includes:
- Net profit per the financial statements for each year presented, normally the last two.
- Each add-back on its own line, with the amount and the account it came from.
- A one-sentence reason for each — “depreciation, non-cash”, “interest on equipment loan to be refinanced”, “voluntary super above compulsory rate”.
- Supporting evidence referenced alongside: depreciation schedule, loan statements, invoices for one-off costs.
- Adjusted profit at the bottom, clearly labelled as an adjusted figure, not a restatement of the accounts.
Keep the original financial statements untouched. The schedule sits beside them. Our adviser guide to management accounts for lenders shows a similar layout for year-to-date figures, which can help when the current year is trading more strongly than the last return shows.
If you’d like a lender’s view on your numbers before you go further, start a short enquiry and mention that your accountant can supply an add-back schedule.
Does the type of loan change how much this matters?
Yes — quite a lot. The tax return carries more weight for some facilities than others.
| Facility | How much taxable income matters |
|---|---|
| Smaller unsecured cash flow loan | Less — often sized mostly on turnover and bank statements |
| Line of credit | Moderate — financials and BAS help set the limit |
| Larger unsecured term loan | Significant — adjusted profit drives the amount |
| Property-secured business loan | Varies — security carries more weight, though servicing still matters |
As a guide, unsecured, cash flow and line-of-credit options typically run from $5k to $500k, while loans secured over residential or commercial property can range from $20k to $5m. If your taxable income is the sticking point, it’s worth asking whether a different facility type, or using property equity as security, changes the picture.
A worked example
Here’s a hypothetical case to show how the pieces fit. A family-owned electrical contracting company has strong turnover, and its accountant’s tax planning has done its job:
- Net profit per the financial statements: $72,000
- Depreciation, including instant asset write-offs on tools and two vans: $48,000
- Interest on an equipment loan the owner wants to refinance: $9,000
- Director super above the compulsory amount: $14,000
- A one-off legal cost over a contract dispute: $11,000
Before adjustments, the business looks marginal for the facility the owner wants. With a clear schedule, a lender might assess adjusted profit of around $154,000, then subtract existing commitments — including repayments on the van finance — before comparing what’s left with the proposed repayments plus a buffer. Whether every add-back is accepted depends on the lender; the legal cost, for example, needs the invoices and a short explanation that the dispute is resolved. The figures are illustrative only.
The question to ask before 30 June
The best time to deal with this tension is before it happens. Most tax planning meetings happen in May and June. If you expect to borrow in the next twelve months — for a vehicle, a second site, a business purchase or simply a buffer — tell your accountant at that meeting.
Questions worth asking:
- “If I apply for finance next year, what will my profit look like to a lender after this strategy?”
- “Which of these deductions will a lender treat as add-backs, and which are permanent?”
- “Would it help to apply before or after we lodge this year’s return?”
- “Can you prepare an add-back schedule when the financials are finalised?”
Your accountant isn’t being asked to give up legitimate deductions. It’s simply a matter of knowing which way the decision cuts, so there are no surprises. For owners already facing a large bill, our page on planning the funding when your accountant projects a big tax bill covers the other side of the same calendar.
Advisers: a quick note on referring these clients
If you’re the accountant or bookkeeper, you’re in the best position to make this file easy. Include the add-back schedule, the depreciation schedule and the last two years of financials with the referral, and note any structure details — trusts, related companies, guarantors — up front. Our Link-up checklist builder splits the documents between what the owner provides and what you provide.
Your tax return isn’t the whole story
Smart tax planning shouldn’t cost you the funding your business needs. The gap between taxable income and real repayment capacity comes up constantly in business lending, and an adjusted, well-explained profit figure is exactly what we like to see.
Enquiring takes about 60 seconds, and there’s no credit check when you first enquire. We don’t send your details to a pile of lenders hoping one bites, so your phone won’t blow up with calls from strangers. A real person reads your situation — including how your accountant has structured things — and calls you, with your adviser on the line if you’d like. Please fill in the form accurately, including your structure and the profit figures your accountant has, so we can link you with the right lender the first time.
Frequently asked questions
Can I get a business loan if my tax return shows a small profit?
Often, yes. Lenders adjust net profit for non-cash and one-off items, and some facilities lean more on bank statements, BAS or property security than on the tax return. The key is showing clearly why the taxable figure understates what the business can repay.
What add-backs do business lenders usually accept?
Depreciation and instant asset write-offs are the most common. Interest on debt being refinanced, director super above the compulsory amount, and documented one-off costs are often considered. Lenders differ, so every add-back should be listed with a reason and evidence.
Does the instant asset write-off reduce my borrowing power?
It reduces taxable income in the year you claim it, but because it's a non-cash deduction, many lenders add it back. The repayments on any finance used to buy the asset are still counted as a commitment.
My trust distributed income to my spouse. Does that count?
Only if your spouse is part of the application and the income is genuinely theirs. Distributions to beneficiaries who aren't borrowing or guaranteeing are generally treated as money that has left the picture.
Should I amend my tax return to show more income?
Don't do it to get a loan. Returns should reflect your actual tax position. If you think a return contains an error, that's a conversation with your tax agent — separate from any loan application.
Is there a credit check when I enquire?
No. We don't run a credit check when you first enquire. A credit check only comes up if you choose to go ahead with a specific option.