Self-em­ployed bat­tle for bonds

Business Day - Home Front - - HOMEFRONT -

PROOF OF IN­COME SA has in the last decade seen a big rise in the num­ber of self­em­ployed peo­ple, says Rob Lawrence, Na­tional Man­ager for Raw­son Fi­nance. These en­trepreneurs op­er­ate ei­ther as sole pro­pri­etors, through reg­is­tered close cor­po­ra­tions (CC) or Pty (Ltd) com­pa­nies. “In the case of sole pro­pri­etors, they and their op­er­a­tion are one en­tity. On the other hand, where they form a CC or a com­pany, they are in­de­pen­dent of their op­er­a­tion. How­ever which­ever way they work, they will struc­ture their ac­counts to make them as tax ef­fi­cient as pos­si­ble.” While this is usu­ally good for the en­tre­pre­neur in many re­spects, in oth­ers, says Lawrence, it can be a prob­lem es­pe­cially when it comes to ob­tain­ing bond fi­nance. In the old days, prior to the Na­tional Credit Act, the banks would ac­cept a Let­ter of Earn­ings from a rep­utable ac­coun­tant, es­pe­cially a qual­i­fied CA, as suf­fi­cient proof of in­come for a bond ap­pli­ca­tion. “Now, how­ever, one of the things on which the Na­tional Credit Act places great em­pha­sis is that banks must have in­dis­putable proof of in­come. If they have acted with­out this they run the risk of be­ing charged with reck­less lend­ing.” Prov­ing in­come is rel­a­tively easy if the bond ap­pli­cant is a salaried em­ployee, says Lawrence.

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