For PAYG employees, most lenders only need your most recent tax return or group certificate (payment summary), along with recent payslips and a letter of employment confirming your income and tenure. If you have been in the same job for several years, the income verification is usually straightforward.
For self employed borrowers - whether as a sole trader, company director, or trust beneficiary - the standard requirement is two years of tax returns for each entity that contributes to your income, plus matching ATO notices of assessment for each year. The notices of assessment confirm the ATO has processed the returns and the income figures are consistent. Some lenders also want profit and loss statements and business bank statements for additional context.
A growing number of lenders will accept one year of tax returns for self employed borrowers, typically at slightly higher rates or with tighter LVR limits. These lenders are generally second-tier or non-bank lenders rather than the major banks. The trade-off is that you access lending sooner after starting a business, but often at a marginally higher cost.
One year approval is more likely if your income is strong and consistent in that single year, if your industry is stable, and if you have no negative credit history. Some lenders will still want two years of BAS statements to corroborate the single year of tax returns.
For borrowers who cannot provide standard tax documentation - perhaps because they are recently self employed, or their returns are complex - low doc and alt doc loans offer alternatives. Instead of tax returns, these lenders may accept some combination of BAS statements (typically 6 to 12 months), a signed accountant's declaration of income, and 6 months of business bank statements.
Alt doc loans almost always come with a higher interest rate and lower maximum LVR (typically 80% at most, often 75%) compared to full doc loans. They are a genuine pathway, but the cost differential should be weighed against the benefits. Borrowers who are six to twelve months away from having two full years of returns should consider whether waiting is worthwhile before committing to an alt doc loan at a higher rate.
Lenders are not just confirming your income level - they are looking for trending income (is it growing, stable, or declining?), consistency between years, and a clear picture of what you actually earn. For company or trust structures, lenders add back certain non-cash expenses and distributions to arrive at an assessable income figure. This is called a tax add-back and it often results in a higher assessed income than the taxable income shown on the return.
Common add-backs include depreciation, one-off expenses that will not recur, and the borrower's share of company profits before tax. Getting your accountant to prepare a detailed income calculation showing add-backs can significantly improve your assessed income position with the right lender. A broker experienced with self employed lending knows which lenders allow which add-backs and can position your application accordingly.
Jason and Steve are Adelaide mortgage brokers who give honest, practical advice at no cost to you. No obligation.
The information on this page is general in nature and does not constitute financial or taxation advice. Given Finance Pty Ltd (t/a Lendology) ACN 624 144 501 is authorised under LMG Broker Services Pty Ltd ACL 517192. Lender policies change frequently - speak with a broker for current requirements.