---
title: Parental Leave and Home Loans Australia | GNT Finance
description: How lenders assess income while you are on parental leave, what a return-to-work letter must say, how childcare hits expenses, and the borrowing power at stake.
url: https://gntfinance.com.au/guides/parental-leave-and-home-loans/
section: guides
updated: 2026-09-02
author: Gorakh Timilsina, GNT Finance
---

# Parental leave and home loans

**In short:** Many lenders will assess your normal pre-leave salary while you are on parental leave, provided you supply an employer letter confirming your return date, position and salary. Some use only your reduced or part-time return income, and some also require the return date to fall within a set window. Childcare costs and an extra dependant are added to your expenses either way.

Buying while you are on parental leave, or planning to be, is entirely normal and lenders deal with it every day. What determines the outcome is a single piece of paper from your employer and a realistic view of what your household budget looks like on the other side of the leave.

## The three ways lenders treat parental leave income

From a credit desk, a parental leave file falls into one of three buckets, and which bucket you land in is set by your evidence.

1. **Assessed on pre-leave income.** Where you have an employer letter confirming you are returning to the same position, at the same hours, on a stated date, many lenders will assess your full pre-leave salary as if the leave were not happening. This is the strongest outcome and it is available more often than people expect.
2. **Assessed on return-to-work income.** Where you are returning part-time, the lender assesses the reduced figure. Some lenders will assess the reduced figure even where you are returning full-time, if the return date is beyond their window.
3. **Assessed on current income only.** Where there is no return-to-work letter, or the return is uncertain, the lender assesses what you are actually receiving now, which may be employer-paid parental leave, government Parental Leave Pay, or nothing at all.

The distance between bucket one and bucket three, in dollars, is usually larger than any rate saving you will ever negotiate.

## How parental leave income is commonly treated

Policy varies between lenders and changes without notice, so we check the current position before you apply.

| Situation | What lenders commonly do | Evidence typically requested |
|---|---|---|
| On leave, returning full-time to the same role within 3–6 months | Assess pre-leave salary at 100% | Employer letter with return date, position, hours and salary; last payslip before leave |
| On leave, returning full-time but more than 6 months away | Some assess pre-leave salary, some assess only current income | Employer letter; some lenders also want a savings buffer |
| Returning part-time | Assess the part-time salary at 100% | Employer letter stating the agreed days and pro-rata salary |
| Employer-paid parental leave currently being received | Usually counted while it lasts, but the return figure drives the assessment | Payslips showing the leave payments |
| Government Parental Leave Pay | Treated as temporary; usually supplementary at best | Centrelink income statement |
| Not returning to work | Assessed on the remaining household income only | Employer letter or resignation confirmation |

Government Parental Leave Pay is administered by Services Australia and is paid at a flat weekly rate regardless of your previous earnings, with a superannuation contribution added for children born or adopted from 1 July 2025. Because it is time-limited, most lenders treat it the way they treat other short-term payments, which is covered in [Centrelink and family payments as income](/guides/centrelink-and-family-payments-as-income/). Check your own entitlement at [servicesaustralia.gov.au](https://www.servicesaustralia.gov.au).

## The return-to-work letter, and what it must say

This is the document the whole file turns on. A vague letter gets your application assessed in bucket three. A specific one gets it assessed in bucket one. Ask your employer for a letter on company letterhead that states:

- Your name, position, employment status and commencement date with the employer.
- The date your parental leave started and the date you are returning.
- The position, hours and gross annual salary you will return to.
- That your position is being held for you and your return is agreed.

If you are returning part-time, the letter should state the days and the pro-rata salary explicitly. If you intend to return full-time later, say that too, with a date, because some lenders will assess the higher figure where a written step-up is documented.

## Worked example: pre-leave income versus part-time return

Sarah earns $96,000 as a full-time project officer. She is four months into twelve months of parental leave. She has agreed with her employer to return three days a week, which is 0.6 of full-time, or $57,600 pro rata, with an intention to return to full-time after another year.

- **Lender A** assesses her at the pre-leave full-time salary because her employer letter confirms she is returning to the same position and her return date is inside the lender's window: **$96,000 assessed**.
- **Lender B** assesses the agreed part-time return figure: **$57,600 assessed**.

The arithmetic on the 2026–27 resident tax scale plus the 2% Medicare levy:

| | Lender A ($96,000) | Lender B ($57,600) |
|---|---|---|
| Tax ($4,020 on the 15% band, plus 30% above $45,000) | $19,320 | $7,800 |
| Medicare levy at 2% | $1,920 | $1,152 |
| Net income | $74,760 | $48,648 |
| Net per month | $6,230.00 | $4,054.00 |

The monthly difference is $2,176. At a rate of 6.00% p.a. assessed with the APRA buffer of 3 percentage points, the assessment rate is 9.00%, and over a 30-year term $1 of monthly surplus supports about $124 of loan.

**$2,176 × 124 = about $269,800 of borrowing capacity.**

That is the gap between two lenders reading the same employer letter under different policies. These figures are illustrative and every lender's calculator differs. Model your own position with the [borrowing power calculator](/calculators/borrowing-power/) first.

There is a second half to this example that an honest assessor would insist on. If Sarah is returning three days a week, the household will pay for three days of childcare, and it now has an extra dependant in the expense benchmark. If childcare is $150 a day, three days a week for around 48 weeks is $21,600 a year, or $1,800 a month. At $124 of loan per $1 of monthly surplus, that childcare cost removes roughly $223,000 of capacity on its own. A lender that assesses her full pre-leave salary but ignores childcare is not being generous, it is being unrealistic, and a good broker will run both scenarios so you know which budget you can actually live in.

## The living expenses side

Adding a child changes the expense assessment in two ways.

- **The benchmark rises.** Lenders compare your declared living expenses against a household benchmark that scales with income, household size and dependants, then use the higher of the two. See [living expenses and HEM explained](/guides/living-expenses-and-hem-explained/).
- **Childcare is added separately.** Most lenders treat childcare as a specific expense on top of the benchmark, using your declared figure or your provider's quoted fees. The Child Care Subsidy reduces the net cost and can usually be netted off with evidence.

## Timing your application around a baby

Applying before you go on leave is the simplest path by a wide margin: full payslips, full salary, no return-to-work letter needed. If you are already on leave, get the letter before you lodge rather than after. A resignation while an application is live converts your file from bucket one to bucket three overnight, and the same rule applies to any employment change; see [probation and new job home loans](/guides/probation-and-new-job-home-loans/).

Build a buffer as well. Some lenders that assess pre-leave income want to see savings covering the shortfall for the leave period, and three to six months of the new repayment sitting in an offset is persuasive on its own. The mechanics are in [offset versus redraw](/guides/offset-vs-redraw/).

## Frequently asked questions

### Can I get a home loan while on maternity leave?

Yes, commonly. Many lenders will assess your normal pre-leave salary if your employer confirms in writing that you are returning to the same position, on stated hours, on a stated date. Others use your return-to-work income or only what you are currently receiving. The employer letter is the single most important document, and the lender choice decides how it is read.

### What does the return-to-work letter need to say?

It should be on employer letterhead and state your position, employment status, start date with the employer, the dates your leave started and ends, and the hours and gross annual salary you are returning to. It should confirm your position is being held. If you are returning part-time, it must state the days and the pro-rata salary. Vague letters get files assessed on current income only.

### Does government Parental Leave Pay count as income?

Rarely as core income. It is paid at a flat weekly rate for a set number of days, so lenders treat it as temporary support in the same way they treat other short-term payments. Some will count it while it is being received, but your assessment will still be driven by what you earn when you return. Check your entitlement with Services Australia.

### Will childcare costs reduce my borrowing power?

Yes, and significantly. Most lenders add childcare as a specific expense on top of the household benchmark. Three days a week at typical metropolitan fees can remove a six-figure amount of borrowing capacity. The Child Care Subsidy reduces the net cost and can usually be applied with evidence of your assessed entitlement, so bring the subsidy estimate to the application.

## Talk to GNT Finance

Parental leave is a documentation problem, not an income problem, and it is solved before the application is lodged rather than after. Gorakh Timilsina assessed these files as a senior credit officer and knows exactly which wording in an employer letter moves an assessment from current income to pre-leave income. There is no cost to you for our home-loan service in most cases. [Book a free consultation](/contact/) or call 0426 403 703.

*This page is general information only and not legal, tax or financial advice. Lender policy varies and changes without notice, and government payment rules are set by Services Australia; we confirm the current position before you apply.*