In short: Self-employed borrowers can get the same home loans and rates as employees, but lenders verify income from two years of tax returns and notices of assessment rather than payslips, and usually take the lower or the average of the two years. If you have only one year of returns, some lenders will still lend at full-doc terms, and low-doc loans exist for ABN holders with BAS instead of returns.
Around one in six Australian workers is self-employed, yet many still believe a home loan is out of reach without a payslip. It is not. The difference is in how income is proven and calculated, and in how much preparation happens before the application. This guide explains what lenders look for, how to present each business structure, and how to avoid the timing traps that cause declines.
How lenders verify self-employed income
Full-doc: the standard path
| Business structure | Documents lenders typically request |
|---|---|
| Sole trader | Two years of personal tax returns and ATO notices of assessment; often the most recent BAS |
| Company | Two years of company tax returns and financial statements (profit and loss, balance sheet), plus your personal returns and notices of assessment |
| Trust | Two years of trust tax returns and financials, trust deed, plus personal returns of the beneficiaries applying |
| Partnership | Two years of partnership returns and financials, plus each partner's personal returns |
Alongside those, most lenders want an ABN registered for at least two years, GST registration for at least one year (where turnover requires it), an accountant's contact details, and three to six months of business bank statements. Our home loan documents checklist sets out the full list.
One year of returns
Several lenders accept a single completed financial year if the ABN has been registered for at least 12 months and the income is consistent with the year-to-date BAS or bank statements. Expect a smaller lender panel and sometimes a slightly higher rate.
Low-doc and alt-doc
If your returns are not lodged or do not reflect your current earnings, low-doc lending uses an accountant's declaration, 6–12 months of BAS or business bank statements. Deposits are larger and rates are higher. See low-doc loans explained.
How the income figure is calculated
Lenders do not simply take your latest profit. Each has a policy for reconciling two years of figures, and the differences are large enough to change whether you qualify.
| Method | How it works | Assessed income (Year 1 $95,000, Year 2 $130,000) | Rough borrowing guide at 5.5 times income |
|---|---|---|---|
| Most recent year | Uses the latest return if income is stable or rising | $130,000 | approx. $715,000 |
| Average of two years | Adds both years and halves them | $112,500 | approx. $619,000 |
| Lower of two years | Takes the smaller figure | $95,000 | approx. $522,000 |
| Most recent year capped at 120% of prior year | Allows growth but limits how much of a jump counts | $114,000 | approx. $627,000 |
The multiple is a rough guide only; real capacity depends on your expenses, other debts and the APRA buffer of 3 percentage points over your rate. Use the borrowing power calculator for a proper figure.
Where income has fallen, most lenders use the lower year and some ask for an explanation and a year-to-date update. A one-off dip with a clear reason (parental leave, a large equipment purchase, a bad debt) can often be argued.
Add-backs that lift your assessed income
Your taxable income is designed to be low; your assessed income should not be. Lenders add back certain non-cash or one-off items shown in your financials:
- Depreciation and instant asset write-offs
- Interest on business loans that will be refinanced or repaid
- Superannuation contributions above the compulsory rate
- One-off, non-recurring expenses (with evidence)
- Company profit retained in the business (for company structures, where you control the entity)
- Salary or wages paid to yourself from your own company (added to the company profit)
A sole trader electrician in Tarneit with $88,000 of taxable income and $7,000 of depreciation on a work ute is assessed on $95,000 at most lenders. The difference between a well-prepared file with add-backs and a bare tax return can be $30,000 of borrowing power or more.
Worked example: Tarneit electrician
Bikash has run his electrical business as a sole trader for three years. He and his partner Sita, a nurse on $92,000, want to buy a $700,000 house in Tarneit with a 20% deposit.
| Item | Figure |
|---|---|
| Year 1 net profit (after add-backs) | $95,000 |
| Year 2 net profit (after add-backs) | $130,000 |
| Lender A (lower of two years) | $95,000 assessed |
| Lender B (most recent, capped at 120%) | $114,000 assessed |
| Household assessed income (with Sita's $92,000) | $187,000 (Lender A) or $206,000 (Lender B) |
| Loan required | $560,000 |
| Repayment (for illustration, at 6.00% p.a. over 30 years) | approx. $3,357 per month |
| Assessed repayment at the buffered rate of 9.00% p.a. | approx. $4,506 per month |
Both lenders approve, but Lender B leaves more headroom, matters if Bikash also wants a car loan next year, and offers the same rate. Choosing the right lender's income policy is where a broker earns their keep. Our self-employed loans page describes how we match income patterns to lender policy, and our Tarneit page covers local prices.
Timing your application
Self-employed applications succeed or fail on timing more than any other factor.
- Lodge your returns early. Lenders want the most recent financial year's return within a few months of 30 June, and some will not accept returns older than 18 months. A return lodged in May for the previous year is nearly stale on arrival.
- Talk to a broker before you talk to your accountant. If you plan to buy within 18 months, minimising taxable income this year will minimise your borrowing power next year.
- Keep ATO lodgements and payments current. Overdue BAS or a tax debt without a payment plan is a decline at most lenders. Some accept a documented ATO payment arrangement; others require the debt paid before settlement. The ATO's payment plan options are at ato.gov.au.
- Do not restructure just before applying. Moving from sole trader to company resets the clock at many lenders unless the business is demonstrably the same.
Deposit, LVR and rates
Self-employed borrowers on full-doc terms can borrow up to 95% LVR with LMI, and 80% without, just like employees. The First Home Guarantee, the Victorian first-home stamp duty exemption and the First Home Owner Grant are all available to eligible self-employed buyers. Rates are the same products at the same price; only low-doc loans carry a premium. If your credit file has a few late payments from a lean year, read credit score and home loans before applying.
Self-employed application checklist
- Two years of personal (and business) tax returns, lodged and assessed.
- ATO notices of assessment for both years.
- Financial statements for companies, trusts and partnerships.
- ABN and GST registration details with dates.
- Three to six months of business bank statements showing income deposits.
- Most recent BAS for a year-to-date check.
- Evidence any tax debt is nil or on a formal payment plan.
- Accountant's name and contact details.
- Personal bank statements showing deposit and genuine savings.
- A short written explanation of any dip or spike in income.
Common mistakes
- Minimising taxable income in the year before applying. Every dollar of deduction is a dollar less of assessed income.
- Running personal spending through the business account, which makes the bank statements hard to read and invites questions.
- Applying with one month of the new financial year done, when waiting for the new return would double the assessed income.
- Ignoring an ATO debt. It appears in the notice of assessment and in your bank statements; lenders will find it.
- Assuming your own bank is the best option. The bank that holds your business accounts may have the strictest self-employed policy.
- Not getting pre-approval. With variable income, a home loan pre-approval tells you the real budget before you bid.
Frequently asked questions
Can I get a home loan if I'm self-employed with 1 year of ABN?
Yes, with a smaller group of lenders. Some full-doc lenders accept one year of tax returns if the ABN has been registered for 12 months and your income is supported by BAS or bank statements. Otherwise a low-doc loan with 12 months of BAS or an accountant's declaration is the usual route, with a deposit of 20% or more and a higher rate.
How do banks calculate self-employed income?
Most use your net profit after add-backs from two years of tax returns, then apply a policy: the lower year, the average, or the most recent year capped at around 120% of the previous one. Add-backs include depreciation, one-off expenses, extra super and interest on debts being refinanced. For companies and trusts, the lender looks through to the profit you control.
Do I need 2 years tax returns for a home loan?
Two years is the standard requirement, but it is not universal. A number of lenders lend on one year of returns, and low-doc lenders substitute BAS, bank statements or an accountant's letter. The trade-off for less documentation is usually a larger deposit and a higher rate. Once you have two years of returns, you can refinance to standard terms.
Can I get a home loan with ATO debt?
Sometimes. A small debt on a formal ATO payment plan with a clean payment history is acceptable to some lenders, who add the plan repayment to your expenses. A large or undocumented debt, or overdue lodgements, will usually cause a decline. The cleanest path is to clear the debt or formalise the plan before you apply.
What deposit do self-employed borrowers need?
The same as employees on a full-doc loan: as little as 5% with LMI (or under the First Home Guarantee for eligible first-home buyers) and 20% to avoid LMI. Low-doc loans typically need 20–40% depending on the lender and the documents you can provide. Genuine savings rules of 5% held for three months still apply.
Are self-employed home loan rates higher?
Not for full-doc loans. If you provide two years of tax returns, you are offered the same products at the same rates as a salaried borrower. Low-doc loans do carry a premium, often around half to one percentage point, and sometimes a risk fee in place of LMI. Refinancing to a full-doc loan once your returns are in order removes that premium.
Talk to GNT Finance
Gorakh Timilsina spent years as a senior credit officer assessing self-employed applications, so GNT Finance knows which lender will read your financials most generously and how to present add-backs properly. We work with sole traders, tradies, company directors and trust beneficiaries across Melbourne, and there is no cost to you for our home-loan service in most cases. Read how to improve borrowing power, then Book a free consultation or call 0426 403 703.
This page is general information only and not legal, tax or financial advice. Laws change — confirm current rules with the State Revenue Office, the ATO or a licensed professional.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.