Why Self-Employed Highett Buyers Should Plan Early

Self-employed borrowers can get a home loan, but lenders want to see your income proven through lodged tax documents rather than payslips. If you run your own business in Highett, getting those documents in order early is the most useful thing you can do.

That can feel like a lot of paperwork on top of running a business. The good news is that the requirements follow a pattern, and a little preparation goes a long way.

What documents do self-employed borrowers need for a home loan?

Self-employed borrowers usually need to show more income evidence than employees. Lenders may ask for personal and business tax returns, financial statements, Notices of Assessment and trust documents, where applicable.

For a standard full-documentation application, that typically means personal and business tax returns for the last two financial years, with the matching ATO notices of assessment. Many lenders also ask for profit and loss statements, balance sheets and business bank statements. Requirements differ from lender to lender, so it pays to check before you apply for a home loan.

Why do lenders want a Notice of Assessment as well as a tax return?

A Notice of Assessment confirms the ATO has processed your return and shows the figures it assessed. It confirms the return was lodged and what the assessed figures were.

This matters in practice because most lenders require lodged and assessed tax returns, supported by an official Notice of Assessment. If your latest return is still with your accountant, your home loan application may have to wait. Lodging on time each year keeps your options open.

Can you get a home loan with less than two years of self-employment?

Sometimes. Some lenders will consider a single year of tax returns, though eligibility and deposit requirements vary by lender.

The trade-off is that you may have fewer lenders to choose from. Some lenders also offer alternative-documentation (low-doc) loans that use BAS, business bank statements or an accountant's declaration instead of full tax returns. These loans often need a larger deposit and can carry higher rates.

A broker can compare these home loan options for you. Our home loans page explains how we work with lenders across Australia.

How does your business structure change the paperwork?

Your structure decides which returns a lender needs to see. A sole trader provides personal returns and matching notices of assessment, while a company borrower adds company returns, financial statements and evidence of director wages.

Partnerships and trusts add their own returns on top. If you borrow through a trust, lenders may also ask for the last two years of trust tax returns. Knowing this early helps you ask your accountant for the right documents in one go.

Your structure can also affect your borrowing capacity, because lenders assess the income you actually report. Our borrowing capacity page shows what lenders look at.

Example: a Highett tradesperson with a lower latest year

Consider a sole trader in Highett who has been self-employed for several years. In the latest financial year, their taxable income dropped because they bought new equipment for the business. They want to buy a home and live in it.

The lender will assess the income shown on the lodged returns. Because the latest year is lower, the borrower's capacity looks smaller than their day-to-day cash flow suggests. Lenders also differ in how they treat that kind of change, so the choice of lender matters.

In a scenario like this, the first step is to ask the accountant to finalise the latest return so the Notice of Assessment is ready. The second is to work out a comfortable loan amount before applying. As an illustration only, a $600,000 principal-and-interest loan over 30 years at 6.75% p.a. has repayments of about $3,892 a month. The borrower can test other loan amounts with the mortgage repayment calculator.

The outcome is that the borrower applies with documents that match, and with a loan amount that fits the income the lender will actually see. That is a stronger position than applying first and finding the gap later. The trade-off is time, since waiting for the returns to be finalised can delay your plans.

Should you get home loan pre-approval before you start house hunting?

For most self-employed buyers, yes. Home loan pre-approval gives you an indication of how much a lender may let you borrow before you start making offers.

It is not a final commitment. The lender can still change its mind if your finances or the property change, and the approval has an expiry date. Even so, going through the process early shows you where your paperwork is thin while there is still time to fix it.

If you are buying your first place, our first home buyers guide covers extra points worth knowing. Any questions about how your accountant's tax work affects your application should go to your accountant, as they know your full tax position.

Call one of our team or book an appointment at a time that works for you. We will talk through your business income, check your documents and show you the lenders that suit your situation. You can also learn more about our Highett service or go straight to the booking page.

Frequently Asked Questions