What Income Counts for a Home Loan?

The number on your payslip and the number the bank uses to work out your borrowing power are two different numbers. For anyone whose pay includes a bonus, penalties, overtime, casual hours or a wage from the family business, they can be a long way apart.

Nobody tells you this before your first application. You add up what you earn, someone punches it into a calculator, and the answer comes back lower than the maths in your head. This page is the map of why, and where each type of income goes from here. One idea explains all of it.

The one question behind every income rule

A lender is agreeing to be paid back out of your income for up to thirty years. So it doesn't take your gross income and run with it. It rebuilds your income from scratch, line by line, and asks the same question of every line: how confident are we that this money keeps arriving?

Base salary is contracted, so it generally passes through untouched. Everything else has to earn its place. A bonus is at someone's discretion, so it gets discounted. Casual hours have no guaranteed floor, so the annual figure gets rebuilt conservatively. A payslip signed by your mum isn't independent evidence, so it gets a second check. A salary that started three weeks ago has no track record yet, so the history around it gets weighed instead.

None of these rules is personal, and none of them means no. Every one of them is the same question wearing a different outfit. Once you see that, the whole terrain gets easier to walk.

The three things lenders do to your income

1. They discount it. The polite word is shading. Most lenders take a bonus at 80% of its face value, so a $20,000 bonus counts as $16,000. Shift allowances, penalties and overtime get a haircut too, but not evenly: at several lenders your permanent shift allowances count in full while overtime from the same fortnight gets cut, and whether any of it comes back to 100% depends on whether your occupation sits on that lender's essential services list.

2. They rebuild the annual figure themselves. A salary arrives as an annual number. Variable income doesn't, so the lender constructs one. For casual workers that means multiplying your pay across a set number of weeks, and that number is a policy setting, not a fact: some lenders use 52 weeks, plenty use 48, several use 46. For bonuses it means choosing between averaging your last two years or simply using the most recent one, and if your bonus is growing, that choice moves real money.

3. They test whether it's real and durable. This is the verification layer. If you're on probation or recently switched jobs, the lender reads the shape of your work history: time in the role, the gap between jobs, whether your industry experience carries across. If you're employed by the family business, the payslip alone doesn't settle it, and the lender wants to see the wage landing on your lodged tax return as well.

Every income question I get asked is one of those three moves in action. Which brings us to the part that actually changes outcomes.

Same payslips, different lender, different answer

Here's the bit the calculators can't show you: every lender sets those dials itself. How much to shade, whether to average, how many weeks to annualise over, which occupations get exemptions, how much history is enough. Same rules of thumb, wildly different settings.

The spreads are not small. A casual worker on the same roster can have over $20,000 of difference in assessed annual income between the most generous lender and the least, purely from the weeks used to annualise the pay. Illustrative numbers, not a quote, but no conversation about interest rates moves your borrowing power that far. A nurse with $20,000 of shift penalties keeps all of it at one lender and loses $4,000 a year of assessed income at another, on identical payslips. A growing bonus gets averaged down at some lenders and taken at its latest figure at others.

And the occupation lists that decide so much of this are written separately by every lender. Childcare workers, aged care workers, miners, train drivers, cabin crew and teachers all sit on somebody's essential services list, even though almost none of them would describe themselves that way. You just have to be sent to the lender whose list you're on.

Which is why "what income counts for a home loan" has no single answer. There is only what counts at the lender you walk into. A branch can only ever offer you its own policy, and nobody in that building is going to mention that the lender down the road would have counted the lot.

The five questions, one by one

Each of these has its own full answer, with the lender-by-lender detail underneath it. Find your income type and go down a level.

The honest part

If your income is a plain base salary, you're permanent, and you've been in the job a while, almost none of this applies to you. Lender income policy barely moves your number, and you don't need a broker to untangle an income that isn't tangled. Don't let anyone, me included, convince you your situation is more complicated than it is.

And sometimes the honest answer at the other end is wait. If your family-business wage hasn't reached a lodged tax return yet, the right move is often to lodge, let the income show up, then apply. If you've changed careers entirely, new industry, new employer, a few weeks in, the industry-experience substitute doesn't apply and the field of lenders narrows right down. Waiting costs me a deal today. It's still the right call, and I'd rather say it here than have you find it out mid-application.

What to bring, and the question to ask

You don't need a shoebox of paperwork. For nearly every employed applicant, a couple of recent payslips plus your income statement from the ATO covers the evidence test, and the year to date figure on the payslip does most of the work. Employed by family? Add the lodged tax return.

Then the question to ask isn't "what's your rate" and it isn't "will you count my income". Almost everyone will count it. The question is "how do you assess my income": average or latest, how many weeks, which list, how much history. Those settings move your borrowing power more than anything else on the application, and the question only becomes useful when someone can see across a whole panel of lenders at once. That's the job.