The Reserve Bank’s 13 cash rate increases between May 2022 and November 2023 compressed household borrowing power by roughly 30 per cent across the conventional full-documentation market. For self-employed applicants, the squeeze is more acute. A single lodged tax return can unlock a loan offer from a non-bank, but the serviceability arithmetic behind that offer has become markedly less accommodating than it was before the rate cycle turned. The gap between one-year and two-year income histories now erases tens of thousands of dollars in borrowing capacity and, for some loan purposes, shuts the door entirely. With APRA’s serviceability buffer fixed at 3.0 percentage points since October 2021 and the specialist lenders that supply most low-doc credit operating under reset funding costs, the policy window for one-year tax return deals has narrowed. This article maps current conditions across six key non-bank lenders and shows exactly where a self-employed borrower with a thin tax record stands.
The Two-Year Norm and Where It Comes From
APRA’s Prudential Practice Guide APG 223 (Residential Mortgage Lending), last updated in December 2022, requires lenders to verify self-employed income over “a period of at least two years” unless they can demonstrate that a shorter timeframe is prudent for the specific borrower. That guidance shapes the entire low-doc ecosystem because it sets the prudential baseline that ADIs and their mortgage insurers follow. When a lender departs from the two-year benchmark, it typically carries a higher capital charge under APS 112, and its lender’s mortgage insurer (LMI) will impose additional constraints.
How LMI Providers Reinforce the Rule
Australia’s two primary LMI providers, Genworth and QBE, set their own verification standards for the flow business they underwrite. Genworth’s Self-Employed Income Policy, as published in its 2023 Underwriting Guidelines, accepts one-year tax returns only where the lender holds a specific delegated authority and where the loan-to-value ratio (LVR) does not exceed 70 per cent for purchases and 65 per cent for refinances. QBE’s equivalent framework, in an October 2023 circular to accredited lenders, tightened the maximum LVR for one-year income evidence to 60 per cent on interest-only terms. These LMI limits directly influence the headline rates and fees that non-banks can offer.
Why Banks Typically Require Two Years
Main banks that still originate low-doc loans—a small contingent since the 2018 Banking Royal Commission—almost always insist on two full years of tax returns and notices of assessment. ANZ’s Self-Employed Home Loan policy, revised in November 2022, explicitly excludes any application with fewer than two years of lodged returns from its standard variable rate offer, pushing such files to its specialist non-conforming arm at a margin premium of 1.25 to 1.75 percentage points. Commonwealth Bank discontinued its one-year low-doc pathway entirely in March 2023. The major lenders’ retreat leaves the field to non-banks, where policy can be more flexible but comes with LVR caps, rate loadings, and stricter debt-to-income (DTI) limits.
Six Non-Bank Lenders That Engage One-Year Returns
Each specialist lender applies its own filters to one-year tax return applications. The survey below reflects policy positions as at early 2024, assembled from product guides and broker updates.
Pepper Money
Pepper’s Easy Low Doc product, reissued 15 June 2023, accepts one year of personal tax returns and a corresponding notice of assessment provided the borrower’s ABN has been registered for at least 12 months. The minimum net profit disclosed must be $45,000, and the maximum LVR is 75 per cent for purchases (70 per cent for refinances). Pepper charges a risk fee of 1.10 per cent of the loan amount on these deals, and the product carries a standard variable rate 1.40 percentage points above its full-doc equivalent.
La Trobe Financial
La Trobe’s Lite Doc policy, updated 1 February 2023, permits one-year tax returns for self-employed applicants who have held an active ABN for a minimum of two years. The lender imposes a hard DTI cap of 6.5 times and limits LVR to 65 per cent for refinances and 70 per cent for purchases where the borrower provides a 30 per cent genuine savings deposit. La Trobe also requires an accountant’s letter confirming the business is trading profitably, regardless of the tax return figure.
Liberty Financial
Liberty’s Free Thinking loan, detailed in a broker update of 4 October 2023, allows one-year returns if the applicant’s credit score exceeds 680 and net assets total at least $250,000. LVR is capped at 80 per cent for prime residential security, but Liberty applies its own servicing floor rate of 7.50 per cent—substantially above its headline rate—which compresses borrowing power by approximately 22 per cent relative to a two-year income assessment.
Resimac
Resimac’s Specialist Alt Doc product, as of September 2023, accepts one year of tax returns only where the business has been GST-registered for at least two years and the most recent year’s net profit exceeds $60,000. The maximum LVR is 70 per cent for metro postcodes and 65 per cent for regional locations, with a maximum loan size of $1.2 million. Resimac shades the stated net profit by 15 per cent when calculating serviceability to account for income volatility.
Bluestone Mortgages
Bluestone’s Near Prime policy, circulated in an October 2023 product flash, restricts one-year tax return deals to refinances of existing owner-occupied debt. Purchases are excluded unless the application is supported by a full two-year history. LVR is capped at 65 per cent, and the minimum credit score is 640. Bluestone also requires the most recent Business Activity Statement (BAS) for the quarter ending after the tax return period to confirm ongoing revenue.
Brighten Home Loans
Brighten’s Alt Doc product, released in March 2023, accepts one year of tax returns for self-employed applicants with an ABN registered for at least 24 months. The minimum deposit is 30 per cent, giving a maximum LVR of 70 per cent. Brighten levies a risk fee of 0.85 per cent and insists that the borrower’s industry falls within its approved list—hospitality and construction are excluded unless the file includes an additional six months of BAS records.
Serviceability Arithmetic: Why One Good Year May Not Be Enough
Even where policy allows a single tax return, the servicing calculation often erases much of the apparent income. APRA’s serviceability buffer has been locked at 3.0 percentage points since October 2021, and in a letter to ADIs dated 19 July 2023, the regulator reiterated that “a prudent buffer is essential to ensure that borrowers can withstand a rise in interest rates.” Non-bank lenders, while not directly bound by APRA’s capital rules, routinely adopt the same 3.0 per cent buffer as a market norm because warehouse funders and aggregators demand it. The buffer means that a loan assessed at a discount variable rate of 6.49 per cent is tested at an assessment rate of 9.49 per cent.
For a self-employed borrower with net profit of $90,000 in a single year, standardised household expenditure measures—typically the higher of the Henderson Poverty Index (HEM) and declared living expenses—will consume about $32,000 to $38,000 annually, leaving a net servicing surplus of approximately $52,000. At an assessment rate of 9.49 per cent, that supports a maximum loan of roughly $410,000 on a principal-and-interest 30-year term. If the same borrower had a two-year average net profit of $85,000, the servicing surplus would be similar, but lenders applying a one-year-only assessment often impose an additional haircut—Resimac’s 15 per cent shading, for instance, would reduce the $90,000 figure to $76,500 in the servicing calculator, slicing the maximum loan to about $350,000. The pricing difference alone can shift the viable loan size by $60,000 or more.
DTI caps add another layer. With many non-banks enforcing a hard DTI limit of 6.0 to 6.5 times, a $90,000 income forces a maximum total borrowing of $540,000 to $585,000, regardless of serviceability surplus. Combined with the LVR constraints—often 70 per cent—the effective purchase price ceiling for a borrower with a 30 per cent deposit and $90,000 single-year income sits between $500,000 and $550,000 in metro markets. That figure is rarely sufficient for median-priced capital city dwellings, which is why one-year applications skew heavily toward refinances and lower-value regional purchases.
Does One Year Ever Beat Two? The Accountant Letter and Alt-Doc Escape Hatches
When a single tax return misses a lender’s required income threshold or the servicing hair-cut proves too severe, two alternative documentation pathways can salvage the application.
The Accountant Letter Declaring Income
Almost all non-banks that entertain one-year returns also accept an accountant’s letter in lieu of a second tax return, provided the letter declares a historical income figure that is consistent with the business’s trading trajectory. La Trobe and Pepper both require the letter to state that the business has been profitable for at least two years and that the declared income is sustainable. The letter typically costs $150 to $300 to produce and must be on the accountant’s letterhead with their tax agent registration number. The trade-off: the LVR cap often drops to 65 per cent, and the interest rate can be 0.20 to 0.35 percentage points higher than a full-doc low-doc loan.
BAS-Only and Asset-Lend Structures
A handful of lenders—Liberty and Pepper among them—offer a BAS-only pathway where six to twelve months of lodged BAS statements substitute for tax returns. The maximum LVR on a BAS-only loan is generally 60 per cent, and the interest rate premium runs between 1.75 and 2.25 percentage points above the standard variable rate. For borrowers with significant equity but thin income evidence, an asset-lend structure backed by residential property can bypass income verification entirely. Brighten’s Asset Release product, launched in April 2023, allows LVRs up to 55 per cent with no income evidence, priced at a margin of 2.75 percentage points over the standard rate. That route is typically used for bridging or debt consolidation rather than for a new purchase, because the deposit requirement is too high for most entry-level buyers.
Five Concrete Steps to Secure a One-Year Return Loan
- Confirm ABN and GST registration timelines. Almost every lender requires the ABN to have been active for at least 12 months—and often 24 months—before it will consider a single tax return. Order an ABN lookup printout and ensure the GST registration date aligns with the lender’s policy.
- Target a deposit of 30 per cent or more. At 70 per cent LVR, the pool of available one-year products expands markedly and the rate loading narrows by 0.30 to 0.50 percentage points compared with an 80 per cent LVR deal. A 30 per cent deposit also satisfies La Trobe and Brighten’s minimum genuine savings requirement in one hit.
- Run the servicing number with the 3.0 per cent buffer and a DTI ceiling of 6.0x. Before applying, use the lender’s online calculator (or a broker tool) to see what the maximum loan is under these constraints. If the result falls short of the needed purchase price, consider waiting until a second tax return is lodged.
- Commission an accountant’s letter early. Even if the lender does not initially request it, having a letter that confirms sustainable income over multiple years can lift a borderline application into approval territory and may reduce the shading haircut some lenders apply.
- Compare at least two non-bank offers through an experienced low-doc broker. Pepper and Liberty, for instance, treat serviceability shading and DTI caps differently. The difference in maximum loan amount between the two can exceed $80,000 on the same declared income. A broker who regularly places one-year deals will know which lender’s calculator produces the strongest result for a given postcode and loan purpose.