My partner and I have 20% deposit and enough borrowing power to purchase our own home.
However the Mortgage Broker we are going through says the banks will knock us back because I owe the ATO a small amount of money. I have a payment arrangement in place with the ATO and I am in the position to pay this off immediately if I really need to. Other than this debt, I have a clean credit rating and I am not actually in default with the ATO.
But the broker is saying that even if I do pay off the ATO debt immediately, the banks will still knock me back on this. And now, he’s trying to remove me from the loan application and use my partner’s name only. I do not want this and I think this is unreasonable.
Is there some legislation or protection for someone like me? What can I do?
Get a second opinion (eg another broker or a banker, not from an internet forum). Your broker could be correct, or he could be looking to minimise his own work in having more paperwork to cover your situation.
My accountant also recommended a second opinion and described it as “a bit harsh”. But he did confirm the banks can be tough on ATO debts.
When I refused the offer to place it in my partner’s name only, he came up with some alternatives. I think you’re right: He’s trying to minimise his workload.
My previous mortgage was through a credit union. They seemed to be more flexible than the big banks however my experience is limited.
Banks hate ATO debts. Banks are required to report your TFN to the ATO. The ATO then puts a garnishee order on the bank and they have to hand any money you get into your account over to the ATO. This means they risk you not being able to meet a mortgage payment because your money has been taken from you. So they look at these debts very badly.
If you agree you owe the ATO money, pay it out if you can afford it. The ATO does not list your debt with any credit agencies and it rarely sells personal debts to the bottom dwellers such as D&B and Baycorp and Collection House but it sometimes sells corporate debts. If this is the case, you may be default listed.
Check your credit reports (start with Veda then DNB then Experian) for free online (wait is about 7 to 10 days max). See what is recorded on your files.
If your file is clear and your ATO debt is current (i.e. you are not in default under your payment arrangement), I would not list it as debt separately. I’d just lump it in with the utilities and other debts such as credit cards. This is a bit naughty if there is an actual box for the ATO but you can say that a debt is something that is overdue which is a reasonable enough view - otherwise we would all have debts, wouldn’t we? Merely turning on a light creates an obligation to pay in the future for electricity so do you estimate that in your Assets & Liabilities statement? I don’t think you can reasonably be expected to do so.
Finally, all consumer credit providers are bound by the Code under the Consumer Credit Act (or whatever it is called now-a-days). Just google it. They all are required to have a code of practice which implements the Code.
