HOME > BLOG > Home Loan Advice > Self-employed home loans: What are the income evidence requirements?

Obtaining a home loan for a self-employed person can be difficult, with your application being heavily scrutinized and can seem like you jump through a lot of hoops.

Obtaining a home loan for a self-employed person can be difficult, with your application being heavily scrutinized and can seem like you jump through a lot of hoops.

So, in order to save you time and money, it is worth knowing the basic requirements.

Income Evidence Differences

As a self-employed person, the main difference is in how you prove your income. As this is the basis for you being able to meet your repayments it is very important to ensure it is consistent and regular. For an employees it can be as little as a couple of pay slips but self-employed borrowers need to provide a lot more paperwork, going back a few years. 

To qualify for mainstream loans with the cheapest rates, most lenders will ask you to provide two years lodged tax returns and financial statements. This will include your personal tax returns, company, partnership or trust returns and as well as tax assessment notices. 

Lenders look at these documents to establish consistency of trading and income. The ideal situation is where the two years show a consistently increasing income. This gives lenders the reassurance that your business is established and has solid trading income. Declining income or showing a loss in one year can spell disaster, even if you have an explanation.  

The issue with two years lodged tax returns as evidence is that, the figures can be quite old and can reflect your trading situation 12 to 18 months prior. Lots can change and your trading today might be significantly better. Self-employed people have extensions with lodging tax returns and can fall behind, so possibly the years that are required may not have been completed so therefore cannot be used. So what do you do?  

Further Ways to Verify Income

Luckily there are alternative ways to verify your income if your tax returns are not up to date or do not reflect your current trading situation. 

BAS statements show trading figures like sales, on a quarterly basis. As they need to be lodged soon after the end of the quarter they will contain the latest trading figures. Lenders tend to ask for either 2 or 4 BAS statements so that they can arrive at an annual figure. It also helps to show the ebbs and flows of your sales particularly if you have a seasonal type business. 

As BAS shows the gross income or sales before expenses, a percentage is applied to estimate how much of it will be net profit. The lender will then use this figure in working out if you can afford the home loan repayments.

Another way to verify income is business trading statements, possibly for 3 to 6 months. Business bank statements show your trading income being deposited into your bank account. This income is similar to what is shown on a BAS statement and is treated similarly to arrive at a net profit figure. 

If you are unable to provide either business bank statements or BAS but your accountant is familiar with your trading situation and is prepared to sign a declaration around your income, you may be able to use this.

Minimum Time For Self Employment

ABN and GST registration is a mandatory requirement for most lenders if they are using self-employed income. The public register shows the date that ABN and GST registration took place and this is often used to pinpoint when your business started.

Registrations are normally required for at least 2 years but there are some loans that only require 6 months. If you are recently self-employed but have taken over a business with strong trading or are contracting with income from day one, State Custodians have loans that only need you to have been registered for 6 months. Check out the requirements here or give us a call on 137262 to discuss your situation with a lending specialist.

Get Pre Approved

If you are looking at getting a home loan, look around at lenders who have a range of loans for self-employed borrowers. You can chat to them about your business income what income evidence you are going to be able to provide. They can also advise you on your options. 

State Custodians has a range of self employed home loans and we also have access to a range of other lenders who have niche requirements specifically designed to provide flexibility that self-employed borrowers often need. Check out our range of Self-employed home loans and email ask@statecustodians.com.au to have a lending specialist chat you through your options.