Your income is more than a number on a payslip. It represents your capacity to repay a loan, your financial stability, and your ability to step into the next chapter of your life. Lenders look beyond the headline figure to understand the security and consistency of your earnings, and knowing what they assess can help you prepare with confidence.
How Lenders View Your Employment Type
Lenders classify employment into categories that reflect perceived stability and repayment risk. Permanent full-time employment is generally considered lower risk because income is predictable and supported by employment contracts and workplace protections. Permanent part-time employment is also viewed favourably, provided your hours are consistent and you can demonstrate ongoing engagement with your employer.
Casual, contract and self-employed income are assessed with more scrutiny. Consider a buyer who has worked casual hours as a retail assistant for eight months while completing study. Her income is variable, her employer cannot guarantee ongoing shifts, and she has no paid leave entitlements. A lender reviewing her home loan application would assess her capacity based on recent payslips, the length of time she has been in the role, and whether her income pattern is stable enough to service the loan. If her hours fluctuate significantly or her tenure is short, the lender may discount a portion of her income or require evidence of a second income source to approve the loan.
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What Documentation You Will Need to Provide
The type of employment you hold determines what paperwork lenders require. For permanent employees, lenders typically request your two most recent payslips, a letter of employment confirmation from your employer stating your role, salary and start date, and up to three months of bank statements showing salary deposits. Some lenders also require your most recent PAYG payment summary or tax return if you have recently changed roles or receive variable income components such as commission or overtime.
Self-employed applicants are asked to provide two full years of tax returns, including the notice of assessment from the ATO for each year, and two years of financial statements prepared by a registered accountant. If you operate through a company or trust structure, lenders may also request business activity statements and evidence of ABN registration. For buyers who have been self-employed for less than two years, some lenders allow a combination of prior employment income and recent self-employment income to be considered, though approval depends on the individual lender's policy.
When Your Income Includes Overtime, Commission or Bonuses
Many women earn a significant portion of their income from variable components such as overtime, commission, bonuses, allowances or shift loadings. Lenders can include these amounts in your serviceability assessment, but they apply consistency tests to ensure the income is reliable.
For overtime and allowances, lenders typically require evidence that you have been receiving these payments consistently for at least three to six months. They calculate an average over your recent payslips and may discount the figure if the pattern is irregular. Commission and bonus income is assessed more conservatively. Most lenders require at least 12 months of history, and some require two years. They calculate an average over that period and may apply a discount or haircut of up to 20 per cent to account for variability. A buyer working in sales with a base salary of $70,000 and annual commission averaging $25,000 over two years would likely have the full base salary recognised, with the commission averaged and possibly reduced to $20,000 for serviceability purposes. That adjustment can affect how much she is able to borrow, particularly if the commission makes up a large share of her total income.
How Parental Leave and Career Breaks Are Managed
Returning to work after parental leave or a career break does not disqualify you from applying for a home loan. Lenders assess your current employment status and your capacity to meet repayments based on your income at the time of application. If you have returned to work on a permanent basis, even if your hours are reduced, lenders will assess the income you are currently earning. You will need to provide recent payslips, a letter from your employer confirming your return to work arrangement, and bank statements showing salary deposits.
If you are still on parental leave but have a confirmed return date and a letter from your employer outlining your role, salary and hours upon return, some lenders will assess your application using your expected returning income rather than any parental leave payments you are currently receiving. This approach allows you to apply for a home loan while still on leave, provided settlement occurs after your return date or the lender is satisfied you will meet serviceability from that point forward. Parental leave payments from the government, including the Paid Parental Leave scheme, are not generally included as assessable income because they are time-limited.
Income from Rental Properties and Investment Assets
If you own an investment property or receive rental income from a room in your home, that income can support your home loan application. Lenders typically assess 80 per cent of the gross rental income shown on your lease agreement or rental statement, with the 20 per cent reduction applied to account for vacancy periods, maintenance costs and property management fees. The remaining 80 per cent is added to your employment income when calculating serviceability. You will need to provide a copy of the current lease agreement and evidence of rental payments, such as bank statements showing deposits or a rental ledger from your property manager.
Other investment income, such as dividends from shares or distributions from managed funds, can also be included if you can demonstrate it is ongoing and supported by at least 12 months of history. Lenders require statements from your share registry or investment platform and may average the income over one or two years depending on volatility. Centrelink payments such as Family Tax Benefit, Child Care Subsidy, Carer Allowance and Disability Support Pension are treated as assessable income by most lenders, though some apply partial shading or require the payment to be ongoing for a minimum period.
How Lenders Calculate What You Can Borrow
Once your income is established, lenders assess your ability to service the loan by applying a serviceability buffer. Under current APRA requirements, lenders must assess your capacity to meet repayments at an interest rate that is at least 3.0 percentage points above the actual loan product rate. If you are applying for a variable rate loan at 6.2 per cent, the lender tests your ability to repay at 9.2 per cent. This buffer is designed to ensure you can continue to meet repayments if rates rise.
Lenders also factor in your existing financial commitments, including credit card limits, personal loans, car loans, HECS-HELP debt and any investment loan repayments. Credit card limits are treated as if they were fully drawn, regardless of your actual balance. A credit card with a $10,000 limit may reduce your borrowing capacity by around $40,000 to $50,000 depending on the lender's assessment rate. If you hold cards you rarely use, consider closing them or reducing the limit before applying.
Your living expenses are also assessed, either based on your actual declared expenses or using a household expenditure measure such as the Henderson Poverty Index, whichever is higher. Some lenders allow you to provide evidence of lower living costs if your circumstances differ from the benchmark, but you will need to support that with bank statements showing your actual spending.
Preparing Your Application When Income Is Non-Standard
If your income does not fit a traditional employment structure, preparation becomes central to a successful application. Buyers with multiple part-time roles, freelance income, contract work, or income derived from a family trust or partnership structure are not uncommon, but they do require more detailed documentation and often a longer assessment process.
Consider a buyer working two part-time roles, one as a classroom teacher on a permanent part-time contract and another as a private tutor paid as a sole trader. Her teacher income is straightforward and supported by payslips and an employment letter. Her tutoring income is variable, paid in cash and via direct deposit, and she has been operating for 18 months. To include the tutoring income, she would need to provide her most recent tax return and notice of assessment, business bank statements showing client payments, and an accountant's letter confirming her ABN registration and trading history. Some lenders would accept 12 months of self-employed income if supported by strong financial records, while others would wait until she has two full years of tax returns. A mortgage broker can identify which lenders are more receptive to shorter trading histories and structure the application to reflect both income streams in the most favourable way.
Call one of our team or book an appointment at a time that works for you. We work with lenders who understand the diversity of income structures and employment pathways, and we will help you position your application with clarity and confidence.
