ANZ Income Calculations

  • You must have one of the following to accurately calculate base pay. You cannot use the IRD summary alone

    • Payslip clearly stating annual base salary

    • Employer Letter/Contract confirming base salary or hourly rate and minimum hours per week.
      The employer letter cannot state average hours, it must be ‘minimum’

    • 3x payslips that show the exact same amount of income every pay cycle - annualise this figure

    • Payslips regularly showing ‘ordinary hours’ or similar wording. For example, if the payslip shows ‘Ordinary hours - 40 x $26ph’ and then all other payments are on top of things like bonuses, overtime, meal allowances etc, then we can take 40 x 26 = $1,040 per week or $54,080PA as the base pay

    • ANZ ONLY - If the hours per week are relatively close, from experience regularly over 30 hours per week, but fluctuate, we can assume 40 hours per week as the base pay.

      This has to make logical sense, so if there is still overtime above this, it would be logical that the minimum hours are less than this. However, if the client is working regular hours of 22, 25, 30 hours as per their last 3 payslips, no reasonable assessor would accept that 40 hours is their base.

  • For this you will need

    • Bank statements for the last 3 months

    • Base salary already calculated

    1. Take the base salary. For our example, we will use $79,007 gross per year.

    2. Download and open this ANZ Overtime calculator

    3. Go to PAYE.net.nz. Input the annual salary, in our case $79,007.

      Note: When selecting Kiwisaver and Student Loans, do this as per the payslips you have received, NOT after changing Kiwisaver and Student Loan payments.

    4. Note the frequency of the payslips. For our example the payslips are fortnightly, so this is the figure we need as per the ‘Take Home Pay’ See example here.

      This is the figure we should expect to see going into their bank accounts every week based on the declared base salary.

    5. Input this figure into the ‘Base Income NET’ box in the ANZ Overtime Calculator you have downloaded. See example here.

    6. Next we select ‘Fortnightly’ in our case. By selecting this, it will black out some of the boxes in the calculator. This tells us how many pay cycles we need to include.

      Monthly - 3
      Fortnightly - 7
      Weekly - 13

    7. Take the clients last 3 months bank statements and find all the salary and wages payments that have gone in. See example here.

    8. Input these figures into the white boxes, ‘Pay 1, Pay 2, Pay 3’ etc, one for each pay cycle. See example here.

    9. Round the figure under ‘Scaled @ 80% Weekly’ to the nearest dollar and put this in the standard ANZ calculator under ‘Weekly NET Income’

  • Requirements

    • Client has worked the role for 2 years

    When the client is not on a permanent contract, we must use the average of the last 2 years income, according to their IRD summary to determine their income.

    This doesnt have to be tax years, it can be 2 years from todays date.

    It is not scaled further and is used at 100% in the calculator.

  • You will need

    • Last 2 years financials

    • IR4 if in a company

    • IR3, IR7, or IR10 if in personal/trust names

    Before beginning, take note of the owners as per companies office/annual report. If the client is only one of two owners with equal holdings, then only take 50% of any numbers calculated below.

    Take out any shareholder salaries or directors fees and include those at 100%, assuming they relate to your client.

    Include all business loans in servicing and provide 3 months statements for each.

    Net Profit Calculations

    Note: Net profit in business accounting terms does not mean after tax, it means after expenses.

    Take the net profit before tax

    x0.72 - this will take off 28% of assumed tax.

    /52. This will give us our weekly net figure.

    Example

    Net profit = $50,000

    $50,000 x 0.72 = $36,000

    $36,000/52 = $692.31. $692 to the nearest dollar.

    Do this for the last 2 financial years and average the 2 figures OR use the most recent tax year, if that is lower than the average.

    Addbacks

    Acceptable addbacks

    • Depreciation

    • Home Office

    • Interest

    Add these up for each year. /52 and add to your Weekly Net figure.

    Example continued from above

    Depreciation: $10,000

    Home Office: $2,000

    Interest: $1,000

    Total = $13,000

    $13,000/52 = $250

    Add $692 from previous example to $250 = $942 Weekly NET

  • Note that only ANZ calculates projections like this, all other banks use the method of discounting net profit rather than gross profit as below.

    You will need

    • Clearly split projections. There cannot be a mix of actual and projected in the same figues.
      EG: It must say
      Apr - Jul Actuals
      Jul - Mar Projections

      Usually in 2 separate columns.

    • Previous years actual financials

    • IR4’s, IR3, IR7’s and IR10’s as appropriate (proof of income lodged with IRD)

    1. Calculate the full previous years financials as per the above category ‘Self Employed Business: No Projections’.

      Note these figures in your diary notes.

    2. Now we need to calculate the projected year’s final income. This has to be done in 2 parts. The actual part year, and the remaining projections.

      For the Actuals, take the income and addbacks as in ‘Self Employed Business: No projections and keep the final NET Weekly figures to one side. This will likely be a small amount depending on how much of the financial year has passed.

    3. For ANZ, we take the projected figures.

      ANZ scale projected income differently depending on the business type and it’s risks. Businesses with consistent income, for example, an accountant, may only be scaled at 90% or not at all. A riskier industry, like a restaurant may be scaled more. Most businesses are scaled at 80%.
      My recommendation is make sure the deal works at 80% scaling, but use 90% in your diary notes and calculations - let’s be optimistic.

      Gross Profit (note Gross, not NET) x 0.8 to give 80% of the gross profit.
      EG: $100,000 gross profit x0.8 = $80,000

    4. Take your discounted gross profit figure. Now take off all cost of goods sold and expenses at 100% of what they are on the financials.
      EG: COGS = $10,000
      Expenses = $50,000

      $80,000 discounted gross profit - $10,000 COGS — $50,000 Expenses = $20,000 Projected Net Profit Before Tax

    5. Convert to weekly NET. Take 28% off for tax and divide by 52 for weekly.

      $20,000 x 0.72 (removing 28%) = $14,400

      $14,400/52 = $276.92 Weekly NET or $277 rounded to the nearest dollar.

    6. Add in any addbacks as per the projections at 100%, do not take any tax off as addbacks are already net of tax.
      EG: $2,000 Home Office /52 = $38 Weekly NET of additional addbacks.

    7. Add together the Weekly NET figures of your most recent years part year actuals and projections.
      This is your figure for your second tax year.

    8. Add your first tax years actuals and your second tax year weekly net figures together. Divide by 2. This is your average of the 2 tax years including projections.

  • You will need:

    • Minimum 1 year IRD summary for the last 12 months

    • An understanding that this income is consistent, an explanation of how long they have been doing this type of role, contracting or not as well as any assurances about contract extensions from managers.

    • Any payslips, financials or contracts that apply

    This is less black and white, but at a minimum, ANZ will accept the last 12 months IRD summary as the gross income for the clients - even if they have not been contracting for the last 12 months, as long as the PAYE and contracting income shown are for similar roles.