Why it feels harder
Lenders can't rely on a payslip, so they usually want two years of tax returns and financial statements. If your taxable income is low because of legitimate deductions, your borrowing power can look lower than your real cash flow.
Options that help
Some lenders accept one year of financials, add back certain expenses such as depreciation, or offer alternative documentation loans using BAS statements or an accountant's letter. Pricing and deposit requirements vary.
Prepare before you apply
Lodge your tax returns on time, keep business and personal accounts separate, and talk to your broker before your accountant finalises the year if you're planning a purchase.
Gather everything with our home loan documents checklist.
How lenders calculate self-employed income
Most lenders average your taxable income over the last two years. If your most recent year is lower, many will use the lower figure. Some will add back certain non-cash or one-off expenses, such as depreciation, interest on loans being refinanced, and one-off costs that won't recur. Add-backs vary by lender, which is why the same tax return can support very different loan amounts.
| Structure | What lenders usually ask for |
|---|---|
| Sole trader | Personal tax returns and notices of assessment |
| Partnership | Personal and partnership returns |
| Company or trust | Company or trust returns, financial statements and personal returns for directors |
Newer businesses
If you've been trading for less than two years, options narrow but don't disappear. Some lenders accept one year of financials, particularly if you worked in the same industry as an employee beforehand. An ABN registered for at least 12 months is a common minimum.
Mistakes that cost borrowing power
- Paying personal expenses from the business account, which muddies your statements.
- Lodging tax returns late, leaving lenders without current figures.
- Carrying large tax debts with the ATO without a payment arrangement.
- Minimising taxable income aggressively in the year before you apply.
Read how lenders work out borrowing power and, if you need finance for the business itself, see business finance and equipment finance.
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