Why banks require 2 years of tax returns
Most banks have a hard rule: to assess your ability to repay a loan based on business income, they need to see 2 years of tax returns. The bank wants to see a pattern of income over at least 24 months to feel confident the business is stable and will continue earning. This is where lo-doc lending (low documentation lending) differs — lenders can assess current income using bank statements and invoices instead of requiring historical tax returns.
For anyone who's been in business for less than 2 years — whether it's a consultant, tradesperson, or someone who's just left corporate to start their own firm — this rule is a wall. Even if the business is already earning well and growing, the bank will decline the application because the tax returns don't exist yet. To a bank, lack of history equals unproven, no matter how strong the business looks.
How lo-doc lenders look at this differently
Lo-doc lenders understand that many strong businesses don't have a 2-year track record yet. Instead of demanding tax returns that don't exist, they ask: "What proof do you have that the business is earning right now?" They focus on current evidence, not historical evidence.
- Business bank deposits. If you're depositing income regularly into a business account, that's proof the business is earning now.
- Invoices issued to clients. Invoices prove you're trading and customers are paying you.
- Business registration and ABN. A registered ABN shows you're a legitimate business entity.
- Accountant's letter. Your accountant can confirm you're trading and provide an estimate of current income.
- Client contracts or work agreements. If you have signed contracts with ongoing clients, that demonstrates income stability.
With this evidence, a lo-doc lender can assess that your business is real and earning — which is what they really care about. The fact that you don't have 2 years of tax returns is irrelevant if you can show current income.
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Describe your business and your property, and we'll show you options from lenders who don't need 2 years of tax returns.
Check Your OptionsWhat a typical deal looks like
Illustrative example — not a real caseImagine an IT consultant who left a corporate job 18 months ago to start their own firm. The business is already earning about $120,000 per year — they've got 3 regular clients and are attracting new work every month. They own a $1.3 million apartment and want to borrow $300,000 to hire an extra developer and grow the business.
A traditional bank would decline this because the consultant doesn't have 2 years of tax returns. A lo-doc lender would instead look at: (1) the apartment is worth $1.3 million — the $300,000 loan is only 70% LVR, so it's well secured, (2) the business bank account shows regular income deposits from multiple clients, (3) the consultant has client contracts in place showing ongoing work, and (4) the consultant's accountant can confirm the business is trading and current income projections. With this evidence, the lender would approve the loan.
What lenders want to see
For a new business lo-doc refinance, expect lenders to ask for:
- Business bank statements (last 3–6 months). Shows regular deposits and proof that the business is currently earning.
- Invoices or client contracts. Evidence that you have clients and ongoing work in the pipeline.
- ABN registration and business details. Proof that the business is registered and legitimate.
- Tax return (if available). If you've completed a tax return for any period since starting the business, it helps (but isn't required).
- Property valuation. So the lender knows how much equity you have available to borrow against.
- Use of funds. A clear explanation of how you'll use the borrowed money and how it will help the business grow.
When this might not work
A new business lo-doc loan might not stack up if:
- The business is brand new (less than a few weeks old). Lenders want to see at least some months of deposits or invoice history to prove the business is real and earning.
- There's no clear pattern of income. If deposits are sporadic or the business hasn't invoiced any clients yet, the lender can't be confident income is reliable.
- The property doesn't have enough equity. If the property is worth less than 2 times the loan amount, the LVR might be too high.
- You want to use the loan to start a brand new business (rather than grow an existing one). Lenders prefer to lend against a business that's already operating and earning.
Our panel includes specialist lo-doc lenders who actively fund young businesses. Across these lenders:
- Businesses under 2 years old are accepted — no requirement for 2 years of tax history
- Current income is assessed using bank deposits, invoices, and contracts — not just tax returns
- Loan sizes from $25K to $80M, with rates starting from 4.99% p.a.
- Settlement in as fast as 24 hours for straightforward deals
The exact lender and terms depend on your specific deal. Describe your situation and our AI will match you with the most suitable lenders.
How to get a lo-doc loan for your new business
The process is straightforward:
- Step 1: Gather your evidence. Collect 3–6 months of business bank statements, any invoices you've issued, your ABN registration, and any client contracts. If you've done a tax return, include that too.
- Step 2: Describe your business and property. Tell us about your business (what you do, how long you've been trading, current income), your property, and what you need to borrow. Our AI matches you with lo-doc lenders who understand young businesses.
- Step 3: Connect with a lender. Review the options and connect directly. Most lo-doc lenders can give you an indication within days, not weeks.