A few weeks ago, a client came to us after being turned down by his own bank. He’d run a successful trades business for six years, his income had grown every year, and he couldn’t understand why he’d been declined. It turned out the issue had nothing to do with how much he earned. It was how his income had been presented. This is one of the most common situations we see at PierPoint Lending, and it’s seldom about whether a self-employed applicant earns enough.
Lenders assess self-employed applicants differently to PAYG employees because business income is inherently less predictable and harder to verify from a payslip alone. Most lenders want at least two years of financials, including tax returns and notices of assessment, and will look closely at business activity statements, add-backs, and the consistency of income year on year. That said, the amount of documentation required often comes down to equity: many lenders will accept just one year of financials, or in the case of company directors, a salary verified through BAS statements alone, provided the loan sits under an 80 per cent loan-to-value ratio. Applications are commonly declined not because the business isn’t performing, but because of how income has been minimised for tax purposes, inconsistent reporting between years, or a lack of the right supporting documents. Working with a broker who understands how to present a self-employed application properly, and who knows which lender’s policy actually fits your situation, can make the difference between a decline and an approval, without changing a single thing about the underlying business.
Why Self-Employed Applications Are Assessed Differently
A PAYG employee’s income is straightforward to verify: a payslip and an employment letter usually tell a lender everything they need to know. Self-employed income is more complicated because it can fluctuate from year to year, it’s reported after deductions and expenses, and a business owner has more control over how their taxable income appears on paper. None of this means self-employed applicants are riskier borrowers. It simply means lenders need more information to reach the same level of confidence.
This is also why many self-employed people feel like they’re being treated with more suspicion than an employee earning a similar amount. In reality, the lender is simply working from a narrower set of documents and need enough detail to fill in the gaps.
The Documents Lenders Actually Want to See
Most lenders will ask for two full years of personal and business tax returns, along with the corresponding notices of assessment from the Australian Taxation Office. If your most recent return is more than six to twelve months old, depending on the lender, you may also need an accountant’s letter or recent BAS statements to demonstrate the business is still trading and performing consistently.
Lenders are also looking for consistency across these documents. A business with steadily increasing income across two years tells a very different story to one with a sudden, unexplained spike or drop, even if the most recent figure is the strongest. Where there’s a legitimate reason for a fluctuation, such as a one-off contract or a temporary drop in trade during renovations, having that explanation ready and documented makes a difference.
Equity also plays a bigger role in this than most people expect. Some lenders will accept just one year of financials, rather than the usual two, provided the loan sits under an 80 per cent loan-to-value ratio (LVR). A larger deposit or existing equity position gives the lender more of a buffer, and several are willing to trade a longer documentation history for that added security.
When a Director’s Salary Is Enough on Its Own
If your business is structured as a company and you pay yourself a wage or salary through it, you may not need to provide full company financials at all. A number of lenders will assess you on your director’s salary alone, verified through your BAS statements, rather than requiring two years of company tax returns and profit and loss statements. This option generally also depends on the loan sitting under an 80 per cent LVR.
This can make a real difference for company directors who draw a consistent, modest wage but whose company financials look more complicated once retained earnings, reinvestment or other shareholders are factored in. Rather than that complexity working against you, a lender assessing your salary in isolation can lead to a more straightforward approval, provided the structure and the deposit stack up.
Add-Backs: What They Are and Why They Matter
Add-backs are non-cash or one-off business expenses that reduce your taxable income but don’t reflect an ongoing cost to your cash flow. Common examples include depreciation, one-off asset purchases, and in some cases a portion of vehicle expenses or personal superannuation contributions made through the business.
Because these expenses lowered the taxable income shown on your tax return, lenders can often add a portion of them back when calculating how much you can afford to borrow. This is one of the most overlooked opportunities in a self-employed application. We regularly see business owners assume their borrowing power is limited to the bottom line on their tax return, when a properly prepared application with legitimate add-backs tells a more accurate story of what the business generates.
The Most Common Reasons Self-Employed Applications Get Declined
In our experience, the most frequent reasons an application is declined tend to be structural: tax returns that are older than a lender’s policy allows, inconsistent income between financial years without an explanation, insufficient evidence that a business structure (such as a trust or company) flows income to the applicant, or an application that simply doesn’t include the add-backs and context a lender needs to say yes.
Another common issue is applying to a single lender whose policy doesn’t suit self-employed income well, rather than one of the many lenders who specialise in it. Not every lender assesses self-employed income the same way, and a decline from one doesn’t necessarily reflect how another would view the same application.
How Working With a Broker Changes the Outcome
The value a broker adds here isn’t about making an application look better than it is. It’s about presenting an accurate, complete picture that a lender can assess with confidence, and matching that application to a lender whose policy suits self-employed borrowers. This might mean identifying legitimate add-backs your accountant hasn’t flagged for lending purposes, sourcing an accountant’s letter before it’s requested, or simply choosing a lender who treats consistent, well-documented business income the way it deserves to be treated.
At PierPoint Lending, we spend a lot of our time helping business owners present their income the way it deserves to be seen. Get in touch and we can talk through what your application would look like.
Frequently Asked Questions
How many years of tax returns do I need?
Most lenders ask for two full financial years of personal and business tax returns and notices of assessment. Some lenders will consider one year of financials if the business shows strong, consistent performance and the applicant has a solid history in the same industry, though this depends heavily on individual lender policy.
Will lenders use my full income or an averaged figure?
This depends on the lender and how consistent your income has been. If your income has grown steadily, most lenders will use the most recent year’s figure, or an average weighted toward it. If income has declined between years, lenders will typically use the lower, more recent figure or an average of the two, whichever is more conservative.
Can I get a loan with only one year of financials?
It’s possible with some lenders, particularly if you’re borrowing under an 80 per cent LVR. A larger deposit or equity position gives the lender enough of a buffer that they’re willing to accept one year of financials instead of the usual two. Above 80 per cent LVR, most lenders will still want the full two years.
I’m a company director. Do I need to provide my company’s financials?
Not always. If your business is structured as a company and you pay yourself a salary or wage, some lenders will assess you on that salary alone, confirmed through your BAS statements, rather than requiring two years of company tax returns. This is generally only available under an 80 per cent LVR, but it can significantly simplify the application for directors whose company financials are more complex than their personal income suggests.
Do add-backs actually increase how much I can borrow?
Yes, when they’re legitimate and properly documented. Add-backs like depreciation or one-off business expenses can meaningfully increase your assessed income, which in turn increases your borrowing capacity. The key is ensuring they’re supported by your financials and accepted under the specific lender’s policy, since not every lender treats every add-back the same way.
Enquire Now
Complete the enquiry below and a member of the PierPoint Lending team will contact you to schedule a complimentary home loan review.