A self-employed home loan uses business income to assess repayments through a full doc or alt doc route. Choose the route your client’s records support before comparing lenders.
Full doc usually uses tax returns and Notices of Assessment. Alt doc uses other income evidence, such as business activity statements (BAS), business bank statements or an accountant’s letter.
How Lenders Assess Self-Employed Income
Business-income policies determine how a lender assesses a self-employed applicant, alongside the usual home loan checks. The assessment starts with what the business earns and what income the borrower can use.
Turnover is the business’s sales income. Profit is what remains after business costs. A lender needs evidence of the income available for repayments, so a strong sales figure alone does not establish borrowing capacity.
Record the business structure and the borrower’s share of its income. Explain how salary, drawings or distributions relate to the figures in the financial statements. Avoid counting the same income twice.
If the question is income from an engagement, use the contractor income guide. The trust and company home loan guide covers borrowing in an entity’s own name.
Full Doc or Alt Doc: Choosing the Route
Full doc is usually the first route when the client has lodged returns that support the income needed. It generally provides wider lender choice and sharper pricing than a comparable alt doc application.
Alt doc suits a client whose income can be supported through other accepted records. Expect higher rates and a larger deposit than a comparable full doc loan.
| Decision | Full Doc | Alt Doc |
|---|---|---|
| Main income evidence | Usually two years of tax returns and Notices of Assessment, with business financial statements. | BAS, business bank statements or an accountant’s income verification letter, as the lender requires. |
| Business history | Trading history and lodged returns must meet the lender’s policy. | ABN age, GST registration and the evidence period must meet the selected lender’s policy. |
| Pricing and deposit | Usually lower rates and more options at higher loan-to-value ratios. | Usually higher rates and lower maximum loan-to-value ratios. |
| Timing | Fits when the required returns are ready and accepted. | Can fit when accepted alternative evidence is ready before the required returns. |
An Australian business number (ABN) establishes registration history. It does not show that the business has traded profitably throughout that period. Check both before selecting a lender.
If the accountant can finalise the required returns within the client’s timeline, compare that full doc option with applying now through alt doc. Include fees and repayments in the comparison.
Documents Lenders Want From Self-Employed Borrowers
Self-employed home loan documents must support the income figure used in the application. Confirm the selected lender’s list before collecting the pack, including its rules for the age of each document.
| Document | Typical Route | What the Broker Checks |
|---|---|---|
| Personal tax returns | Full doc | The required years, lodged status and income belonging to the borrower. |
| Business tax returns | Full doc, where required for the business structure | The entity name and income period match the financial statements. |
| Notices of Assessment | Full doc | The lender’s required notices match the personal returns. |
| Business financial statements | Full doc, or supporting evidence | Profit and loss figures, liabilities and the borrower’s share of the income. |
| BAS | Alt doc, where accepted | The required consecutive periods and consistency with the declared income. |
| Business bank statements | Alt doc, or supporting evidence | The required period, business receipts and transfers that are not revenue. |
| Accountant’s income verification letter | Alt doc, where accepted | The lender’s form or required wording, supported income and accountant eligibility. |
These are typical requirements, not a universal checklist. CommBank’s self-employed income guide illustrates the distinction between personal returns, business returns and financial statements.
An accountant’s letter verifies the information the lender requests. It does not replace the lender’s repayment assessment. Pepper Money’s alt doc income guide separates income verification from an accountant declaring repayment ability.
Accountant-Confirmation Request Template
Use this accountant letter template to request factual income confirmation. Copy the request into an editable document, complete the fields and attach the lender’s required form.
Obtain the client’s authority before requesting their information. The accountant prepares their own response from the records they hold, with any limits on what they can confirm.
Request for accountant income confirmation
Borrower name:
Business legal and trading names:
Business structure:
ABN:
Borrower’s ownership share:
Lender and product:
Lender’s required form or wording:
Financial years to confirm:
BAS or management-account periods:
Requested response date:
Client authority attached:Please address the following questions using the records you hold.
- Which entities and financial periods do you act for, and which records support your response?
- Are the tax returns for the requested years finalised and lodged? Identify any outstanding returns.
- What income belongs to the borrower for each requested period? Explain the calculation and distinguish salary from business profit or distributions.
- Which expenses or one-off items support any proposed income adjustments? Identify the supporting records.
- Do the latest available records show a material change from the income figures supplied? Explain the change and the period affected.
- Do the records show tax debts or superannuation arrears? Provide the documented balances and repayment arrangements within the client’s authority.
Please return your own factual response or the completed lender form. State any information you cannot confirm. The lender assesses the borrower’s repayment capacity.
Check the response against the lender’s requirements before lodging. Follow up missing periods or unexplained differences instead of editing the accountant’s confirmation yourself.
Keep identity, liabilities and household expense documents in the same application pack. Alt doc changes the income evidence route, while the lender still assesses the client’s financial position.
Credit, Deposit and LVR Criteria
The credit file affects which lenders can consider the application. Missed payments, defaults or a thin credit history can reduce the lender pool even when business income is sufficient.
Review the client’s credit history before lodging. Correct report errors and explain adverse entries with supporting records. Match the explanation to the lender’s credit policy.
The loan-to-value ratio (LVR) is the loan amount divided by the lender’s accepted property value, expressed as a percentage. A larger deposit reduces the LVR.
For example, a $640,000 loan against an accepted value of $800,000 has an 80% LVR. Purchase costs still need funding beyond that deposit.
LVR affects pricing and the products available. Confirm the maximum LVR for the chosen documentation route, loan amount and security before setting client expectations.
For broader specialist credit options, use the low doc and non-conforming loan guide. Alt doc describes an income evidence route, while non-conforming lending addresses a wider range of policy exceptions.
Serviceability and Add-Backs
Serviceability tests whether accepted income covers expenses and assessed repayments. APRA-regulated banks apply a minimum buffer of 3 percentage points above the loan rate for new lending.
APRA’s mortgage buffer setting confirms that minimum. A lender’s assessment floor can also affect the rate used. Non-bank lenders apply their own serviceability policies.
For example, a 6% loan rate with a 3 percentage point buffer gives a 9% assessment rate before any higher lender floor. The client pays the contracted rate.
APRA’s APG 223 Residential Mortgage Lending guide expects banks to use the higher of declared living expenses or an appropriately scaled expense benchmark.
The household expenditure measure (HEM) is one such benchmark. A low expense declaration does not automatically reduce the assessment below the lender’s benchmark.
Some lenders accept add-backs for expenses such as depreciation when evidence supports the adjustment. Each lender decides what it accepts. A business expense is not automatically available income for loan repayments.
Show each proposed add-back separately and attach its supporting financial statement entry. Use the lender’s accepted income figure in the serviceability calculator.
Preparing the File Before You Apply
Prepare a file that explains the income trend and reconciles the evidence. Missing periods or unexplained differences can leave the assessor unable to use the income you propose.
- Collect current BAS and business bank statements for the required period. Reconcile receipts with the income declaration and identify transfers between accounts.
- Prepare an income summary across the available years. Explain seasonal changes, a weaker year and changes in the business that affect future earnings.
- Resolve tax debts and superannuation arrears where possible. Otherwise document the balance, repayment arrangement and reason, then include the commitment in the assessment.
- Model the proposed loan using the lender’s buffer and accepted income. If refinancing or paying out other debts, compare the existing commitments with the proposed structure.
- Reconcile the application figures with the supporting documents before lodging. The income summary must show how the proposed assessable income comes from those records.
For a hypothetical seasonal business, a quiet quarter needs context beside the annual figures. A bank statement balance alone cannot show whether that quarter represents the normal trading pattern.
Debt consolidation changes the repayment structure. It does not guarantee a better serviceability result. Compare repayments, total interest and the new loan term before recommending it.
Refinancing a self-employed home loan needs the same current income evidence, because the new lender assesses the application afresh. A weaker recent year can limit the options even when the existing loan was approved on stronger figures. A construction loan adds the building contract and progress-payment rules to the income assessment. Lender policies for a low doc construction loan set their own deposit and LVR limits.
How a Broker Matches Self-Employed Files to Lenders
Match the evidence available to a lender whose self-employed policy accepts it. Compare documentation requirements alongside serviceability and the client’s credit position.
Non-bank lenders are part of that shortlist when their policies fit the file. Pepper Money publishes full doc and alt doc options in its home loan range.
Keep the lender’s business development manager (BDM) informed when a scenario needs an exception. Send the income evidence and proposed assessment with the request. An exception still needs the lender’s credit approval.
Use the lender policy guides for lender-specific criteria. Before lodging, confirm the selected route accepts the complete evidence pack and the loan services on the income the lender will use.
