How Lenders Assess Income
How do lenders assess my income when I apply for a home loan?
By Andrew, franklenn FINANCE 7 min readUpdated 3 November 2026
The short answer
Lenders assess income by looking at how reliable and ongoing it is. Base salary from permanent work is usually counted in full, while overtime, bonuses, commissions and rental income are often shaded, meaning only a portion is counted, commonly around 80%. Self-employed and casual income usually needs a longer track record. Each lender has its own rules, so the same income can produce different borrowing amounts with different lenders.
Detailed explanation
Base salary and wages
If you are a permanent full-time or part-time employee, lenders typically count your base salary in full. They will usually ask for your two most recent payslips and may want an employment letter or your latest income statement from the ATO.
Many lenders want you to have passed any probation period, though some accept applicants on probation if they have a history in the same industry.
Contractors paid through an agency or on a fixed-term contract are often assessed differently from permanent employees. Some lenders treat ongoing contractors much like employees, while others want a longer history or more documents.
Overtime, allowances, bonuses and commission
Variable income is treated more cautiously. Lenders often want to see that it has been earned consistently, usually for six to twelve months or more, and may count only part of it.
Some lenders count regular overtime in full for certain essential service workers, such as nurses, police and paramedics. This is a good example of where lender choice matters.
- Overtime and shift allowances: often 80% to 100%, depending on lender and occupation
- Bonuses: often averaged over two years and shaded
- Commission: usually needs a track record and may be averaged
- Allowances: depends on whether they are regular and ongoing
Rental and investment income
Lenders usually count around 70% to 80% of rental income, to allow for vacancies, management fees and maintenance. They may want to see a lease, rental statements or an appraisal from a property manager for a property you are buying.
Dividends and interest income may be accepted if they are ongoing and shown on tax returns.
Self-employed and casual income
If you are self-employed, most lenders want two years of personal and business tax returns and ATO notices of assessment. Some accept one year, and some offer alternative documentation loans using BAS statements, bank statements or an accountant's letter, usually at a higher rate.
Lenders may add back certain expenses, such as depreciation or one-off costs, to your taxable income. Casual employees are often asked for six to twelve months in the role or industry, with income averaged over that time.
Add-backs can make a real difference for business owners. Interest on loans being refinanced, non-cash depreciation and genuine one-off expenses may be added back by some lenders, which can lift the income they assess. Policies differ widely, so this is an area where lender choice matters.
Government payments and other income
Some lenders accept certain Centrelink payments, such as Family Tax Benefit, if they are expected to continue for a set period, often while children are under a certain age. Child support may also be counted with evidence.
Income that is temporary, irregular or not documented is usually excluded. The clearer your paper trail, the more of your income a lender is likely to count.
Foreign income can also be accepted by some lenders, usually shaded more heavily and converted at a conservative exchange rate. If any part of your income is unusual, tell us early so we can approach the lenders most likely to accept it.
Worked example
How a lender might assess a mixed income
Here is an illustrative example of a borrower with a base salary, regular overtime and rental income from an investment property. It assumes a lender that counts 80% of overtime and 80% of rent. Other lenders may differ.
| Base salary (counted at 100%) | $92,400 |
| Overtime earned: $11,800 (counted at 80%) | $9,440 |
| Gross rental income: $31,200 (counted at 80%) | $24,960 |
| Total gross income earned | $135,400 |
| Total income the lender assesses | $126,800 |
Although this borrower earns $135,400 before tax, the lender assesses $126,800, a difference of $8,600. A lender that counts overtime in full for the borrower's occupation would assess $129,160 instead, which could lift borrowing capacity.
Illustrative only. Figures are examples, not a quote or a recommendation.
Common mistakes
- Assuming every lender treats overtime, bonuses or rental income the same way
- Changing jobs or industries just before applying, without checking how lenders view it
- Self-employed borrowers minimising taxable income without realising it reduces borrowing capacity
- Not having recent payslips, tax returns or ATO notices of assessment ready
- Leaving out eligible income, such as regular allowances or Family Tax Benefit, from the application
Frequently asked questions
Next steps
Talk to franklenn FINANCE
Want to know how lenders will see your income? Book a free discovery call with franklenn FINANCE and we will match your situation to lenders whose policies suit it.
This guide is general information only and does not consider your objectives, financial situation or needs. It is not financial, tax or legal advice. Lender policies, rates and government schemes change. Please speak with us, and with your accountant or solicitor where relevant, before acting.