An accountant letter is a document that is used to verify an individual’s or company’s financial status.
Banks, landlords, and other institutions often request it when someone is applying for a loan or credit card, trying to rent a property, or seeking other financial assistance.
An accountant’s letter can be a valuable tool in obtaining the financial assistance you need, so here’s what you need to know.
What Is an Accountant’s Letter?
As the name suggests, an accountant’s letter is a formal document signed by a qualified accountant. It’s often used to confirm a self-employed borrower’s income.
The letter must be on the accountant’s letterhead and state their qualifications. It must also note that the accountant has reviewed the borrower’s finances and has no reason to believe that their reported income is inaccurate.
These are generally used by lenders when reviewing loan or credit card applications from business owners, or self-employed individuals who don’t necessarily have the traditional paperwork used to confirm their financial position.
While not all lenders require an accountant letter, it can be helpful in providing additional documentation of income.
Examples of Situations Where You May Require Accountant’s Letters
There are a number of situations where you may be required to provide a letter from your accountant. For example, if you are applying for a business loan, the lender may request a letter confirming that your finances are in order.
Similarly, if you are selling or leasing property, the buyer or tenant may require a letter attesting to your financial stability. In some cases, government agencies may also request a letter from your accountant as part of an investigation.
In each of these situations, a letter from your accountant can help to establish your credibility and financial standing.
Low-Doc Accountant’s Letter
A low-documentation loan (or a low-doc loan for short) is a type of loan that requires less information from the borrower in order to obtain financing. Low-doc loans can be helpful for borrowers who may not have all of the necessary documentation on hand.
If you’re self-employed or recently opened a business, you may find it a bit difficult to provide the bank or lenders with the long list of documents they usually require to prove your taxable income, such as financial statements and tax returns. And in some circumstances, your financial records don’t necessarily reflect your accurate income. For example, you may have only operated for part of the year so your income is lower.
In either of these cases, it could be tricky to apply for finance – whether it’s a personal loan, credit card or mortgage loan. However, to make things less complicated for you, some banks or lenders offer loan products that only require certain documents that are easier to obtain.
This is where an accountant’s letter acts as your financial documentation and comes in handy.
The idea is for the accountant to confirm that you have made an income declaration that is “not an unreasonable estimate” of your income. They don’t necessarily have to declare what your income is; they just have to confirm that your declaration is true and accurate.
However, accountant letters must meet certain requirements:
- It must be an official letter presented on the accountant’s company letterhead
- The letter should contain specifics about the accountant’s firm, such as their Australian Business Number (ABN) and details relating to the accountant’s qualification
- It must be dated and signed
- Your name (the borrower) should appear in the letter
- There should be confirmation that the firm acts as your accountant.
Following the economic crisis brought about by the COVID-19 pandemic, state and territory governments introduced a range of business grants to help keep business owners afloat.
Some of these grants, specifically in New South Wales, require an accountant’s letter to prove their loss of revenue. For example, as part of the NSW Small Business COVID Grant application, the applicant would need to provide an accountant letter to substantiate that:
- The turnover of the business is more than $75,000
- The business has experienced a drop in income of more than 40% during the eligible periods.
Additionally, there are other grants – like the EMDG Grant – that may request an accountant letter as well.
Corporate SMSF Trustees Applying for a Home Loan
Self-managed superannuation funds (SMSFs) are notorious for their red tape, and if your SMSF has a corporate trustee who is planning on applying for a loan, an accountant letter is one of the many documents they’ll need to submit to get the loan approved.
The purpose of the accountant’s letter is to confirm that the corporate trustee solely acts as trustee for the SMSF and doesn’t trade as a company in its own right and on occasion substantiate that the SMSF can service the loan. This is a case-by-case basis so please speak to a broker and an accountant.
How Can Box Advisory Services Help?
In most of the cases listed above, your letter must confirm that the accountant is, in fact, rendering services to you – whether in your personal capacity or for your business. So, most accountants won’t just hand the letter to you.
As you can see from the required details, an accountant needs to assess your financial position before declaring it true. So, before you consider only contacting these professionals for the purpose of simply obtaining a letter, you may want to consider hiring an accountant to help you with your finances in general and get your taxes up to date.
When it comes to financial matters, it is always best to err on the side of caution and seek professional help when needed. This is where we come in. The Box Advisory Services team is highly trained and experienced and can provide expert guidance on a wide range of matters.
If you are unsure about how to handle a financial issue or if you need feedback on how to improve your current position, our accountants can offer invaluable assistance. They can help you understand your options and make the best decision for your situation. Getting an accountant’s letter is just a bonus service!
If this sounds like a solution you would be interested in, contact us today.