Accountant’s letters, declarations and capacity to repay certificates

An ‘Accountant’s Letter’ is a document prepared by an accountant at your request for a bank, lender, or another party for the purposes of approving a loan, lease or rental agreement for a client.

Sometimes when you’re seeking finance, your lender may request that you ask us for an Accountant’s Letter to help support your application. This may be because you’re self-employed, may have incomplete financial records or your chosen lender has adopted this requirement as part of their standard lending process for some types of clients.

We can, and always will provide you with an Accountant’s Letter to support your credit application.

We can provide financial information that we have helped prepare or have direct access to. This might include your gross taxable income, principal sources of income, years your tax returns have been lodged, and confirmation if your accounts have been audited.

However, we have noticed recently that some lenders are now asking accountants to provide information such as, estimating or validating your future income or expenses, if your business is solvent and will remain solvent, and your ability to service a loan.

For an accountant to provide this information they would be in breach of their professional obligations because this is information that they cannot factually verify and they do not have professional indemnity insurance to cover this advice.

The Chartered Accountants ANZ, CPA Australia and the Institute of Public Accountants have taken the position that the determination of capacity to repay must be made by the lender. The lender cannot ask applicants to engage third parties to determine their capacity to repay as part of the loan application.

Importantly, we note that the Independent Review of the Banking Code of Practice 2021 (November 2021) recommended that: The Code should clarify that a bank’s approval of a small business loan will not be dependent on a third party (such as the small business’s accountant) certifying the capacity of the small business to repay the loan.

It is the responsibility of the lender to ensure that they have the necessary due diligence in place to make sure that the service they are offering you is the right fit for you.

Please contact me paul@congdonfuzi.com.au if you would like more information or if you have any questions.