Banks assess self-employed income conservatively. Specialist lenders don’t. Paddy explains how add-backs, business financials, and the right lender makes all the difference.
I couldn’t tell you how many times I’ve sat down with a self-employed client who’s already been told no somewhere else, or been quoted a borrowing figure that doesn’t match how their business is actually going. It happens a lot. So let me start with some good news: the rules have changed over the last couple of years, and mostly in your favour.
The Big Shift in 2026: One Year of Financials Is Now Often Enough
For as long as I’ve been doing this, the standard line from every major bank was the same. Two years of tax returns, minimum, no exceptions. If your business had a rough first year and a strong second one, that first year still dragged your average down, and your borrowing capacity got calculated on a number that had nothing to do with where you actually were.
That’s changed. Since late 2024, all four major banks have moved on this. Commonwealth Bank started accepting one year of financials in late 2024. NAB followed in early 2025, and Westpac brought in a one-year option in July 2025. ANZ already accepted one year in many cases, and in August 2025 it went further. It now uses your actual repayments on existing fixed-rate asset finance instead of adding a buffer on top, and it only needs one year of documents for income from director fees and dividends.
Every lender has its own conditions, and policy can change again without much warning, so the details always need checking for your situation. But the direction is clear, and it’s a big deal if you’ve had a stronger year recently after a slower one. If that’s you, it’s worth having this conversation again, even if you got knocked back twelve months ago.
Why Banks Still Get This Wrong Sometimes
Even with the one-year shift, not every lender has moved. And even among the ones that have, “accepting one year of financials” doesn’t mean every lender reads that year the same way. Most lending assessment is still set up around PAYG income: a regular payslip and a predictable number. Self-employed income doesn’t work like that. It comes through company profit, director drawings, trust distributions and dividends, and none of that maps neatly onto a standard assessment.
Add-backs are where this really matters. These are legitimate deductions on your tax return that don’t represent actual cash leaving your business, like depreciation or a one-off cost. Not every lender treats add-backs the same way, and if they aren’t clearly set out in the application, they can easily be missed. That means your assessed income can end up well below what you’re actually earning and living on.
I’d also push back on the idea that one year of financials solves everything on its own. If that one year happens to be a quiet one (a slow quarter, a big one-off expense, a new piece of equipment), you can still end up with an assessed income that undersells you. The lenders who’ve made this change are a real step forward, but how your numbers are read and presented still matters just as much as which lender you go to.
What You’ll Need to Bring to the Table
For a standard, full-doc application, I’m generally asking for your most recent personal tax return and ATO Notice of Assessment, plus your business tax return and financial statements if you trade through a company, trust or partnership. On top of that, I’ll usually need either 12 months of BAS statements, 12 months of ATO tax portal statements, or a second year’s tax return. Even where a lender accepts one year of financials, many still want your ABN to have been registered for around two years. Some lenders will also want two full years if your income’s been inconsistent, so I always check the specific lender’s position before we start gathering anything.
If your numbers don’t quite fit the full-doc mould, alt-doc (sometimes called low-doc) options exist too. These usually rely on recent BAS statements and business bank statements, sometimes with a declaration from your accountant, instead of full tax returns. They generally come with a higher rate and a lower maximum loan-to-value ratio, so I’ll usually look at full-doc first.
Making Add-Backs Work for You, Not Against You
This is where I spend a lot of my time with self-employed clients, and it’s often the difference between a borderline application and a strong one. Depreciation, interest on business loans that are being paid out, and one-off expenses that won’t happen again can all be added back to your taxable income where a lender’s policy allows it. That lifts your assessed income closer to what you’re really earning. A one-off expense usually needs a letter from your accountant confirming it won’t recur.
Talk to your accountant about this before you lodge your next return, not after. There’s a real tension between minimising tax and maximising borrowing capacity, and a return structured purely to reduce tax can quietly cap what you’re able to borrow. I’m not suggesting you pay more tax than you need to. That’s not my lane. I’m suggesting the conversation about your next return should include “what does this do to my borrowing capacity” as well as “what does this do to my tax bill.”
I’m always happy to jump on a call with you and your accountant. Your accountant knows your business, and I know how lenders read it. Getting us both in the same conversation before your next return is lodged, rather than after, tends to produce a much better outcome than either of us working in isolation.
A Scenario I See All the Time
Picture a business owner with a taxable income of around $110,000 once deductions are taken out. Assessed on that figure alone, they come up well short of what they need. Once the legitimate add-backs are applied, like depreciation, interest on a business loan being paid out and a one-off expense, the income a lender can use lifts to around $160,000. Same business, same year, same tax return. The difference is how the numbers were read and presented.
I’ve changed the specifics here so it’s not any one client’s story, but it’s a pattern I see often. It’s rarely about your business doing badly. It’s usually about the assessment not matching reality.
How I Handle This for Self-Employed Clients
I look at your full picture, not just the number on page one of your tax return, and I compare lenders whose policies actually suit self-employed income. That includes company directors drawing a salary below what their business could support, seasonal or fluctuating income in trades and hospitality, trusts with more complicated distributions, and business owners earlier in their journey, under two years trading, where some options exist but need a more careful approach.
Frequently Asked Questions
Do I really only need one year of tax returns now?
With all four major banks and a number of other lenders, often yes. It’s not universal across the 60 or so lenders I work with, though, and some situations still call for two years, so it’s worth checking your specific circumstances with me before assuming either way.
What’s an add-back and why does it matter so much?
It’s a legitimate deduction on your tax return that isn’t an actual cash cost, depreciation being the classic one. Adding these back to your taxable income can lift your borrowing capacity, but only if the lender’s policy allows it and it’s set out clearly, often with a letter from your accountant.
Can I get a home loan if I’ve been self-employed for less than two years?
It’s more limited, but not impossible. Some lenders will consider it, particularly with a clean ABN history and consistent income. I’d rather have that conversation honestly with you upfront than let you assume the door’s closed.
Let’s Look at Your Actual Numbers
If you’ve been told no, or told a number that didn’t feel right, I’d love the chance to take another look. Lending policy for self-employed borrowers has moved a lot over the last couple of years, so the answer you got a while ago might not be the answer today.
| Self-employed and not sure where you stand? Book a free 15-minute call with me and I’ll walk you through what’s changed and what it could mean for you. https://tidycal.com/trilending/15mincall |
This article is general information only and doesn’t take into account your objectives, financial situation or needs. Please speak to me before making any decisions about your lending.