Top 10 Ways Income and Employment Shape Your Home Loan

Your income doesn't just determine how much you can borrow. It shapes which lenders will consider your application, how they calculate your borrowing capacity, and whether you'll need extra documentation or a longer settlement period.

How Lenders Assess Salary and Wage Income

Salary and wage income is assessed at 100% of gross earnings if you've been in your role for at least three months. Most lenders require two recent payslips and, in some cases, a letter of employment confirming your start date and ongoing status. If you've been with your employer for less than three months, some lenders will still assess the income but may ask for proof that you've passed probation or request a longer employment history in the same industry.

Consider a buyer who started a new role on a higher salary six weeks before applying for pre-approval. Their previous role was in the same field for four years. In that scenario, most lenders accepted the new income at full value once probation was confirmed in writing, though one required a three-month payslip history and delayed the assessment by six weeks.

Self-Employed and ABN Income: What Lenders Actually Need

Lenders assess self-employed income using tax returns, notices of assessment, and business financials. If you've been self-employed for two full financial years, lenders typically average your net profit or taxable income across those years. If you've been operating for less than two years, your options narrow, though some lenders will consider applications from buyers with 12 months of financials if the business is stable and the income is consistent.

At current variable rates, a self-employed borrower earning $90,000 in year one and $110,000 in year two would have their income assessed at $100,000. Add-backs such as depreciation, home office expenses, and motor vehicle costs can lift that figure, but lenders apply their own rules about which expenses qualify. One lender might add back $8,000 in depreciation, another might allow only $5,000. That difference changes your borrowing capacity by tens of thousands of dollars.

Casual and Part-Time Work: When Your Income Counts in Full

Casual and part-time income is assessed at 80% of gross earnings by most lenders, though some assess at 100% if you've been with the same employer for at least 12 months and your hours are stable. Lenders calculate your average income over the most recent 12 to 24 months using payslips, tax returns, and a letter from your employer confirming the likelihood of ongoing work.

In our experience, a casual worker in hospitality with two years of consistent rostering and an average income of $65,000 across that period will be assessed at $52,000 by a lender applying an 80% shading, or $65,000 by a lender that treats long-term casual income as equivalent to permanent employment. That $13,000 difference changes your borrowing capacity by around $60,000 to $70,000, depending on your other commitments.

Bonuses, Overtime and Commission: How Much Actually Counts

Bonuses, overtime and commission are shaded by most lenders, with the percentage applied depending on how long you've been receiving that income and whether it's discretionary. Guaranteed overtime that appears on every payslip for the past 12 months is generally assessed at 80% to 100%. Discretionary bonuses paid annually are often shaded to 50% or excluded altogether unless you can show a two-year history.

A buyer working in construction with a base salary of $85,000 and regular Saturday overtime adding another $18,000 per year would have that overtime assessed at 80%, adding $14,400 to their income calculation. If the overtime was irregular or recent, some lenders would exclude it entirely, which would reduce borrowing capacity by around $65,000 to $75,000.

Rental Income from Investment Property You Already Own

Rental income is assessed at 75% to 80% of the gross rent by most lenders, with the percentage depending on whether the property is negatively or positively geared. If you're buying an investment property and already own one, the rental income from your existing property can offset some of the holding costs when the lender calculates your serviceability.

Lenders require a current lease agreement and evidence that rent is being paid into your account. If the property is vacant or the lease is about to expire, some lenders will exclude the income or reduce it further until a new lease is signed. Rental income can improve your serviceability, but it won't increase your borrowing capacity in the same proportion as salary or wage income because lenders apply a buffer to account for vacancy periods and maintenance costs.

Centrelink and Government Payments: What's Included and What's Not

Centrelink payments such as the Age Pension, Disability Support Pension, Carer Payment, and Parenting Payment are assessed by some lenders but not all. The Family Tax Benefit is included by most lenders if it has at least two years remaining, though the payment is shaded to account for the time-limited nature of the benefit. Child support received under a court order or binding agreement is generally assessed at 100% if the payment history is consistent.

A single parent receiving Parenting Payment and Family Tax Benefit with a part-time income of $45,000 might have total assessable income of $60,000 to $65,000, depending on which lender is used and how long the benefits will continue. Some lenders exclude government payments entirely, which rules out certain applicants who would otherwise have sufficient income to service the loan.

Why Your Employment Type Changes Which Lenders You Can Use

Your employment type determines which lenders will assess your application and how quickly they'll do it. Permanent employees with two payslips can often settle in four weeks. Self-employed borrowers with two years of tax returns can access most lenders but will need more documentation and a longer timeframe for assessment. Casual workers with 12 months of history can access some lenders at 100% income recognition and others at 80%, and that difference is significant enough to change the outcome.

If you're moving from permanent employment to self-employment or contract work, your borrowing capacity can drop sharply in the first year, even if your income stays the same. A buyer earning $120,000 as a permanent employee who moves to a contract role on the same income will find that most lenders won't assess the new income until they have at least one full financial year of tax returns. In that period, refinancing your existing loan or applying for a new one becomes difficult unless you can show continued employment in the same industry or provide additional evidence of income stability.

Probation Periods and New Roles: When Three Months Matters

Most lenders require you to have passed probation before they'll assess your income in full, though some will accept a letter from your employer confirming that probation is a formality or that you've been working in the same field for several years. If you've just started a new role and want to apply for a home loan, your options depend on how long you've been in the industry and whether your previous employment was stable.

A borrower who worked in nursing for six years, took three months off, and started a new role at a different hospital would generally be assessed at full income after passing probation. A borrower who worked in retail for two years, took six months off, and started a new role in a different field would find that most lenders either exclude the new income or delay the application until three to six months of payslips are available.

How Lenders Calculate Serviceability for Multiple Income Sources

If you have income from more than one source, lenders calculate your total assessable income by applying their shading rules to each component separately. A buyer with $70,000 in salary, $15,000 in rental income, and $10,000 in overtime would have assessable income of $70,000 plus 80% of rental income ($12,000) plus 80% of overtime ($8,000), giving a total of $90,000. That figure is then tested against the lender's serviceability model, which applies a buffer of at least 3.0 percentage points above the loan product rate and factors in your existing commitments.

The same buyer assessed by a different lender might have rental income shaded to 75% and overtime excluded if the history is less than 12 months, reducing total assessable income to $81,250. That $8,750 difference reduces borrowing capacity by around $40,000 to $45,000, which can be the difference between securing the property or missing out.

Why Documentation Matters More Than the Income Itself

You can have strong income and still be declined if the documentation doesn't meet the lender's requirements. Payslips that don't show your employer's ABN, tax returns that haven't been lodged with the ATO, or rental income without a signed lease agreement will delay your application or result in that income being excluded.

In our experience, most delays happen because the buyer assumes their accountant has lodged their tax return when it's still sitting in draft, or because their employer issues payslips that don't meet the lender's format requirements. If you're self-employed and your financials show a loss in the most recent year, some lenders will exclude your income entirely, even if you had strong profits in previous years. The documentation needs to match the lender's policy, and if it doesn't, the application won't progress.

Call one of our team or book an appointment at a time that works for you. We'll review your income structure, confirm what documentation you need, and connect you with lenders who assess your employment type at the highest percentage available.

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