How will a bank assess your tradie income?

The lender used Gavin's 5 years of carpentry history. His home loan was unconditionally approved.

If your payslip shows an ordinary salary or hourly wage, this is usually the simplest starting point. The parts that need a closer look are overtime, site allowances, travel payments, living-away-from-home payments and a recent move to a new employer.

I separate the payslip into ordinary income and everything on top. Then I check whether the extra income is regular, how long it has been paid and whether the lender treats it as continuing income or a reimbursement.

View the income graphic at full size

If you work on a major project as a crane or plant operator, bring payslips that itemise overtime and each allowance, plus your enterprise agreement (EBA) classification where it applies. Site, travel and living-away-from-home payments need to be checked separately.

If a large part of your pay comes from overtime, shift work, allowances or a separate job, the unusual employment home loan guide is a starting point for the income evidence to discuss with your broker.

The word contractor can describe 2 very different people. You may be paid through payroll as a PAYG contractor, or you may send invoices through an ABN or company.

A PAYG contractor can sometimes be assessed much like an employee, with the contract term, gaps between contracts and earlier work in the same trade helping explain the income. If you invoice, the lender is more likely to treat you as self-employed and ask for business evidence.

The contractor income home loan guide explains how lenders assess PAYG, day-rate and ABN setups differently.

The number that matters is not the turnover printed across the top of the accounts. It is the income left after the business costs, adjusted only where the lender's rules allow it.

I usually start with:

• how long the business and ABN have been active
• the latest completed personal and business returns
• profit and loss statements and balance sheets
• wages, dividends or distributions paid to you
• business debts, leases and credit cards
• whether the latest year is stronger or weaker than the year before

Some lenders may use the latest completed year. Others average 2 years, cap a large increase or need a longer time in business. That is why using the taxable income from one return in an online calculator can give you an inaccurate result.

Other adjustments can include voluntary super above the compulsory amount or interest on a business debt being cleared. They depend on the lender and the accounts. I check whether each cost continues, and whether any replacement repayment still needs to be included.

If you pay yourself a wage from your trade business, read the self-employed home loan guide for more on how lenders assess business income.

I checked 11 lenders for this guide. They use 3 broad ways to assess the latest completed year. That year may help, but only when the business history and current trading support it.

Westpac’s self-employed guidance and Macquarie’s credit guidelines (broker reference) explain why the income year used and the documents required are separate checks.

Related lender and guide links: ANZ · Bankwest · NAB · Commonwealth Bank · ING · Macquarie · Westpac · St George · Firstmac · Suncorp · People First Bank ·

A ute can appear as a business expense and as an ongoing loan. Those are not the same thing.

Depreciation is a paper expense and may be added back within a lender's rules. Loan repayments and ordinary running costs are real commitments. I do not add back every motor vehicle expense and pretend the ute costs nothing.

A changed setup does not always mean the work itself is new. Gavin's example is one version of this. A PAYG plumber moving into the same work as a sole trader may have useful industry history, even though the ABN is recent.

I would look for evidence connecting the old and new setup, such as earlier payslips, the former ABN, company registration, invoices, contracts, customers, bank statements and an accountant's explanation. Whether a lender accepts that continuity is still a policy and credit decision.

If the business is new, we need to assess it on that basis. We can check whether a lender has an option now, whether a smaller loan changes the answer or whether waiting for the next set of figures is the sensible choice.

Being a tradie does not create a general LMI waiver by itself. Your deposit options may still include a standard loan, a family guarantee or the Australian Government 5% Deposit Scheme if you meet its current eligibility rules and property price cap.

The deposit is only one part of the application. A 5% option does not make unfinished tax returns or an unsupported income figure disappear. Check the income and deposit route together.

Allow for purchase costs as well as the deposit. Check your state’s current grant and transfer-duty rules. In Queensland, the first home owner grant and home transfer-duty concessions have separate eligibility conditions. Your property type, contract date and personal circumstances can change the help available.

Our low-deposit home loan guide explains the deposit options. If this is your first purchase, the first home buyer guide covers the wider buying process.

Compare buying on your current income with waiting until the qualified pay rate is documented. Keep evidence of regular overtime and allowances. A gift or guarantor may help with the deposit, but you still need to show that you can afford the repayments. A lower purchase budget is another option to assess.

If you have HELP or an Australian Apprenticeship Support Loan, bring the current balance and repayment details. I check the loan type before assessing its effect. See how HECS debt can affect a home loan for the HELP side of that check.

Tell me your visa and residency status, who you are buying with, and whether you want an existing home, a new home or land. Loan eligibility and permission to buy the property are separate checks. Foreign buyers face restrictions on existing homes, with limited exceptions. Check the Australian Government’s residential-property guidance and any state foreign-buyer duty before committing to a purchase. A citizen or permanent-resident partner does not settle every question about your share of the property.

If you plan to build, our construction loan guide explains how the loan and progress payments work. Property-purchase permission still needs its own check.

• recent payslips
• latest Tax Ready income statement
• employment contract or letter if the role is new
• prior-year payslip or income statement where overtime and allowances matter

• latest lodged personal and business returns
• notices of assessment
• financial statements, including profit and loss and balance sheet
• current business debts and equipment finance
• recent BAS or business statements where a lender needs them
• documents linking an old and new business setup where continuity matters

Do not collect every document on that list before speaking with me. I would first identify what is missing and ask for the evidence that could affect the assessment.

An electrician, plumber, builder, carpenter and concreter can face the same income questions. The occupation becomes more useful when it changes the pay pattern, licensing evidence, business costs or work history.

Use the mortgage repayment calculator to test repayments alongside your other commitments. Our borrowing power guide explains the factors behind a lender’s estimate.

This is general information, not a loan approval. Lender policy, pricing and evidence requirements can change, and the lender must assess the full application.

Client examples are based on real situations. Names and identifying details have been changed.