A profitable business does not automatically translate into the same home-loan capacity at every lender. The lender needs to identify sustainable income available to the borrower after considering business structure, tax returns, financial statements, debts and recurring expenses.
- Lenders use different document sets
- One-year assessment may be available in some cases
- Add-back policy varies widely
- Declining income needs explanation
- Business debts and commitments can affect personal capacity
What documents are commonly used
Depending on the lender and product, assessment may rely on personal and business tax returns, notices of assessment, company or trust financial statements, BAS, business bank statements or an accountant’s information.
Some lenders use two years and average results. Others may use the most recent year in defined circumstances.
Add-backs can change the result
Certain non-cash or one-off expenses may be added back when permitted by lender policy. Examples can include depreciation or specific one-off items, but the rules are lender-specific.
Do not assume every accounting adjustment will improve servicing. The lender still needs to be comfortable that the income is genuine and sustainable.
Income trend matters
A rising business can be easier to explain than a sharply declining one. Where income has fallen, the lender may use the lower figure or ask for a clear reason and more recent evidence.
Planning early with your accountant and broker is useful, especially before making major business purchases or tax-structure changes.
Frequently asked questions
Do I always need two years of tax returns?
No. Some lenders have options using a shorter history, but eligibility and evidence requirements vary.
Can depreciation be added back?
Some lenders allow defined add-backs, but the exact treatment depends on policy.
Should I minimise taxable income before applying?
Tax planning and borrowing capacity can pull in different directions. Discuss major decisions with both your accountant and broker.