Banks now accept your business salary as income. Here is what you need to know.
If you run your own business, applying for a self-employed home loan used to mean digging out two years of tax returns and full financial statements. That changed in 2021. Australian banks now accept the salary you pay yourself from your own company as income, using documents most business owners already have. This guide walks you through how it works, what the banks need to see, and how to make sure your application is as strong as possible. If you want to know how much you could borrow, try our Borrowing Power Calculator before you read on.
Step 1: Understand the policy change
Before 2021, lenders treated self-employed borrowers very differently from employees. You had to provide two full years of tax returns and business financial statements, no matter how long you had been paying yourself a regular salary. That requirement could hold you back, especially if one of those years showed a dip in profit.
The rules are now more flexible. If you pay yourself a salary from your own company, many banks will assess that salary the same way they assess a PAYG employee’s wages. You do not need to hand over years of business financials, as long as you meet the new income verification requirements.
This is a significant shift. It means more business owners can apply as standard borrowers rather than self-employed borrowers, which often opens up better rates and more lending options.
Step 2: Choose your income verification method
Banks accept three different methods to verify your salary income. You only need to satisfy one of these to proceed.
Check your records before you apply. Often the evidence you need is already sitting in your email or accounting software.
Step 3: Get your accountant's letter
Most lenders will also ask for an accountant’s letter to confirm the business can sustain your salary. This letter must be on your accountant’s company letterhead and include three specific pieces of information.
There is one exception. If you can provide profit-and-loss statements for the past two financial years, and both years show a profit, the accountant’s letter is not required. Talk to your accountant about which option is easier in your situation.
Step 4: Know what income the bank will count
This is an important detail that catches some business owners off guard. When you apply using this method, the bank only counts your salary income to assess how much you can borrow. They do not count the broader profits of the business.
For example, if your business earns $300,000 a year but you pay yourself a salary of $120,000, the bank will base your borrowing capacity on $120,000. The remaining business profit is not included unless you provide full financial statements and apply as a self-employed borrower.
This approach works well if your salary comfortably covers the loan repayments you are applying for. But if you are trying to borrow close to your maximum, it may be worth discussing two alternatives with your broker.
A good broker will help you decide which approach suits your numbers.
Step 5: What if you don't take a salary?
Not every business owner pays themselves a formal salary. Some draw dividends, distributions, or take money from the business in other ways. If that describes your situation, the payslip method does not apply, but you are not out of options.
Lenders have other ways to assess income for self-employed borrowers who do not receive a regular salary. These typically involve tax returns, business financials, BAS statements, or a combination of these. The right approach depends on your business structure, how long you have been operating, and how your accounts are set up.
This is exactly the kind of situation where working with a specialist mortgage broker can make a real difference. Different lenders have very different policies for self-employed income, and knowing which lender to approach can save you time and protect your credit file from unnecessary applications.
Common questions
Q: Can I use this method if my business is less than two years old?
Yes. The payslip method does not require two years of business history. As long as your accountant can confirm the business is trading, profitable enough to sustain your salary, and that your salary is regular and continuing, many lenders will accept the application. Your accountant’s letter will need to state when the business started trading.
Q: Does the bank need to see my business tax return?
Not necessarily. If you are using the payslip method with an accountant’s letter, most lenders will not require your business tax return. However, if you choose to provide two years of profit-and-loss statements instead of an accountant’s letter, those statements will need to show profit in each year.
Q: What if my salary varies month to month?
Lenders prefer to see consistent salary payments. If your salary changes regularly, it may be harder to meet the verification requirements using payslips alone. In that case, your broker may recommend providing financial statements or applying through a lender with more flexible income assessment policies.