There are over 2.2 million self-employed Australians, including more than 1.1 million independent contractors. Many of them run profitable businesses, earn strong incomes, and are perfectly capable of servicing a home loan. Yet getting approved by a bank can feel nearly impossible. Here's why — and what you can do about it.
Why Banks Struggle With Self-Employed Borrowers
The core issue is simple: banks are built to assess PAYG employees. They want payslips, group certificates, and a steady salary deposited into a bank account every fortnight. When you're self-employed, your income doesn't look like that — even if it's substantially higher.
Self-employed income is often variable, spread across multiple entities, and — if your accountant is doing their job — structured to minimise tax. That last point is the most common hurdle. Your taxable income on paper may be far lower than the actual cash flowing through your business, because legitimate deductions, depreciation, and business expenses reduce your reported earnings.
Banks typically assess your income based on your last two years of tax returns. If those returns show a modest taxable income — even if your revenue is strong — the bank's serviceability calculator may conclude you can't afford the loan. The result? A decline, or a much smaller loan than you expected.
"The biggest challenge for self-employed borrowers isn't affordability — it's proving affordability in the way banks want to see it. That's a documentation problem, not a financial one."
Understanding Your Options: Full Doc, Low Doc, and Alt Doc
Not all home loans require the same level of documentation. Understanding the difference between these categories is key to finding the right path forward.
Types of Self-Employed Home Loans
The standard option. Requires two years of personal and business tax returns, ATO notices of assessment, and often your business financials. Offers the most competitive rates, but demands complete and up-to-date documentation. Best suited if your tax returns accurately reflect your earning capacity.
Designed for self-employed borrowers who can't provide the full suite of traditional documentation. Instead, lenders may accept Business Activity Statements (BAS), business bank statements, an accountant's signed income declaration, or a combination of these. Rates are typically higher and LVR caps are stricter — generally requiring a minimum 20% deposit.
Non-bank lenders often take a more flexible, case-by-case approach to assessing self-employed income. They may consider add-backs (expenses that reduce taxable income but don't represent real cost of living, like depreciation), accept one year of financials instead of two, or apply different serviceability models. A broker can identify which specialist lenders suit your situation.
What Documentation Will You Need?
The exact requirements vary by lender, but here's a general guide to what self-employed borrowers should prepare:
For a full doc application, you'll typically need your last two years of personal and business tax returns, ATO notices of assessment, a current profit and loss statement, and details of any other income or assets. For a low doc or alt doc application, lenders generally accept 6–12 months of BAS statements lodged through the ATO portal, 6 months of business bank statements showing income deposits, or a signed accountant's declaration confirming your income. Most lenders also require an active ABN — typically registered for at least 12 to 24 months, though some will consider shorter periods if you have prior industry experience.
There are no genuine "no doc" home loans available in Australia for consumer lending. Responsible lending obligations under the National Consumer Credit Protection Act require all lenders to verify a borrower's ability to repay. Low doc and alt doc loans simply allow alternative forms of evidence — they don't skip verification entirely.
How a Broker Makes the Difference
This is where working with a mortgage broker becomes especially valuable for self-employed borrowers. Different lenders have vastly different credit policies for self-employed applicants. Some will accept one year of tax returns. Others require two. Some apply add-backs generously. Others don't. Some will lend at 80% LVR on a low doc basis, while many cap it at 60%.
A broker who specialises in self-employed lending knows which lenders are most favourable for your specific situation — whether that's because you're a sole trader, a company director, recently self-employed, or operating across multiple entities. They can also work with your accountant to present your income in the way that maximises your borrowing power while staying fully compliant.
Tips to Strengthen Your Application
While every situation is different, there are several practical steps you can take to improve your chances of approval. Keep your tax returns up to date — lodging on time signals financial discipline. Separate your personal and business banking to make income verification cleaner. If possible, speak with your accountant about your borrowing plans before tax time, so your returns reflect your true earning capacity. Save a solid deposit — a 20% deposit opens up far more options and better rates for low doc borrowers. Finally, maintain a clean credit history; even one missed payment can derail a low doc application with prime lenders.
What If You've Already Been Declined?
A bank decline doesn't mean you can't get a home loan. It often just means you applied to the wrong lender for your situation. In fact, it's one of the most common reasons self-employed borrowers come to us — they've been knocked back by their bank and assume that's the end of the road.
A specialist broker can review why you were declined, identify lenders with more suitable credit policies, and structure your application to give you the best chance of approval. In many cases, we can find a solution with a mainstream lender — it's just a different one to the bank that said no.
The Bottom Line
Being self-employed doesn't disqualify you from getting a home loan. It just means the path to approval requires a different approach — one that accounts for how your income actually works, not how a bank's standard checklist expects it to look. With the right broker, the right lender, and the right documentation strategy, most self-employed Australians can get approved on competitive terms.
At Best Option Loans, self-employed lending is one of our core specialities. Our brokers have access to over 50 lenders — including specialist non-bank lenders with flexible credit policies for business owners, contractors, and freelancers. If you've been told "no" or you're not sure where to start, we're here to help.
Disclaimer: This article provides general information only and does not constitute financial advice. Your personal circumstances may differ, and lender policies, rates, and criteria are subject to change. We recommend speaking with a qualified mortgage broker or financial adviser before making any financial decisions. Best Option Loans Pty Ltd holds an Australian Credit Licence and is a member of the MFAA.
