Lender approaches to self-employed income are not consistent. The same applicant can be approved at one major bank and declined at another, on identical financials. Knowing how each lender assesses your particular situation is most of the work.
The two main assessment models
Most lenders use either Year-To-Date plus prior-year averaging, or two-year averaging. YTD plus prior-year favours growth — if your business is up year-on-year, this assessment shows a higher number. Two-year averaging smooths volatility, useful if you had one strong year and one weaker one.
There is no rule about which lender uses which method. We see major banks split roughly 50/50, and non-bank lenders trend toward YTD-favouring assessments.
Add-backs that genuinely add up
“Self-employed borrowers see a haircut on assessed income, but the right lender selection turns a marginal application into an approved one.
Depreciation, one-off expenses, owner superannuation contributions, and interest on the loan being refinanced are all common add-backs. The rule of thumb: if it appears as a deduction in your tax return but is not a real cash cost going forward, it may be added back.
Lender appetite for add-backs varies. We have seen the same applicant qualify for an extra $80,000 of borrowing capacity by moving from a lender that accepts only depreciation to one that also accepts owner super.
What to bring to the conversation
Two years of financial statements, two years of personal tax returns, the most recent BAS, and a current YTD profit and loss. With these in hand, we can model your application against eight to ten lenders in about thirty minutes and tell you which three to actually approach.
Want to talk specifics?
Twenty-minute brief, no obligation.
A real broker on the other end of the line. No fees to clients.
