Being self-employed doesn't mean you can't get a great home loan — it just means lenders assess your income differently. Here's exactly what they look at, what documents you'll need, and how to maximise your borrowing power as a business owner in 2026.
The Core Challenge: How Lenders View Self-Employed Income
When you're a PAYG employee, proving income is straightforward — a couple of payslips and a letter from your employer does the job. As a self-employed borrower, lenders need to build a more complete picture of your financial situation because your income can fluctuate year to year.
The good news is that Australian lenders have well-established processes for assessing self-employed borrowers, and with the right documentation and an experienced broker on your side, your borrowing capacity can be just as strong as any salaried employee.
How Lenders Calculate Your Borrowable Income
Most lenders use one of two primary methods to calculate your assessable income as a self-employed person:
Method 1: Two-Year Average with Income Shading
The most common approach is to take the average of your last two financial years' net profit (after tax) or taxable income, then apply what's known as an "income shading" — typically reducing the assessed income by 20%, leaving 80% of your averaged income as the figure used for serviceability calculations.
For example, if your taxable income was $110,000 in FY2022 and $130,000 in FY2023:
- Average income: $120,000
- After 80% shading: $96,000 assessed income
This shading exists to buffer against income volatility and future business risk. However, some lenders — particularly non-bank lenders like La Trobe Financial, Pepper Money, and Resimac — are more flexible and may use the most recent year's income if it's the higher figure, or even gross business income with add-backs.
Method 2: Add-Back Methodology
For business owners who run expenses through their company, many lenders will also consider "add-backs" — legitimate business expenses that reduce your taxable income but don't actually represent money leaving your pocket. Common add-backs include:
- Depreciation of business assets
- One-off or non-recurring expenses
- Interest on existing business debt
- Superannuation contributions above the compulsory rate
Broker Tip
If you minimise your taxable income heavily through legitimate business deductions, your borrowing power may be lower than you expect. Talk to your accountant and your broker before your next tax return — there are strategies to optimise both your tax position and your ability to borrow.
ABN Age Requirements: How Long Do You Need to Be in Business?
One of the most common questions we hear at Mortgagefy is: "I only registered my ABN 12 months ago — can I still get a home loan?" The answer depends on which lender you approach.
Less Than 12 Months ABN
This is the most challenging scenario. The majority of mainstream lenders (the Big 4 banks and most second-tier lenders) will not approve a home loan if your ABN is less than 12 months old. However, there are specialist non-bank lenders who will consider your application if you can demonstrate:
- You were previously employed in the same industry (e.g., a nurse who became a private healthcare provider)
- Strong savings history and a clean credit record
- A larger deposit (typically 20% or more, to avoid LMI)
- A signed accountant's letter confirming your business is viable
1–2 Years ABN
With 12–24 months of ABN history, your options expand significantly. Many lenders will consider your application, but they will typically require your most recent year's financial statements and tax return. Some lenders in this bracket will also require:
- One full year's Business Activity Statements (BAS)
- Bank statements showing consistent business revenue
- An accountant's letter confirming year-to-date income
2+ Years ABN (Full Doc)
With two or more complete financial years of business operation, you have access to the full range of lenders and the most competitive interest rates. This is the standard benchmark because it allows lenders to verify your income trend — whether it's growing, stable, or declining.
Documents You'll Need for a Self-Employed Home Loan
Being prepared with the right paperwork makes the application process much smoother. Here's what lenders typically request for a full doc self-employed application:
The Core Documents
- Last 2 years' personal tax returns — including the ATO Notice of Assessment for each year
- Last 2 years' business tax returns — if operating as a company or trust (Pty Ltd, Unit Trust, etc.)
- Last 2 years' financial statements — profit & loss statements and balance sheets prepared by your accountant
- Last 2 years' BAS statements — all four quarters for each year, showing consistent turnover
- Current business bank statements — usually 3–6 months showing income deposits and operating expenses
- Accountant's letter — confirming your business is a going concern and verifying your current-year income
Additional Documents Often Required
- ABN/ACN registration details
- Current personal bank statements (3 months)
- Evidence of any rental income (if applicable)
- Details of all business and personal liabilities
Low Doc vs Full Doc: What's the Difference?
Not all self-employed borrowers can provide two years of full financial documentation. That's where low doc (low documentation) loans come in.
Full Doc Loans
Full doc loans are available to self-employed borrowers who can provide the complete package of tax returns, financials, and BAS statements described above. These loans offer:
- The most competitive interest rates (same as PAYG borrowers at most lenders)
- Higher LVR allowances (up to 95% with LMI at some lenders)
- Access to all product types including fixed rates and offset accounts
Low Doc Loans
Low doc loans are designed for self-employed borrowers who have a legitimate income but can't fully document it through traditional means. Common low doc verification methods include:
- Accountant's declaration: Your accountant signs a letter confirming your income level
- BAS statements only: 12 months of BAS used to verify turnover
- Business bank statements: 12–24 months of statements showing revenue deposits
- Self-declaration: Some lenders accept a signed declaration of income
Low Doc Trade-Offs
Low doc loans typically come with a higher interest rate (0.2%–0.8% above standard rates), a lower maximum LVR (usually 80%), and higher LMI premiums if you're borrowing above 60–70% LVR. They're a valuable tool, but should be seen as a stepping stone — ideally refinancing to a full doc loan once you have two years of financials.
Case Study: Omar, Sydney Plumber — $680,000 Borrowed on a 3-Year ABN
Omar, 38 — Plumbing Contractor
Western Sydney · ABN: 3 years · Sole trader
Omar had been working as a sole trader plumber for three years after leaving a plumbing company where he'd worked for eight years. His taxable income was $95,000 in FY2022 and $112,000 in FY2023 — the increase driven by a growing commercial client base.
He came to Mortgagefy after being knocked back by his bank, who would only count $87,000 as his assessable income (two-year average, 80% shaded) and offered a maximum loan of $560,000.
Our team reviewed his financials in detail. Omar's BAS statements showed strong quarterly revenue growth, and his FY2023 depreciation and one-off equipment purchases totalled $28,000 — legitimate add-backs that most banks had ignored. By presenting his application to a specialist non-bank lender who accepted add-backs, his assessable income increased to $103,000.
$680K
Loan approved
5.89%
Interest rate
$120K
More than bank offered
How to Maximise Your Borrowing Power as a Self-Employed Person
Here are the most effective strategies for increasing how much you can borrow:
- Work with a specialist broker: A broker who understands self-employed lending can identify lenders who treat your income type most favourably. This alone can make a $100,000+ difference in borrowing capacity.
- Prepare your add-backs: Before applying, have your accountant prepare a letter identifying all legitimate add-backs in your financials. Every dollar added back increases your assessable income.
- Show income growth: If your most recent year's income is higher than the prior year, approach lenders who allow use of the higher figure rather than the two-year average.
- Clear personal debts: Credit card limits, personal loans, and car finance all reduce your borrowing capacity. Clearing these before applying can significantly increase what you can borrow.
- Build a strong deposit: The larger your deposit, the lower your LVR — and many specialist lenders have significantly better policies at 80% LVR than 90% or 95%.
- Keep your BAS lodgements current: Lenders look for consistent, on-time BAS lodgements. Any arrears or late lodgements will be a red flag.
What Interest Rates Can Self-Employed Borrowers Expect?
The good news: if you can provide full documentation, you'll typically access exactly the same interest rates as any other borrower. The Big 4 banks and most major lenders do not charge a premium for self-employed full doc loans.
Low doc borrowers will typically see rates that are 0.2%–0.8% higher than standard rates, reflecting the additional risk the lender takes on with reduced documentation. However, many non-bank lenders are now offering highly competitive low doc rates — we regularly place clients with rates around 5.8%–6.2% on low doc products (as of 2026).
Ready to Find Out How Much You Can Borrow?
Every self-employed borrower's situation is unique, and the difference between the right and wrong lender can mean tens of thousands of dollars in borrowing capacity or interest savings. At Mortgagefy, we specialise in self-employed home loans and have helped hundreds of Sydney business owners secure the finance they deserve.
Use our borrowing power calculator for an initial estimate, then book a free consultation with the Mortgagefy team to review your specific situation.
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