How to Maximise Your Borrowing Capacity as a Self-Employed Borrower

One of the most common frustrations for self-employed Australians is discovering that their borrowing capacity is lower than expected — often because lenders are using their taxable income rather than their actual earnings.

The good news is that there are proven strategies to maximise your borrowing capacity. Some require planning months in advance; others can be implemented immediately.

Understand How Lenders Calculate Your Income

Before you can maximise your borrowing capacity, you need to understand how lenders assess self-employed income.

Full Doc Assessment

For full doc loans, lenders typically use your average taxable income over the past two years, as shown on your tax returns and Notice of Assessment. If your income has been increasing, some lenders will use the most recent year only.

Low Doc and Alt Doc Assessment

For low doc and alt doc loans, lenders may use:

• Your declared income (supported by BAS or an accountant's letter)
• Your average monthly bank deposits (annualised)
• A combination of the above

The key insight is that different lenders calculate income differently. Choosing the right lender — with the help of a specialist broker — can significantly increase your assessed income and therefore your borrowing capacity.

Strategy 1: Choose the Right Lender for Your Income Type

This is the single most impactful strategy. The difference between lenders can be substantial.

Example: A sole trader with $120,000 in gross deposits and $60,000 in taxable income might be assessed at:

• $60,000 by a mainstream bank (taxable income)
• $84,000 by a lender using 70% of gross deposits
• $96,000 by a lender using 80% of gross deposits

That difference in assessed income can translate to $100,000-$200,000 in additional borrowing capacity.

A specialist broker knows which lenders will assess your income most generously for your specific situation.

Strategy 2: Add Back Legitimate Business Expenses

Many lenders allow "add-backs" — legitimate business expenses that are added back to your taxable income to give a more accurate picture of your true earnings.

Common add-backs include:

• Depreciation — a non-cash expense that reduces taxable income
• One-off expenses — unusual costs that won't recur
• Interest on business loans — some lenders add this back
• Superannuation contributions — above the standard rate

Work with your accountant and broker to identify all legitimate add-backs before applying.

Strategy 3: Reduce Your Existing Debts

Your borrowing capacity is directly affected by your existing financial commitments. Lenders use a debt-to-income ratio to assess how much additional debt you can service.

Actions to take:

• Pay off or reduce credit card limits (even unused limits count)
• Pay off personal loans before applying
• Consolidate multiple debts into a single lower-rate facility
• Close any credit cards you don't use

Reducing your monthly debt obligations by $500 can increase your borrowing capacity by $80,000-$100,000, depending on the lender.

Strategy 4: Optimise Your Business Structure Before Applying

If you're planning to buy in the next 12-24 months, there may be steps you can take now to improve your income presentation.

Consider:

• Increasing your director's salary if your company has strong retained earnings
• Paying yourself dividends from accumulated profits
• Ensuring your ABN has been active for at least 24 months (some lenders require this)
• Lodging any outstanding tax returns — lenders want to see up-to-date returns

Important: Always consult your accountant before making changes to your business structure or income arrangements. Tax implications need to be considered.

Strategy 5: Save a Larger Deposit

A larger deposit reduces the lender's risk and can unlock access to:

• Better interest rates
• More lenders (some require 20%+ for self-employed borrowers)
• Higher LVR products with specialist lenders

Saving an additional 5% deposit can make a significant difference in both the lenders available to you and the rates you're offered.

Strategy 6: Apply with a Co-Borrower

If you have a partner or spouse with a stable PAYG income, applying jointly can significantly increase your borrowing capacity. The lender will assess both incomes combined.

This is particularly effective when one partner is self-employed with a lower assessed income and the other is a PAYG employee with a strong, verifiable income.

Strategy 7: Time Your Application Strategically

Lenders typically use your most recent two years of tax returns. If your income has been growing, you want your most recent returns to show the highest possible income.

Timing considerations:

• If your income increased significantly in the most recent financial year, wait until your tax return is lodged before applying
• If you're approaching the end of a financial year with strong results, consider waiting until after June 30 and lodging your return
• Avoid applying immediately after a year with lower income

How Much Can You Actually Borrow?

As a rough guide, most lenders will lend up to 4-6 times your assessed annual income. With a specialist lender and optimal income presentation, this can be higher.

Assessed Income	Approximate Borrowing Capacity
$80,000	$400,000 – $480,000
$100,000	$500,000 – $600,000
$120,000	$600,000 – $720,000
$150,000	$750,000 – $900,000
$200,000	$1,000,000 – $1,200,000

These are indicative figures only. Actual borrowing capacity depends on many factors including existing debts, living expenses, and the specific lender.

Get a Free Borrowing Capacity Assessment

At New Vision Financial Services, we specialise in helping self-employed Australians maximise their borrowing capacity. We'll review your income structure, identify the best lenders for your situation, and give you a clear, honest assessment of what you can borrow.

Call 1300 422 506 or book a free 20-minute consultation online. No obligation, no cost.