Top tips to get your refinance approved fast

What lenders actually want to see from self-employed borrowers

When you refinance as a self-employed borrower, lenders need to verify your income differently than they do for wage earners. Most lenders require two full years of financials, either tax returns with Notice of Assessments or full financial statements if your business structure is more complex. Some lenders will accept one year of financials if you've been trading for less time, but your options narrow considerably and the scrutiny increases.

The key document that determines your borrowing capacity is your Notice of Assessment from the ATO. Lenders add back certain deductions like depreciation to calculate your true servicing income, but they won't add back discretionary expenses you've chosen to run through the business. If you've claimed $40,000 in vehicle expenses but only $60,000 in taxable income, your borrowing capacity will reflect that lower figure unless you can demonstrate the vehicle expense was a one-off purchase rather than ongoing running costs.

Consider a borrower operating as a sole trader with two years of tax returns showing $85,000 and $92,000 in taxable income. The lender adds back $8,000 in depreciation across the two years, giving an average assessable income of around $92,500. That income level supports a loan amount in the mid $600,000 range depending on other commitments. But if that same borrower shows taxable income of $55,000 and $62,000 because they've maximised deductions, the serviceability drops to around $400,000 even if their actual cash flow is identical.

The two-year rule and how to work around it

Most lenders want two consecutive years of financials that show stable or improving income. If your most recent year dropped by more than 20% compared to the previous year, expect the lender to either decline the application or use the lower figure for servicing. Some lenders will average the two years, others will take the most recent year only.

If you've only been self-employed for 12 to 18 months, a handful of lenders will assess you on one full year of financials plus year-to-date profit and loss statements. The interest rate might sit 0.10% to 0.20% higher than a standard product, but it's a workable option if you're coming off a fixed rate and need to refinance to a lower rate before your current lender rolls you onto a higher variable product.

You'll also need to supply your business ABN registration, a letter from your accountant confirming you're a going concern, and in some cases a business activity statement showing consistent revenue. Lenders don't just want proof of income, they want proof that the income will continue.

Company and trust structures add another layer

If you operate through a company or family trust, lenders will ask for the full financial statements prepared by your accountant, not just the tax return summary. That includes the profit and loss, balance sheet, depreciation schedule, and directors' report if applicable. They'll also want to see your personal tax return because many business owners pay themselves a modest salary and retain profits in the structure.

Lenders assess the distributable profit from the trust or the director's salary plus dividends, depending on how the income flows to you personally. If your personal tax return shows $70,000 in salary and dividends but the company made $180,000 in net profit, the lender will only use the $70,000 unless you can demonstrate a history of drawing more and that those drawings are sustainable.

This becomes relevant when you're trying to access equity for an investment property purchase. The loan amount you can release depends entirely on how much assessable income the lender recognises, not on how much your business banked.

How recent changes to your business affect your application

If you've changed business structures in the past two years, say from sole trader to a company, or if you've brought on a business partner, lenders treat that as a new business for serviceability purposes. You'll need to provide financials for the previous structure and the new structure, along with an accountant's letter explaining the change and confirming continuity of trading.

The same applies if you've changed industries or your ABN registration reflects a recent start date that doesn't match your actual trading history. Lenders rely on the ABN lookup and your tax lodgement history, so if those documents don't align with the story you're telling, expect delays or a decline.

In our experience, the cleanest applications come from borrowers who've traded under the same structure for at least two full financial years, lodged their returns on time, and kept their taxable income consistent or growing. If your situation is messier than that, it doesn't mean you can't refinance your home loan, it just means you need to prepare the explanation and supporting documents upfront rather than responding to lender queries after the fact.

What else goes in the file

Beyond your financials, you'll need the same supporting documents as any refinance application. That includes 90 days of bank statements for every account where your income is deposited or your business expenses are paid, plus statements for any personal accounts where you service existing debts. Lenders use these statements to verify the income on your tax return and to check for undisclosed liabilities like buy-now-pay-later arrangements or other credit commitments.

You'll also need payslips and employment letters for any PAYG income you or your partner earn outside the business, identification documents, and a rates notice or property valuation for the property you're refinancing. If you're consolidating other debts into the mortgage, provide the payout figures and account statements for those liabilities as well.

If your fixed rate period is ending and you want to lock in another term or switch to a variable offset account, make sure your bank statements show a clean pattern for at least three months before you lodge the application. A single missed payment or dishonour can push your application into a different credit tier or trigger a decline, even if your income is strong.

Presenting your income so lenders understand it

The way your accountant structures your tax return has a direct impact on how much you can borrow. If you're planning to refinance or purchase an investment property in the next 12 months, talk to your accountant before you lodge your next return. Maximising deductions might save you tax, but it can cost you borrowing capacity.

Some deductions are added back by lenders and don't hurt your serviceability. Depreciation on equipment, amortisation of intangibles, and non-cash accounting adjustments are all added back to your taxable income when the lender calculates what you can afford. But deductions for wages, rent, vehicle running costs, and general business expenses are not added back, because they represent actual cash leaving your account.

If you've recently lodged a return with low taxable income, it's worth asking your accountant to prepare a detailed breakdown of which expenses are non-cash and which are discretionary. Some lenders will accept a letter from your accountant that recalculates your income by removing one-off capital purchases or unusual expenses, but that's a lender-by-lender decision and not something you can rely on.

When to engage a broker before you start gathering documents

Most self-employed borrowers benefit from a loan health check before they begin the refinance process. A broker can review your financials and tell you which lenders will assess your income structure favourably, what loan amount you're likely to be approved for, and whether there are any gaps in your documentation that need to be addressed before you apply.

If your income has dropped in the most recent year, or if you've changed structures, or if you're trying to consolidate debt and release equity at the same time, a broker can map out the cleanest path through the application. That might mean waiting a few months until your next BAS is lodged, or switching to a lender that allows you to use projected income, or restructuring the application so you refinance first and draw equity later.

The cost of lodging an application with the wrong lender is not just the time you lose, it's the credit enquiry that sits on your file and the potential for a decline that makes the next lender more cautious. Self-employed applicants have less margin for error than wage earners, so preparing properly before you apply is not optional.

Call one of our team or book an appointment at a time that works for you. We'll review your financials, confirm what documentation you need, and structure the application so it reflects your actual capacity to service the loan.

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