Income Types Lenders Will Not Accept in Perth, WA, What Lenders Check

You can earn a solid income and still watch a lender decline your application, purely because of how that income is structured. It is one of the more frustrating parts of home lending, and it catches people who genuinely have plenty of money coming in every month.

The assessment rules are not about how much you earn. They are about how predictable a lender believes your income will be over a 30-year loan term. Whether you are on allowances, commission, a second job, or drawing income through a trust, different lenders read the same pay packet differently, and that gap between the most generous and the most conservative assessment is often the difference between approval and decline.

Our team helps buyers across Perth, WA compare home loan pre-approvals across 60+ lenders, so the income question gets a real answer before you apply somewhere that will say no.

Which income types do lenders in Perth, WA most commonly reject or discount?

Lenders most commonly reject or heavily discount income that cannot be verified against a consistent, documented history. The types that cause the most problems are cash-in-hand earnings with no paper trail, income from a business that is less than two years old, and allowances or bonuses that have only recently started appearing on payslips. Lenders do not disbelieve you, they simply cannot underwrite what they cannot evidence.

How do lenders actually assess different income types?

Every lender runs your income through an internal calculator that works out a monthly committed income figure, and that figure drives your borrowing capacity. The calculator does not treat all income equally. Base salary from a permanent role is taken at face value with current payslips. Variable income is where the divergence starts.

Overtime is typically taken at somewhere between 80% and 100% of the amount shown on your payslips, once you have a consistent history. The history requirement varies, but most lenders want to see it running for at least six months, and some want two years before they count it at all. One lender's policy may give you full credit for three months of consistent overtime; another cuts it to 80% across two years of evidence.

Commission and bonus income follows a similar pattern. Most lenders average it over one to two years. If your commission has been inconsistent, or if you changed roles mid-year, some lenders exclude it entirely in the year of the change rather than pro-rating it.

Shift allowances and penalty rates are counted by some lenders at their average value and excluded by others unless they appear consistently in every pay cycle. Casual income is generally accepted once you have been in the same role or field for around 12 months, but the history requirement is the question, not the income itself.

What income types do lenders typically exclude altogether?

Some income types are excluded by most lenders regardless of how long they have been running. Understanding the common ones helps you avoid applying with the wrong lender and leaving an unnecessary enquiry on your credit file.

Income types that most lenders exclude or treat with significant caution:

• › Cash-in-hand earnings: income with no payslip, bank deposit trail or ATO record is unverifiable and excluded by every mainstream lender. It simply cannot be assessed.
• › Income from a business under two years old: standard lender policy requires two years of tax returns for self-employed borrowers. A business in its first or second year is generally excluded from the income calculation, regardless of how profitable it is now.
• › Centrelink income (some types): Family Tax Benefit is accepted by some lenders, usually with a child age cut-off applied. Unemployment benefits, JobSeeker and most other Centrelink payments are excluded by the majority of lenders. The distinction between accepted and excluded types varies by lender.
• › Child support income: accepted by some lenders where a formal court order or assessment exists, often with a child age cut-off, but excluded by many others entirely.
• › Foreign income in a foreign currency: most mainstream lenders exclude income earned and paid in a foreign currency entirely. Some specialist lenders will assess it, usually at a shaded rate and subject to currency risk conditions. This is a narrow panel.
• › Income from a second or side job in its first 12 months: a secondary role or ABN started recently is treated sceptically. Most lenders want 12 months of consistent history from a second income stream before counting it, and some require two years.

How does lender policy on income differ, and why does it matter for Perth buyers?

The gap between the most and least generous lender assessments on the same income profile can be substantial. Two Perth buyers on identical salaries with identical employment histories can receive very different borrowing limits, purely because one lender shades overtime to 80% and requires 12 months of history, while another takes it at full value after six months.

This variation is most pronounced in four income situations that come up regularly in Perth.

FIFO and roster-based income

Fly-in fly-out and roster workers often earn significantly more than their base salary suggests, with substantial allowances, overtime and penalty rates forming part of a consistent total. Some lenders assess the full package with evidence; others strip the allowances entirely or shade the variable component heavily. The base salary alone can make a FIFO worker appear significantly underpaid against their actual take-home.

Parental leave income

Lenders assess the income you will have once you return to work, not what you're receiving during leave. A return-to-work letter from your employer is usually what drives the assessment. Where no letter exists, many lenders assess on the pre-leave base salary, but policy varies. Some lenders treat government-paid parental leave as Centrelink income and exclude it from the calculation; others treat it as continued employment income and include it.

Trust distributions

Income paid through a family or discretionary trust is accepted by some lenders where the borrower controls the trust and can evidence two years of distributions. Others exclude it entirely, or require additional legal documentation about the trust structure before the income is counted. Retained profits within the trust that are not distributed are generally not counted by anyone.

Dividend income

Dividends from a business or share portfolio are accepted by some lenders after two years of consistent payment, and excluded by others. Where a borrower is also a director of the business paying the dividend, the lender may require company financials to verify the sustainability of the distributions.

Source: APRA.

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What happens when lenders cap or shade the income they will count?

Shading is distinct from exclusion. Where exclusion means the income is not counted at all, shading means the lender takes a portion of it, typically somewhere between 70% and 100% depending on the income type and the lender's own policy.

The options worth comparing:

• › Overtime counted in full: 100% of average · 6 to 12 months history required · some lenders, not all · most favourable outcome
• › Overtime shaded to 80%: 80% of average · same history requirement · common at conservative lenders · reduces borrowing capacity
• › Rental income: typically 80% of gross rent · property holding costs added on top · assessed by most lenders · lease or rental estimate required
• › Variable income excluded entirely: applies where history is insufficient · base salary only counted · most restrictive outcome · changes the application strategy

Whether the more generous assessment is available to you depends on which lenders your broker has access to and how your income is documented, which is worth a conversation before you apply anywhere.

When does the income assessment issue not matter as much?

If your borrowing needs are comfortably covered by your base salary alone, the income-type question becomes less significant. A buyer who can service the loan on their permanent base wage without touching overtime, allowances or a second income is assessed straightforwardly by every lender on the panel.

Similarly, if you have been in the same role with a consistent income for several years and your pay structure is straightforward, most lenders reach similar conclusions. The complexity and the lender-choice gap are concentrated at the margins, where variable income is needed to make the application work.

If your base salary does not fully service the loan you need, and you are relying on overtime, a second job, a trust distribution or another variable income type to bridge the gap, the lender you approach matters enormously. Applying to the most conservative lender with a complex income profile is the most predictable way to receive a decline, and that decline then sits on your credit file for five years regardless of whether a different lender would have approved it.

What goes wrong when borrowers apply without checking their income assessment first?

Where applications fall over on income:

• › Applying to the wrong lender first: a decline from a lender whose policy excludes your income type sits on your credit file for five years. Every subsequent enquiry is assessed against that history, and a pattern of enquiries and a recent decline is one of the harder things to explain at the next application.
• › Relying on a verbal pre-approval: a bank telling you over the phone that your income looks fine is not an assessment. The formal credit assessment, which is where the income policy is actually applied, often produces a different number. Buyers have exchanged contracts relying on a conversation, then found the formal assessment came up short.
• › Not disclosing all income commitments: buy now pay later accounts and ATO payment plans both appear on bank statements and are treated as ongoing commitments by most lenders. A borrower who does not mention them at application still has them factored in once the statements are reviewed, and the capacity number changes.
• › Mistaking gross for assessed income: the income that goes into a lender's serviceability calculator is not your gross pay. It is your base salary, plus the shaded portion of any variable income, minus ongoing commitments assessed as a monthly figure. The gap between what you earn and what a lender counts can be significant.
• › Starting too early with a new income stream: a borrower who recently started a second job, moved from PAYG to ABN, or began drawing trust distributions may have to wait for the history to accumulate before that income counts. Applying before the history is there means the income is excluded, and the result is a lower capacity number than waiting three to six months would have produced.

Frequently Asked Questions

Can lenders count overtime income if it's only been running for three months?

Some can, but most want at least six months of consistent overtime before counting it, and others require 12 months or more. Three months is not enough for the majority of lenders, so the choice of lender matters here.

Does Family Tax Benefit count as income for a home loan in Perth?

Some lenders accept Family Tax Benefit as income, usually with a cut-off tied to the youngest child's age. Many others exclude it entirely. It's one of the more variable policy areas across the lender panel.

Can I use my trust distribution as income on a home loan application?

Some lenders accept trust distributions after two years of consistent payments where you control the trust. Others exclude it regardless of history. Company financials and trust documentation are usually required.

Does a decline from one lender hurt my chances with another?

Yes, in two ways. The decline sits on your credit file for five years, and each application adds an enquiry. Multiple recent enquiries alongside a decline is a flag that most lenders investigate before proceeding.

Is there a lender that will count my income even if the big banks won't?

Often, yes. Non-bank and specialist lenders typically apply more flexible income assessment policies than the major banks. Whether one is on the panel and whether it suits your broader situation is the conversation worth having before you apply anywhere.

Should I use a mortgage broker or go directly to my bank if my income is complex?

A mortgage broker, every time. A bank assesses your income against its own policy only. A broker compares how multiple lenders on their panel read the same income profile, which is exactly where the difference is made on a complex income application.

Your Next Steps

Getting the right lender match on a complex income profile is the decision that most changes the outcome. The rate is secondary to whether the lender's assessment model is built for your income type in the first place, and finding that match before you apply anywhere is what protects your credit file and keeps your options open.

The right lender for your income type depends on your situation, and that's a conversation worth having. Talk to the Launch Finance team or call 08 9367 4222, and we'll compare your options across 60+ lenders.

About the author Joe Del Borrello Director, Launch Finance Joe Del Borrello is a Director at Launch Finance and has been broking in Perth since 2004. Diploma-qualified and regularly featured in the Professional Lenders Association Network of Australia's (PLAN) Top 200 Mortgage Brokers, he helps first home buyers, investors, self-employed borrowers and refinancers across Perth, comparing loans from a wide panel of lenders at no cost to the borrower. Joe is a Credit Representative (No. 399763) of BLSSA Pty Ltd (ABN 69 117 651 760), Australian Credit Licence No. 391237. Meet the team → Book a free call →

Launch Finance · Perth, WA · Launch Finance Pty Ltd (ABN 17 163 528 701), Corporate Credit Representative 454041 of BLSSA Pty Ltd (ABN 69 117 651 760), Australian Credit Licence 391237 · General information only - this article does not constitute financial advice. Please consider your own circumstances and seek professional advice before making any financial decisions.