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Will you get taxed for a self-employed loan?

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If you’re looking to apply for a self-employed loan, you might be wondering if you’ll need to pay tax on the funding that you receive from your lender. In some cases, depending on what the funds are used for, you may need to pay tax.

If the funds are used for an income generating event, you may be required to pay tax on any profits. However, if you plan to use the funds to pay off debts, then chances are, you won’t need to pay tax. Generally, how you use the funds of a self-employed loan will determine if you will pay tax or not.

Read on below to find out more about self-employed loans and tax purposes.

What is a self-employed loan?

A self-employed loan is a personal loan for people who are sole-traders or run their own business. While there is no specific type of loan called a ‘self-employed loan’, there are several loan options available that are tailored to the self-employed.

In some cases, self-employed loans can require less documentation compared to a traditional loan. This can be helpful if you’re struggling to meet the required documentation during the application process. Generally, a self-employed loan may require you to provide tax returns and payslips to prove that you can meet the repayments of your loan.

Will you get taxed for a self-employed loan?

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Generally, borrowers are not taxed on the funds received from a loan, since a loan is considered a debt. When you are approved for a loan, it is important to remember that you will be required to pay the lender back in full, with whatever terms are agreed to in your loan contract.

In some cases, tax exemption for loans depends on the type of loan, and how the money is used.

  • If funds received from a loan is used for any income-generating event, you may be liable to pay tax on any profit made.
  • If the loan amount is used to pay for necessities or decrease other debts, you generally do not have to pay tax.
  • If the money is used to purchase an investment that may generate income, such as rental property, you may need to include investment return statements as part of your income, and you may be taxed.
  • If the funds from a loan are linked to a business, you may be taxed on the loan amount depending on the situation.


It may be helpful to speak to your lender early if you are worried about being taxed on the funds from your loan. Every loan is different, and they may be able to advise you whether your loan is likely to be taxed or not, depending on what it is used for.

The different types of self-employed loans

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A self-employed loan isn’t too different from a regular loan, although you may need to provide your tax returns and evidence of profit and loss when you first apply. There are also many forms of loans that cater to the self-employed to choose from. Some options that may suit you could be:

  • Secured or unsecured loans- Generally, these are personal loans that you repay over an agreed-to period. A secured loan is a loan guaranteed by an asset, for example, a car. Your lender would use this asset as security, which means that if you cannot make the agreed repayments your lender could take possession of the asset and sell it to cover the cost of the loan.
  • Specialist loans – These are loans that are done through a specialist lender who provide loans for those who are self-employed. You may need a specialist due to your credit score, loan purpose, needing a loan after bankruptcy or not meeting the income verification requirements. Generally, if you’re a specialist borrower, you might be someone with a need for finance who cannot meet the criteria put forward by traditional lenders.
  • Low document loans Can be used if you’re having trouble providing the number of documents needed for another loan. Low doc loans can be taken out using less documentation than what is required for a traditional loan. Typically, low doc loans are for potential borrowers who are self-employed or small business owners and don’t have access to the number of documents normally needed when applying.

Where does Tiger Finance come in?

We have helped countless Australians with both good and bad credit ratings to get funding. We understand that lending criteria from other lenders are too strict and can stop you from achieving your goals. That is wrong, and it should not hold you back.

How we can help

Our finance specialists can help you find the right loan for your project. Getting a loan can be complicated, but we will find a loan that makes the process that much easier.

If you are one of the many Australians finding getting a loan difficult, Tiger Finance can make the process simple and pain-free. Call our loan specialist team today for your free initial consultation.

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