Lenders assess your income and employment to confirm you can service a loan over the long term, not just today.
The type of income you earn, how you earn it, and how long you've been earning it all influence what you can borrow and which loan products you can access. A shift worker at Prince of Wales Hospital with penalty rates and a graphic designer invoicing through an ABN face different assessment methods, even if their annual income looks similar on paper.
How Lenders Assess PAYG Income
Permanent employees with consistent pay cycles are assessed using their base salary plus any regular allowances that appear on payslips. Lenders typically average overtime, shift penalties, or bonuses over a period between three and twelve months, depending on the bank.
Consider a nurse working at South Eastern Sydney Local Health District who earns a base of $85,000 plus regular weekend penalties averaging $12,000 annually. Most lenders will include a portion of those penalties, often discounting them by 20% to account for variability. That brings her assessed income to around $94,600 rather than the full $97,000. Probation periods don't always block approvals. If you've passed probation or your contract confirms permanency after a set period, many lenders will proceed with home loan pre-approval before you've finished your first three months.
Self-Employed and ABN Income
If you operate under an ABN, lenders look at tax returns and often require two full financial years. They assess your taxable income after business expenses, which can work against you if you've structured your affairs to minimise tax.
A tradie running a small business in Maroubra might show $70,000 in taxable income after claiming vehicle depreciation, tools, and a portion of home office costs. The lender uses that $70,000 figure, not the $95,000 in gross revenue. Some lenders allow add-backs for depreciation or one-off expenses, which can lift your assessed income closer to what you actually take home. This varies significantly between banks, and it's one area where having someone who knows which lender to approach makes a tangible difference to your borrowing capacity.
Casual and Contract Workers
Casual employees are assessed on their average earnings over six to twelve months, provided the work history shows consistency. Lenders want evidence that your hours are stable and likely to continue.
A hospitality worker at one of the cafes along Marine Parade averaging 30 hours a week over the past year will generally be assessed on that average, even without permanent status. The lender reviews payslips to confirm the pattern holds. Contract workers with regular renewals are treated similarly, lenders assess the likelihood of ongoing work based on your employment history and the nature of the contract.
Commission, Bonuses, and Irregular Income
If a significant portion of your income comes from commissions or performance bonuses, lenders average that income over one to two years and often apply a discount. The discount accounts for the possibility that performance might fluctuate.
A real estate agent working in the Maroubra and Matraville area might earn $120,000 one year and $95,000 the next. The lender averages those figures and may apply a further 20% haircut, bringing assessed income to around $86,000. It's not a penalty, it's a buffer against variability. If your income has been trending upward and you can demonstrate that with tax returns and a letter from your employer, some lenders will assess you more favourably.
Income That Lenders Won't Count
Not all income is treated equally. Centrelink payments other than Family Tax Benefit or Paid Parental Leave are often excluded or heavily discounted. Rental income from an investment property is usually assessed at 80% of the actual rent to account for vacancy and maintenance. Child support payments require a formal agreement and a consistent payment history spanning at least three months.
One-off payments such as inheritance, redundancy payouts, or irregular freelance work won't be included in serviceability calculations. If you're relying on that income to support your application, the lender will exclude it.
Employment Gaps and Job Changes
Changing jobs doesn't automatically disqualify you, particularly if you're staying in the same industry and your income remains stable or increases. Lenders focus on continuity of income rather than continuity of employer.
Someone moving from a teaching role at South Sydney High School to a position at a school in the eastern suburbs with a pay rise and similar employment terms won't face issues, even if the move happened recently. Employment gaps are a different matter. If you've been out of work for more than a month, most lenders want to see you back in employment with at least one full pay cycle before they'll assess your application. Longer gaps require explanation and may require a longer work history post-gap before you can proceed.
How Multiple Income Sources Are Treated
If you have more than one job or combine PAYG income with ABN work, lenders assess each income stream separately using the relevant criteria. This can work in your favour if both income sources are consistent.
A couple applying for an owner occupied home loan where one partner works full-time as an administrator and the other works part-time while running a small online business will have both incomes assessed. The part-time PAYG income is averaged over recent payslips, and the ABN income is taken from the most recent tax return. If the ABN has been operating for less than two years, that income may be excluded entirely, depending on the lender.
Why Documentation Matters More Than You Think
Lenders base their assessment on what you can prove, not what you tell them. Payslips, tax returns, employment contracts, and bank statements all form part of the picture. Missing documents or inconsistencies between what you've declared and what the paperwork shows will delay your application or reduce what you can borrow.
In our experience, applicants who gather their documents early and check them for accuracy move through the home loan application process weeks faster than those who submit incomplete information and respond to requests as they come. It's not about perfectionism, it's about having your situation clearly documented so the lender can make a decision without second-guessing the numbers.
If your income or employment situation doesn't fit the standard PAYG mould, or if you're unsure whether a lender will accept your circumstances, that's exactly when you need someone who knows how different banks assess different scenarios. Call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
Can I get a home loan if I'm on probation?
Yes, many lenders will approve your application if your contract confirms permanency after probation or if you've already passed probation. Some lenders will even proceed before probation ends if your employment history is strong.
How do lenders assess self-employed income?
Lenders typically require two full years of tax returns and assess your taxable income after business expenses. Some lenders allow add-backs for depreciation or one-off expenses, which can increase your assessed income.
Will casual employment affect my borrowing capacity?
Casual workers can qualify for a home loan if they show consistent earnings over six to twelve months. Lenders assess your average income during that period and look for evidence that your hours are stable.
Do lenders count commission and bonus income?
Yes, but they average it over one to two years and often apply a discount of around 20% to account for variability. A consistent upward trend and supporting documentation from your employer can improve how lenders assess this income.
What income do lenders exclude from calculations?
Lenders typically exclude one-off payments like inheritance or redundancy, irregular freelance work, and most Centrelink payments other than Family Tax Benefit. Rental income is usually assessed at 80% of the actual rent received.
