Quick answer
A low doc income declaration is a signed statement from a New Zealand business owner confirming their income when up-to-date financial statements or tax returns aren't available. Lenders accept it alongside supporting evidence, usually bank statements, GST returns and sometimes an accountant's letter. The figure should be realistic, consistent with your deposits and GST turnover, and something you can comfortably afford repayments from.
Key points
- Declare a realistic figure you can support.
- Back it up with bank statements and GST returns.
- An accountant's letter adds weight.
- Inconsistencies are the main reason declarations fail.
For a lot of self-employed New Zealanders, the problem isn’t income. It’s proving it on a lender’s timeline. The accountant files returns once a year, months after balance date. The business has grown since the last set of accounts. A low doc income declaration bridges that gap, but only when it’s done carefully. This guide walks through how to prepare one that holds up.
What a declaration is, and isn’t
A low doc income declaration is a signed statement in which you confirm your income, usually your business’s net income or your personal income from the business, for a recent period. It is not a substitute for evidence. Lenders accept it because it’s backed by other documents that let them check the figure makes sense. Think of it as a summary you’re vouching for, with receipts.
Who it suits
Declarations are most useful for:
- sole traders and contractors whose returns are filed late in the year;
- company owners whose financial statements are still being prepared;
- businesses that have grown strongly since the last filed accounts;
- owners who’ve changed structure recently, such as moving from sole trader to company.
Most lenders want you to have been GST registered and trading for at least a year. If you’re newer, see new business loans.
Step 1: Work out a realistic figure
Start with your bank statements and GST returns. Add up your GST-exclusive sales for the last twelve months, then subtract your real business costs: materials, wages, rent, vehicle costs, insurance and so on. What’s left is a rough net business income. If you’re a company owner, include the salary or drawings you actually take. Be conservative. A figure that’s too high invites questions and could lead to a loan you struggle to repay.
Step 2: Check it against your evidence
Before you sign, test the figure against the documents a lender will see:
- GST returns. Your declared turnover should line up with the sales on your GST returns.
- Bank statements. Deposits should broadly match your turnover, allowing for timing.
- Previous tax returns. A big jump from your last filed return needs explaining.
- Drawings. Money you take out of the business should be consistent with your declared income.
If something doesn’t line up, fix the figure or prepare a short explanation.
Step 3: Gather the supporting documents
A typical low doc pack includes:
- the signed income declaration;
- six to twelve months of business bank statements;
- GST returns for the same period;
- your most recent filed tax return, even if it’s old;
- an IRD statement of account;
- photo ID and your NZBN or IRD number;
- an accountant’s letter, if the lender asks for one.
The accountant’s letter is often the difference between a declaration that’s accepted and one that isn’t. It confirms you’re a client, how long you’ve traded and, sometimes, that the declared income is reasonable.
Step 4: Explain anything unusual
A short note can head off questions. Explain any large one-off deposits, a quiet month caused by a holiday or illness, a change in structure, or any IRD debt and how it’s being managed. Lenders are more comfortable with a clear explanation than with something they have to ask about.
Common mistakes
- Declaring gross sales instead of net income. Lenders want what’s left after costs.
- Rounding up generously. Small exaggerations compound and look worse than a modest figure.
- Ignoring GST. Declared turnover that doesn’t match GST returns is a red flag.
- Overdue GST returns. If returns aren’t filed, the declaration has little to stand on.
- Mixing personal and business money in a way that hides real income.
An illustrative example
A Wellington graphic designer has traded as a sole trader for four years and moved to a limited company eight months ago. Her last IR3 return shows $68,000, but business has grown and the company’s first accounts won’t be ready for months. She works out net income of about $92,000 from twelve months of GST returns and bank statements, gets a one-page letter from her accountant confirming the figures look reasonable and declares $88,000 to stay conservative. A low doc lender accepts the declaration for a $30,000 loan to fit out a small studio. Illustrative only.
How lenders treat low doc loans
Because there’s less evidence, low doc loans can cost more and lenders may cap the amount or require security. Larger low doc loans are often secured over property. Some lenders limit how much of your declared income they’ll rely on. Ask how your declaration will be used before you apply, so there are no surprises.
Keeping it honest
A declaration is a promise. Overstating income to qualify for a bigger loan is serious and can have legal consequences. It also defeats the purpose: if the loan is sized on income you don’t have, you’ll struggle with the repayments. The aim is a figure that’s accurate, supportable and leaves room in your budget.
Moving to full doc later
A low doc loan is often a stepping stone. Once your returns are filed and the accounts show the income you declared, you may be able to refinance to a cheaper full doc loan. Keep your bookkeeping current from now on, file GST returns on time, and ask your accountant to prepare the annual accounts promptly after balance date. Next time, you may not need a declaration at all.
What a lender does with your declaration
Once the declaration arrives, a credit assessor will compare it with your statements and GST returns, look at the trend in your deposits, check your credit file and IRD position, and then work out how much of the declared income they’re prepared to rely on. Some lenders apply a discount to declared income, using only part of it to calculate what you can afford. Others will want security for anything above a certain amount. Knowing this helps you set realistic expectations about the size of the loan.
Timing your application
The best time to apply with a declaration is when your GST returns are fully up to date and you’ve got at least twelve clean months of bank statements. Applying the week after a very strong month can look like you’re picking a high point, and applying in the middle of a quiet patch can understate your income. Applying with a full year of evidence evens out the peaks and troughs.
Start your enquiry
Tell us how long you’ve traded, roughly what you earn and where your returns are at. Asking won’t mark your file, your enquiry isn’t passed down a list, and a real person reads it and calls you to talk through whether a low doc approach fits. Start your enquiry.
Frequently asked questions
Who can use a low doc declaration?
Usually self-employed people, sole traders and company owners who have been GST registered and trading for a period, often at least a year, but whose latest financials or tax returns aren't available.
Is a declaration legally binding?
It's a signed statement you're making to the lender. Overstating income is serious and can have legal consequences, so only declare what you can support.
Do I need an accountant to prepare it?
Not always, but many lenders ask for an accountant's letter alongside it, and an accountant can help you arrive at a realistic figure.
What if my GST returns don't match the figure?
Lenders will notice. Make sure the declared income makes sense against your GST turnover and bank deposits after costs.