A contractor home loan file needs the right income classification, evidence that work continues and a calculation the chosen lender accepts. Start with who pays your client and how. A fixed-term salary, labour-hire payslip and business invoice can lead to different evidence requirements, even when each client calls themselves a contractor.
Keep the contract history beside the income calculation. A strong day rate cannot establish that the work will continue after the current engagement ends.
Classify the Contracting Arrangement
Read the agreement and follow the payment into the client’s records. Record the employer or contracting entity, who receives the money and whether the client owns that entity. Confirm tax treatment and paid-leave entitlements.
Use these distinctions when selecting the evidence pathway:
| Arrangement | What to establish | Evidence pathway |
|---|---|---|
| Fixed-term PAYG employment | The client receives wages through payroll under a contract with an end date | Contract-employment rules and payslip evidence |
| Labour-hire work | The agency pays wages or the client invoices for services. Record the agency and the host separately | The lender’s PAYG, casual or self-employed category for the actual arrangement |
| Independent contracting through an ABN or company | The client invoices through an Australian Business Number (ABN) or their business | Self-employed evidence and the lender’s treatment of business income |
Pay as you go (PAYG) withholding on its own does not explain the entire arrangement. A director’s payslip also needs the lender’s business-ownership treatment. Do not move a business owner into a salary-only pathway just because payroll produces a payslip.
MyState’s Mortgage Lending Procedure defines dependent contractors through employee-like conditions, including regular contracted hours and paid leave. The employer pays their taxes and superannuation. MyState treats independent contractors as self-employed.
Use the self-employed home loan documentation guide for the wider business-income process. The employment-history guide covers the broader employment assessment.
Document Continuity and Renewal
Build a contract timeline that shows the work already performed and the engagement now supporting the application. Collect the signed current agreement and every extension that changes its end date or pay.
Your timeline needs these details:
- The commencement and expiry of each engagement, with its employer or agency.
- The time spent in the current role and the remaining term at application and expected settlement.
- Previous engagements in the same occupation, supported by contracts or employment records.
- Renewals already signed and any written employer statement about continuation.
- Gaps between engagements, their duration and the client’s explanation, checked against income records.
- Whether the current contract has actually commenced and whether a payslip has been issued.
Distinguish a signed extension from the client’s expectation of another contract. Record an employer’s renewal intention in its own terms. It does not automatically extend the existing contract.
For a contract that starts later, identify every calculation that relies on future earnings. Obtain the lender’s written acceptance of that income basis and any conditions before presenting those earnings as usable. A signed agreement establishes its terms but does not prove the client has started receiving pay.
Retain evidence of unpaid periods even when a tenure rule permits a gap. The absence of a tenure penalty does not create earnings during weeks when the client received none.
Calculate the Income Under Each Policy
Calculate the income after selecting the lender’s employment category. Keep base pay separate from overtime and allowances so each component receives its own treatment.
Macquarie’s credit guidelines, section 3B have additional requirements for PAYG contractors. Annualising year-to-date income requires at least six months of that income. With less history, additional prior-year evidence is required and the lower-income comparison applies.
Worked PAYG Contract Example
This hypothetical contractor has exactly six months of supported year-to-date earnings of $60,000. Annualising that period gives $60,000 multiplied by 2, or $120,000. Assume the evidence and tenure requirements are met and the calculation contains base pay only.
Incorrect treatment: the latest week paid $3,000, so multiply it by 52 and use $156,000 without assessing the income history.
Correct treatment: use the supported annualisation of $120,000 for this example and retain the calculation with the payslips. A larger recent payment does not replace Macquarie’s contractor evidence requirements.
Day Rates and Unpaid Periods
A day rate establishes payment per paid day. It does not establish the number of days a lender will accept over a year. Confirm whether the quoted amount includes superannuation or goods and services tax (GST), then identify the income component the lender allows.
For example, a hypothetical independent contractor invoices $600 excluding GST for each paid day. At 220 evidenced billable days, revenue is $132,000 before business expenses. That arithmetic is a revenue illustration, not an accepted serviceability income figure. The lender’s business-income rules decide the usable amount and permitted adjustments.
MyState’s casual-income method projects year-to-date income over 48 weeks. It specifies 40 weeks, or the period appropriate to the circumstances, for roles with additional unpaid periods. Apply that method only to the category it covers, not to every contractor.
Record unpaid leave and work gaps explicitly. For business income, apply documented expense and add-back rules. Keep relevant loan commitments in the lender’s servicing calculation and avoid counting a deduction twice. Retain the worksheet that shows how the evidence becomes the income entered in the application.
Compare Acceptance and Exceptions
Use a small lender matrix to compare the client’s actual arrangement. Keep tenure separate from remaining term and from income calculation. These published examples show why one contractor rule cannot cover the whole panel.
| Lender and employment type | Published history or term requirement | Evidence to retain | Calculation treatment |
|---|---|---|---|
| Macquarie PAYG contract | Six months in current employment or six months in the same field or industry in a prior role | Payslips and the contractor income-history evidence in section 3B | Six-month year-to-date annualisation or the applicable lower-income comparison |
| MyState dependent fixed-term contract | At least six months with the current employer and more than three months remaining | PAYG evidence plus the contract | Up to 100% of base contract income, with other components assessed under the applicable employment category |
| MyState independent contractor | Self-employed classification | Business-income evidence under the self-employed pathway | Business-income assessment, not automatic annualisation of invoice revenue |
The sources are Macquarie’s credit guidelines and MyState’s Mortgage Lending Procedure. Add other lenders only with their own policy reference and a calculation for this file. Use the lender policy guides for each lender’s wider rules.
When the contract or renewal history falls outside the published pathway, send credit a precise scenario. For example, ask, Will you accept this PAYG fixed-term income with eight weeks remaining, two completed renewals and an unsigned extension?
Attach the contract history and payslips. State the income amount you propose, how you calculated it and whether it relies on a future renewal. Request written confirmation of the accepted category, annual income basis and any condition that must be met before settlement. A discussion about general appetite leaves those application decisions unresolved.
If credit requires a signed renewal, record that as a condition with an owner and a due point in the application process. Recalculate the remaining term if settlement moves.
Carry the Decision Into the Loan Record
Save the accepted income calculation with the lender’s policy reference and written exception decision, if one was needed. Keep the supporting contract version and approval conditions in the application record. That record must show which earnings credit accepted and what had to happen before settlement.
After settlement, match the lender loan reference to the original application. Record later refinance activity against the same client so you can recover the income decision when their contracting arrangement changes.
Track My Trail’s Refinance Finder builds a review queue from each loan’s settlement date. Use that queue to identify clients due for review, then open the application record for their earlier contract assessment. Commission-report analysis supplies the loan-review context. The income decision comes from the lender’s credit assessment and the supporting borrower documents.
If a client moves from payroll to invoicing through a company, reopen the classification and collect evidence for the new arrangement. The preserved decision explains the earlier approval. Apply the proposed refinance lender’s current rules to the client’s current income before carrying an amount into a new application.
