If you’re self-employed and thinking about buying your first home or your next investment property, congratulations — you’ve also just signed up for a more complicated finance application than your PAYG friends. That’s not a reason to panic, but it is a reason to get organised early.
Lenders love self-employed borrowers when the numbers are clean. The problem is, most self-employed people run their business to minimise tax, not to maximise serviceability — and those two goals often pull in opposite directions. The good news? A few smart habits, sorted out well before you apply, can make the difference between a smooth approval and a frustrating decline.
Here are three areas that catch self-employed borrowers out more than almost anything else.
1. Keep Share Trading Out of Your Company
It’s tempting to use spare cash sitting in your company to dabble in shares. Tax-effective, convenient, one less account to manage — what’s not to like?
Here’s the catch: when a lender assesses your business’s net profit for serviceability, they’re looking at your company’s full profit and loss statement. If you’ve had a great year trading shares inside the company, fantastic — but if the market’s had a rough patch (or you’ve simply had a bad run), those losses drag your net profit down, sometimes significantly.
Why this matters for serviceability: Lenders typically use your net profit (or profit before tax, with add-backs — more on that below) as the starting point for how much you can borrow. A $40,000 share trading loss sitting inside your business tax return can look, to a credit assessor, like your business itself had a bad year — even if trading operations were perfectly healthy.
What to do instead:
- Keep investment activity — shares, ETFs, crypto, whatever it is — in a separate personal account or a dedicated investment entity, not your trading company
- If you’ve already got investment activity mixed into your business financials, talk to your accountant about how it’s being presented and flag it to your broker before you apply — a good broker can sometimes explain it away with the right paperwork, but it’s much easier to avoid the conversation altogether
- Keep your trading business’s financials focused purely on trading business income and expenses — it makes your numbers easier to read and easier to approve
2. Depreciation Is Your Friend — Don’t Forget to Add It Back
Depreciation is a non-cash expense. Your accountant claims it to reduce your taxable profit (which is great for your tax bill), but it doesn’t represent money actually leaving the business. That distinction matters enormously when a lender calculates how much you can service.
How it works: Most lenders will add depreciation back to your net profit before calculating your borrowing capacity, because it’s not real cash that reduced your ability to pay a mortgage. If your business claimed $15,000 in depreciation this year, that $15,000 could effectively increase your assessable income for serviceability purposes.
| Item | Amount |
|---|---|
| Net profit (per tax return) | $85,000 |
| Add back: Depreciation | $15,000 |
| Adjusted income used for serviceability | $100,000 |
What to do:
- Make sure your accountant clearly itemises depreciation in your financial statements — it needs to be identifiable, not buried in a general expenses line
- Other common add-backs lenders may consider include one-off or non-recurring expenses, interest on business debts being refinanced, and in some cases superannuation contributions above the compulsory rate — ask your broker which ones apply to your situation
- Have two years of financials ready (most lenders want two years of tax returns and notices of assessment for self-employed applicants) so the pattern is clear, not just a one-off
3. Lodge Your BAS on Time — It’s About More Than Avoiding Penalties
If you’re registered for GST, your Business Activity Statements (BAS) are a routine compliance task — but for lenders, they’re also a window into how well-run your business is.
Two reasons this matters:
a) ATO interest charges quietly erode your position. Late BAS lodgement can trigger the ATO’s General Interest Charge (GIC), which compounds daily. It’s easy to let this slide when you’re busy running a business, but unpaid ATO debt shows up in credit checks and can directly affect your application — some lenders will decline outright if you have an active ATO debt or payment plan, or they’ll want it cleared or demonstrated as being paid down consistently before they’ll proceed.
b) Lenders increasingly ask for recent BAS as evidence. Especially if your latest tax return is getting close to 12 months old, lenders will often want to see your last one or two BAS statements to confirm your business is still trading at a similar (or better) level. If your BAS lodgements are behind, you simply won’t have this evidence available when you need it — which can stall your application at the worst possible time.
What to do:
- Lodge on time, every quarter (or monthly, if that’s your cycle) — even if you can’t pay in full immediately, lodging on time avoids the failure-to-lodge penalty and keeps your compliance record clean
- If you do fall behind, get onto a payment plan with the ATO and stick to it — a documented, consistently-paid plan is viewed far more favourably than an unpaid debt sitting on your record
- Keep a running file of your BAS statements so you can hand them to your broker the moment they’re requested, rather than scrambling to get them from your accountant under time pressure
The Bottom Line
Self-employed lending isn’t harder because lenders are being difficult — it’s harder because your financials tell a more complex story than a payslip does. The three areas above are some of the most common (and most avoidable) reasons self-employed applications get held up or knocked back.
The earlier you have this conversation — ideally 6 to 12 months before you plan to apply — the more time you and your accountant have to present your business in the best possible light. If you’re not sure where your numbers currently stand, that’s exactly the kind of thing worth a quick chat about.
This article contains general information only and does not take into account your personal financial situation, needs, or objectives. It is not intended to constitute personal financial or credit advice. You should consider seeking independent financial, tax, and legal advice before making any decisions. As your broker, let’s organised your financials in advance to put you in the best position forward for a mortgage or investment property loan.
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