ATO Scrutiny Is Rising: What Self Employed Borrowers and Property Investors Should Know Before Applying for a Loan

The Australian Taxation Office is stepping up compliance activity, and that matters for borrowing. In a survey of more than 330 accountants, 87% said the ATO has become more aggressive [1], seven in ten have clients contacted about debt recovery [2], and 28% have real estate clients who faced ATO activity in the last quarter, second only to construction and trades at 59% [1]. Most of those real estate businesses turned over less than $2 million [1]. For borrowers, the link is simple: lenders assess the income you declare to the ATO. Late lodgements, unpaid tax and errors in rental property claims can delay or derail a loan, and the ATO may report a business tax debt of $100,000 or more that is over 90 days overdue to credit reporting bureaus if you are not engaging with it [3]. Up to date returns, a managed payment plan and accurate rental records keep your options open, especially with the cash rate at 4.85% [5].

Lenders lend on the income you can prove. If your tax affairs are behind, your borrowing power often is too.

General guide only. Every lender has its own policy, and your accountant should advise on your tax position.

The ATO is more active, and accountants are feeling it. Accountants Daily's first ATO Sentiment Report, based on an August survey of more than 330 accountants, found 87% believe the ATO has become more aggressive in enforcement and compliance, and more than half rate its activity as high [1]. Seven in ten have clients who were contacted about debt recovery, and nearly half had more than ten clients contacted by the ATO in the last quarter [2]. The ATO has also reported an 80% rise in prosecutions for failing to lodge over two years, with more than $2.7 million in fines [1].

Because they are among the most frequently targeted clients. In the same survey, 28% of accountants said real estate clients had faced ATO activity in the last quarter, level with professional services and behind only construction and trades at 59% [1]. The pressure falls mostly on smaller operators: 76% of the affected real estate businesses had turnover under $2 million [1]. That includes many self employed agents, property managers and small agencies, who are also often the people applying for home and investment loans.

In several ways, because lenders build their assessment on what you have told the ATO. For self employed borrowers, most lenders ask for recent tax returns and notices of assessment, so missing or late lodgements can stop an application before it starts. Lenders also ask about tax debts. An outstanding debt with no arrangement in place raises questions about your cash flow, while a payment plan you are keeping to is usually treated very differently.

Credit files matter too. The ATO may report a business's tax debt to credit reporting bureaus when at least $100,000 is overdue by more than 90 days, the business has an ABN and it is not engaging with the ATO to manage the debt [3]. The ATO says it will not report a debt while you are effectively engaging, such as by keeping up with a payment plan [3]. That is a strong reason to deal with a debt early rather than let it sit.

Their rental property records. The ATO has found that nine in ten returns reporting rental income and deductions it reviewed contained at least one error, even though most of those owners used a registered tax agent [4]. Common mistakes include leaving out income, claiming expenses for periods the property was not genuinely available for rent, and claiming interest on loan redraws used for private spending such as a holiday or a car [4]. As the ATO's Tim Loh put it, you are on the hook for the claims you are making, not the registered tax agent [4].

This matters for lending as well as tax. Lenders count the rental income you declare when they assess an investment loan, and how your existing loans are split between investment and private purposes affects both your deductions and your next application. Keeping loan purposes clean is good tax practice and good lending practice.

Yes. The Reserve Bank lifted the cash rate to 4.85% on 3 November 2026, its fifth increase this year [5]. Higher rates mean lenders' serviceability calculations are tighter, so there is less room for any doubt about your income or obligations. A borrower with up to date returns and no unmanaged tax debt is simply easier to approve, and may have more lenders to choose from. With borrowing power already under pressure, tax compliance is one factor you can control.

Start before you need the loan. These steps help self employed borrowers and investors present a clean application:

1. Lodge everything. Bring all personal, business and BAS lodgements up to date before you apply.

2. Deal with any tax debt. Contact the ATO or your accountant and set up a payment plan you can keep to [3].

3. Gather your documents. Keep recent tax returns, notices of assessment and business financials ready.

4. Check your rental records. Keep receipts, separate private and investment spending and correct any errors [4].

5. Keep loan purposes separate. Avoid using investment loan redraws for private expenses [4].

6. Talk to your accountant. Ask how your structure and recent returns will present to a lender.

7. Speak with a broker early. Different lenders treat tax debts, payment plans and self employed income differently.

Often, yes, depending on the lender and your overall position. Policies vary: some lenders will consider borrowers with an ATO payment plan that is up to date, while others are more cautious, particularly if the debt is large or recent. This is where comparing lenders matters. A broker can match your situation to lenders whose policies fit, rather than risking a decline that sits on your credit file.

We see the effect of tax issues at the application stage, when they are hardest to fix. A late return or an unmanaged debt can delay a purchase or limit which lenders will consider you. The good news is that most of these problems are solvable with a little lead time: lodge, set up a plan, tidy your records and talk to us early. Working alongside your accountant, we can find lenders whose policies fit your situation.

Lenders lend on the income you can prove. If your tax affairs are behind, your borrowing power often is too.

Olive Road Financial is a mortgage broking business with teams in Sydney and Brisbane, helping clients with home, investment and commercial lending. We compare lenders, explain how each one assesses borrowing capacity and look after the application from preapproval to settlement. Thinking of buying, refinancing or investing? Book an appointment with the Olive Road Financial team.

All sources accessed 9 November 2026. This article is general information only and does not take your objectives, financial situation or needs into account. It is not credit, financial or tax advice. Lending criteria, fees and charges apply. Speak with a qualified mortgage broker before making a decision. This article is not tax advice; speak with your accountant or registered tax agent about your tax position. Lending eligibility depends on individual lender policy.

Is the ATO becoming more aggressive?

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Can an ATO debt affect my credit file?

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