Most lenders can approve a self-employed borrower at exactly the same rates and terms as a PAYG employee.
The difference is not the product or the interest rate. It's the documentation. You need to show income in a way that accounts for deductions, variations, and the structure of your business. Some lenders are more flexible than others, and understanding what each one values can change the outcome entirely.
What lenders look for when you're self-employed
Lenders assess your capacity to service a loan based on the income you declare to the ATO. For most self-employed borrowers, that means tax returns, often from the most recent two financial years. The lender adds back certain deductions like depreciation to calculate what they call adjusted taxable income. If your taxable income is low because you claim every allowable expense, your borrowing capacity will reflect that lower figure unless you work with a broker who knows how to present the add-backs clearly.
Consider a business owner in Glen Waverley earning $180,000 in revenue but showing $75,000 in taxable income after deductions. That same person might have depreciation of $12,000 and a home office adjustment of $4,000. Once those amounts are added back, the lender treats the applicant as earning $91,000 for serviceability purposes. That difference can mean the gap between approval and decline, particularly if you're applying near the upper limit of your borrowing capacity.
Full doc applications using two years of tax returns
This is the most common structure for self-employed home loans. You provide two years of individual tax returns, two years of company or trust tax returns if applicable, and a current profit and loss statement. Most major lenders require ATO Notice of Assessments for both years. Some will accept one year if you've been trading for less than two full financial years, but that typically limits your options.
Your ABN should be registered for at least 12 months, though some lenders will consider six months if your industry experience is strong. The lender will also check your Australian Business Register details and may request business activity statements to confirm trading continuity. If you operate through a company or trust, expect to provide financials for that entity as well as your personal returns.
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Alt doc and low doc options when tax returns don't tell the full story
Some lenders offer low doc loan structures where you declare your income using accountant letters, BAS statements, or business bank statements instead of full tax returns. These products were once heavily restricted but have become more accessible in recent years, particularly through non-bank lenders.
In a scenario like this, a tradie operating as a sole trader might show strong cash flow through six or twelve months of business bank statements but hasn't lodged the most recent tax return. A lender using bank statement assessment can calculate income based on deposits, less an assumed expense ratio. The rate might be 0.20% to 0.50% higher than a standard variable product, and a larger deposit is often required, but approval becomes possible when the traditional route doesn't fit.
Low doc loans suit borrowers with genuine income who don't fit the full documentation model. They are not a workaround for poor serviceability. The same 3.0 percentage point buffer applies, and you still need to demonstrate that you can comfortably afford repayments at the assessed rate.
Structuring your application around business type and trading history
Sole traders, partnerships, companies, and trusts are all treated differently. A sole trader's income flows directly to their individual return, making the assessment more straightforward. A company director must show both business profit and personal drawings. If the company retains most of its profit and you draw a modest salary, your borrowing capacity will reflect the amount you personally receive unless the lender allows you to include retained earnings.
Partners in a partnership are assessed on their share of the net profit. If you're a 50% partner in a business showing $200,000 net profit after add-backs, the lender will typically assess you on $100,000. Trusts add another layer because distributions can vary year to year. Lenders usually average the distributions you received over the past two years, or in some cases take the lower of the two if there's a significant discrepancy.
Melbourne has a dense population of small business owners, many operating in trades, professional services, hospitality, and retail. In suburbs like Box Hill, Oakleigh, and Glen Waverley, self-employment is common, and lenders active in the area are familiar with the documentation patterns. Your broker should know which lenders have appetite for your structure and what supporting documents will strengthen the case.
How deposit size and LMI affect self-employed approvals
Deposit size matters more for self-employed applicants because lenders view documentation type as an additional risk factor. If you're applying with less than 20% deposit, expect closer scrutiny on income verification. Some lenders won't offer low doc loans above 80% LVR. Others will, but require LMI and apply a higher interest rate.
For borrowers using the Australian Government 5% Deposit Scheme, full documentation is required. You cannot combine that scheme with a low doc application. The same applies to Help to Buy. If you're planning to access either of those programs, you need two years of tax returns or evidence that satisfies the participating lender's full doc criteria.
If you have a 20% deposit or more, your options widen. Some lenders will accept one year of tax returns if you've been self-employed for 18 months and can demonstrate consistent trading. Others remain firm on the two-year rule regardless of deposit size. A broker can tell you where the flexibility sits and whether it's worth holding off until the second year's return is lodged.
Refinancing when you're self-employed
The same documentation rules apply whether you're purchasing or refinancing. If your income has increased since you took out your original loan, refinancing might improve your rate or release equity for investment or renovation. But you'll need to prove that higher income using current returns.
If you're switching from PAYG employment to self-employment and want to refinance within the first 12 months, most lenders won't proceed until you have at least one full year of trading and a lodged tax return. You may be able to stay on your current loan and revisit refinancing once that threshold is met. Timing your application around your financial year and lodgement date can make the difference between approval and delay.
What a broker does differently for self-employed applicants
A broker experienced in self-employed lending will pre-assess your tax returns before submitting to a lender. They'll identify which deductions can be added back, which income sources are treated as ongoing, and whether any red flags exist that might trigger a decline. They'll also know which lenders are currently active in low doc, which have reduced their appetite, and which are willing to make exceptions for strong applications.
Some lenders treat rental income from investment properties as part of your self-employed income if the property is held in a business structure. Others assess it separately. Some will accept projected income if you've recently expanded. Others only consider historical earnings. Your broker should understand those distinctions and structure your application accordingly. A general submission to a major bank without that preparation often results in a conditional approval that stalls at the documentation stage, or a decline that could have been avoided with a different lender choice.
Call one of our team or book an appointment at a time that works for you. We'll review your returns, walk through your structure, and show you what's possible before you commit to any application.
Frequently Asked Questions
Do I need two years of tax returns to get a home loan if I'm self-employed?
Most lenders require two years of individual tax returns and corresponding ATO Notice of Assessments. Some will accept one year if you've been trading for less than two full financial years, though this limits your lender options. Low doc products may allow you to use accountant letters or bank statements instead.
Can I use a low doc loan if my tax returns show low income due to deductions?
Low doc loans allow you to declare income using BAS statements, accountant letters, or business bank statements instead of full tax returns. Rates are typically 0.20% to 0.50% higher, and a larger deposit is often required. You still need to meet serviceability requirements at the assessed rate.
How do lenders calculate my income if I operate through a company or trust?
For company directors, lenders assess the salary and dividends you personally receive, and may include retained earnings in some cases. For trust beneficiaries, lenders average the distributions you received over the past two years. Your business structure affects how income is treated and which lenders will approve your application.
Can I refinance if I recently switched from PAYG to self-employment?
Most lenders require at least 12 months of self-employment and one lodged tax return before they'll approve a refinance. If you've been self-employed for less than a year, you may need to wait until your first return is lodged and assessed before proceeding.
Does being self-employed mean I'll pay a higher interest rate?
Not necessarily. If you provide full documentation including two years of tax returns, you can access the same rates as PAYG borrowers. Low doc loans may attract a small rate premium, but standard self-employed applications with strong documentation are priced the same as any other owner-occupied or investment loan.
