Section IV
The number that decides it
Self-employed borrowing capacity turns on one figure: what a lender is prepared to count as your income. It starts at your declared taxable income and moves up by whatever add-backs that lender recognises — which is why two people with identical returns can be assessed differently.
Assessable income after add-backs
Start with the taxable income on your notice of assessment, then add back only what a lender recognises. Two years is the usual basis; where the two differ materially, many lenders take the lower year or an average, so both are shown.
Most recent year
Prior year
- Most recent year, after add-backs
- —
- Prior year, after add-backs
- —
- Two-year average
- —
- Lower of the two years
- —
Which add-backs a lender may recognise
- Depreciation. A non-cash deduction. Commonly added back in full because it reduced taxable income without reducing available cash.
- Interest on debt being refinanced. Added back where the debt in question is being paid out by the new loan, so the expense will not continue.
- One-off or non-recurring expenses. Accepted where you can show the expense genuinely will not repeat. Needs evidence, not an assertion.
- Additional superannuation contributions. Voluntary contributions above the compulsory rate are often added back, as they are discretionary.
- Director or trust distributions to the borrower. Counted where they flow to you and are consistent across periods.
- Rent paid to a related entity. Sometimes added back where the property is owned by you or a related party. Policy varies widely between lenders.
Which of these apply, and whether the average or the lower year is used, is lender policy and it differs between lenders. Your accountant can tell you which add-backs your returns actually support; that conversation is worth having before an application rather than during one.
An estimate for orienting yourself, not a quote, an approval or financial advice. Declared income and lodgement status come from the ATO — check your notice of assessment.
Each add-back, and what it needs
None of these are automatic. Each has to be visible in the returns or the financials, and each lender decides which ones it accepts.
- Depreciation
- A non-cash deduction. Commonly added back in full because it reduced taxable income without reducing available cash.
- Interest on debt being refinanced
- Added back where the debt in question is being paid out by the new loan, so the expense will not continue.
- One-off or non-recurring expenses
- Accepted where you can show the expense genuinely will not repeat. Needs evidence, not an assertion.
- Additional superannuation contributions
- Voluntary contributions above the compulsory rate are often added back, as they are discretionary.
- Director or trust distributions to the borrower
- Counted where they flow to you and are consistent across periods.
- Rent paid to a related entity
- Sometimes added back where the property is owned by you or a related party. Policy varies widely between lenders.
What this figure still has to survive
Assessable income is the start of the capacity calculation, not the end of it. From there a lender subtracts your existing commitments — every card at its limit rather than its balance, every loan repayment, HECS-HELP, buy-now-pay-later — and assesses the repayment at a buffer above the actual rate. A strong income figure and a stack of unused credit limits still produces a small capacity.
Which is why the cheapest single action for most self-employed applicants is not finding a better rate: it is closing credit facilities they do not use, and getting the evidence of it onto the file.
General information about how Australian lenders assess self-employed income. Lender policy differs and changes, and tax and lodgement rules are set by the ATO; each page links to the body that sets the rule. Reviewed 17 August 2026.