SPECIALIST LENDING
Self-employed home loans
Getting a home loan when you're self-employed is achievable, but it requires the right lender, the right documentation, and an understanding of how lenders actually assess business income.
THE CORE CHALLENGE
The tax minimisation catch-22
Tax returns understate income
Legitimate tax deductions - things like depreciation, vehicle expenses, super contributions - reduce taxable income, which is exactly what lenders use as their starting point. The gap between what you earn and what the tax return shows can be significant.
Business structure adds complexity
Sole traders, partnerships, companies, and trusts are all assessed differently. Getting the income figure wrong, or presenting it in a way the lender doesn't recognise, leads to unnecessary declines or lower borrowing capacity than the situation warrants.
The most common challenge self-employed borrowers face is one created by their own good tax planning. Minimising taxable income is a legitimate and sensible goal. However, lenders typically use taxable income to assess your borrowing capacity. So the more effectively your accountant has reduced your tax bill, the lower your assessed borrowing capacity tends to be.
This isn't a reason to stop minimising tax. It's a reason to plan ahead, understand which add-backs your lender will allow, and choose a lender whose assessment methodology works in your favour. That's where specialist knowledge makes a practical difference.
BUSINESS STRUCTURES
How lenders assess different structures
Sole trader
The simplest structure for lenders to assess. All income and expenses are declared personally. Lenders look directly at your personal tax returns - your net profit from the business is your assessed income. Add-backs can increase this figure where allowable.
Partnership
Your share of the partnership's net income is used for assessment. Lenders will want both personal tax returns and partnership financials to verify the income split and confirm there are no undisclosed liabilities sitting at the partnership level.
Company (Pty Ltd)
Lenders assess your director's salary plus any dividends drawn. Company retained earnings are generally not counted unless they are distributed. Both personal and company tax returns are typically required, along with company financials.
Trust
Distributions to beneficiaries must be clearly documented. Lenders typically request the trust deed, two years of trust tax returns and financials, and evidence of consistent distributions. Variable or discretionary distributions attract more scrutiny.
Your business structure affects which income figures lenders will use, and which documents they need to verify them.
MAXIMISING YOUR BORROWING CAPACITY
Add-backs: What they are and why they matter
Add-backs are legitimate business expenses that lenders can add back to your taxable income when calculating serviceability -- because they represent non-cash deductions or one-off costs that don't reflect your ongoing financial position. Not all lenders allow the same add-backs, which is one reason lender selection matters so much for self-employed borrowers.
✔
Depreciation - a non-cash expense that reduces taxable income but doesn't affect cash flow
✔
Additional super contributions - voluntary contributions above the compulsory rate
✔
One-off expenses - non-recurring costs that won't be repeated in future years
✔
Interest on business debt - in some refinancing scenarios where the debt is being repaid
Important: If you're planning to apply for a home loan in the next 12 months, it's worth letting your accountant know. Lenders work from your tax returns, and your accountant may be able to identify documentation or context that supports your application - including which expenses may be treatable as add-backs. We can help you understand what lenders will and won't accept on our side of that conversation.
LOAN OPTIONS
Full-doc and low-doc loans
Full-doc loans
The standard approach for self-employed borrowers with up-to-date financials. Typically requires two years of tax returns, though some major lenders now accept one year where income has been consistent and growing. Access to competitive rates and higher LVRs.
BEST WHEN
Tax returns are lodged and reflect income accurately, and you have at least one to two years of trading history.
Low-doc / alt-doc loans
Designed for borrowers who can't provide full tax return documentation - for example, where returns haven't been lodged yet, or where taxable income significantly understates actual earnings. May use BAS statements, bank statements, or an accountant's letter instead.
BEST WHEN
Returns aren't yet lodged, income is growing strongly but prior year figures don't reflect current capacity, or your taxable income is significantly reduced by legitimate deductions.
The right option depends on how current your tax returns are and how well they reflect your actual income.
WHAT YOU NEED
Documents for self-employed borrowers
Full-doc loans
✔ Two most recent personal tax returns and
notices of assessment
✔ Two years of business financial statements
(P&L and balance sheet)
✔ Business tax returns (if company or trust)
✔ Business and personal bank statements
(typically 3 months)
✔ Trust deed (if applicable)
Low-doc / alt-doc loans
✔ ABN registration (usually 12 months
minimum, though exceptions are available
with some lenders)
✔ 6-12 months of BAS statements
✔ Business bank statements (typically 6
months)
✔ Accountant's letter (strongly recommended)
✔ GST registration confirmation
Requirements vary by lender and business structure. This is a general guide - we'll confirm what's needed for your specific situation.
COMMON MISCONCEPTIONS
What self-employed borrowers often get wrong
1
"Because I minimise my tax, I can't borrow very much"
Not necessarily. Add-backs can significantly increase your assessed income above your taxable income figure. The right lender and the right application can produce a substantially different result to what your tax return alone would suggest. The starting point is understanding which add-backs apply to your situation.
2
"I need two full years of business history before I can apply"
Two years is the standard, but several major banks have updated their policies to allow one year of financials where income is consistent and the business is in the same industry as the borrower's prior employment. Specialist and non-bank lenders offer further flexibility. It's worth checking before assuming you need to wait.
3
"My business bank statements will prove my income to the lender"
Bank statements show cash flow, but most lenders assess income from tax returns, not bank deposits. Showing strong turnover through bank statements without the corresponding tax return to back it up doesn't achieve what most borrowers expect it to. Tax returns need to be lodged and accurate before applying for a full-doc loan.
Where returns aren't yet lodged, or don't accurately reflect current income, a low-doc or alt-doc loan can provide flexibility - using business bank statements, BAS statements, or an accountant's letter as an alternative.
4
"My business structure doesn't really affect the assessment"
It does - significantly. Sole traders, companies, and trusts are assessed differently, and the documentation requirements vary accordingly. How income is drawn from the business, what's retained in the company, and how distributions are structured all affect what a lender can and will count as income.
WHY WANT A LOAN
Financial services background.
Lending expertise
Before specialising in mortgage broking, Noah spent years working across financial services in both Australia and the United States, including in roles that required a close understanding of business structures, income, and how financial decisions play out over time.
That background means we understand how tax planning decisions affect the numbers lenders see, and where those two things sometimes pull in opposite directions. Getting the best outcome often means bridging that gap before the application goes in, not after a decline comes back.
We also have personal experience working in contract roles within financial services - so the conversation about what lenders look for isn't theoretical on either the self-employed or the contractor side.
20+
Years' experience in financial services
30+
Lenders on panel
Free guide: 7 things every self-employed person should know before applying
Plain-English, and written specifically for self-employed borrowers, not just general home loan advice.
RELATED READING
You might also find useful
Contractor home loans
If you invoice through an agency or on a PAYG contract rather than your own ABN, the contractor page covers how lenders assess your specific income type.
Borrowing capacity calculator
See a realistic borrowing estimate based on your employment type and income. Accounts for potential income shading for self-employed income.
Try the calculator →
Other pages and tools that may be relevant to your situation.
