Lenders assess your income differently depending on how you earn it. A permanent employee on a salary will have their full base income counted, while a casual worker might only have 80% of their earnings recognised, and a self-employed applicant may need two years of tax returns before a lender will assess their income at all.
How Lenders Calculate Your Usable Income
Lenders don't assess what you earn, they assess what they can prove you'll continue to earn. Full-time employees typically have 100% of their base salary counted toward borrowing capacity. Part-time employees on permanent contracts receive the same treatment. Casual employees, however, usually have their income discounted by 20% to account for the lack of guaranteed hours, even if they've worked the same shifts for years. Some lenders will assess casual income at full value after 12 months of continuous employment with the same employer, but this varies widely between lenders.
Consider someone working casual shifts at Gosford Hospital who earns $65,000 annually. One lender might assess that income at $52,000 after applying a 20% reduction, while another might accept the full amount if employment has been stable for over a year. That $13,000 difference in assessed income could reduce borrowing capacity by $60,000 or more, depending on other commitments.
Self-Employed Income and What Lenders Actually Accept
Self-employed applicants are assessed on net profit after tax, not turnover. If your business turns over $200,000 but your taxable income after deductions is $70,000, lenders will assess the $70,000 figure. Most lenders require two full years of tax returns and financial statements prepared by an accountant. Some will accept one year of returns if you've been operating for 12 to 18 months, but fewer loan products become available and the interest rate is often higher.
ABN holders operating as sole traders in Gosford, whether in trades, consulting, or retail, face the same assessment process. A sole trader electrician who reports $85,000 in net income across two consecutive tax years will have that figure assessed, though some lenders will average the two years while others take only the most recent. If income has dropped between year one and year two, expect lenders to use the lower figure or decline the application altogether.
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Commission, Overtime, and Bonus Income
Commission and bonus income are only counted if you can demonstrate a consistent history of receiving them. Lenders typically require at least 12 months of payslips showing regular commission payments, and even then they may only assess 80% of the average. Overtime is treated similarly. One payslip showing a large overtime payment won't help your application, but 12 months of consistent overtime averaged across your payslips will.
In our experience with applicants working in retail or sales roles around Gosford's waterfront precincts, commission can make up a significant portion of total income. A sales consultant earning a $55,000 base salary plus $20,000 in annual commission might assume their income is $75,000, but a conservative lender may only assess $71,000 after discounting the commission component.
Probation Periods and New Employment
Most lenders won't approve a home loan application if you're still within a probation period. The standard requirement is that probation must be completed before settlement, not just before application. If you're two months into a three-month probation period and want to apply now, expect either a decline or a conditional approval that won't convert to full approval until probation ends.
Switching jobs during the application process can delay or derail approval. If you've been approved based on one employer and then resign before settlement, the lender will likely reassess your application from scratch. If the new role comes with a pay rise and you're past probation, that may work in your favour. If you're starting fresh in a new industry with a lower base salary, the lender may withdraw the approval.
Parental Leave and Returning to Work
Applicants currently on parental leave can still apply for a home loan, but lenders will require a letter from your employer confirming your return-to-work date and the hours or salary you'll return to. The income used in the assessment will be based on what you'll earn when you return, not what you earned before leave. If you're returning part-time instead of full-time, your borrowing capacity will reflect that reduction.
We regularly see this scenario with applicants in Gosford who work in education or healthcare and are returning from parental leave. A teacher returning to four days per week instead of five will have their income assessed at 80% of their previous full-time salary, which directly affects how much they can borrow. Lenders won't approve a loan based on pre-leave income if the return is confirmed at reduced hours.
Multiple Income Sources and How They're Treated
If you have more than one job, lenders will assess both, provided each role meets their minimum employment criteria. Two casual jobs might both be discounted, resulting in a lower assessed income overall. A combination of permanent part-time and casual work will be treated according to each income type. Rental income from an investment property is typically assessed at 80% of the gross rent to account for vacancy periods and maintenance costs, though this can vary.
Centrelink payments such as Family Tax Benefit or Carer Allowance can be included in some cases, but policies differ across lenders. Child support is assessable if you can provide evidence of consistent payments over at least three months, though some lenders require six or twelve months of bank statements showing the deposits.
What You'll Need to Provide During the Application
The documents required depend entirely on how you earn income. Permanent employees will need payslips covering the most recent month, and lenders may request additional payslips if commission or overtime needs to be verified. Employment contracts are often required, particularly if you've recently started a role or if your income structure is complex.
Self-employed applicants need two years of full tax returns, including the notice of assessment from the ATO, plus financial statements for the business signed by an accountant. If your business is structured as a company or trust, additional documents such as company tax returns and trust deeds may be requested. Sole traders operating around Gosford should have these documents prepared well before making a home loan pre-approval request, as delays in obtaining them can push settlement dates out by weeks.
Casual and part-time employees may be asked for additional payslips going back three or even six months to establish consistency of income. If your hours fluctuate, lenders will average your income across that period, and any recent reduction in hours will be factored into the assessment.
Why Income Type Affects Your Interest Rate and Loan Options
Not all loan products are available to all income types. A borrower on a full-time salary will have access to the widest range of lenders and loan features, including offset accounts, redraw facilities, and discounted interest rates. Self-employed borrowers often face a smaller pool of lenders willing to assess their income, and those lenders may charge a higher rate or require a larger deposit to offset perceived risk.
Low-doc loans, which allow self-employed applicants to avoid providing full financials, come with significantly higher interest rates and lower loan-to-value ratios. These products are less common now than they were a decade ago, and most lenders have tightened their policies around alternative income verification. If you're self-employed and want access to competitive rates, full financial documentation is the only reliable path.
Call one of our team or book an appointment at a time that works for you. We'll review how your income will be assessed, identify which lenders are likely to support your application, and make sure your documentation is in order before you start looking at properties in Gosford or across the Central Coast.
