Self-employed · Company directors Home loans on company director income
When you own the company that pays you, lenders look past your payslip to the company itself. Some count only what you paid yourself. Others count the profit you left in the business. Knowing which is which can change what you could borrow.
Key takeaways
- Most lenders treat a director of their own company as self-employed, even with payslips, and ask for the company’s returns too.
- Some lenders count your share of company profit, not just your salary. In the example below that’s $90,000 against $225,000 of assessed income.
- Trust distributions usually need a consistent two-year history, backed by the trust’s own returns.
- Structure and tax questions stay with your accountant. I show you how each lender reads the structure you have.
Salary only
- Director salary
- $90,000
- Company profit
- Not counted
Salary plus company profit
- Director salary
- $90,000
- Profit after 25% tax
- $135,000
Illustrative. One director owning 100% of a company with $180,000 net profit before tax after paying their salary, taxed at the 25% base rate entity rate. Lenders differ, usually average two years, and may adjust for add-backs. Not a quote or an offer.
Five kinds of director income, and how lenders read each
You may have more than one. Lenders add up the ones they accept and ignore the ones they don’t.
| Income | Where lenders find it | How lenders usually treat it |
|---|---|---|
| Salary from your company | Payslips, personal returns | Counted, but most lenders still ask for the company’s returns because you control it |
| Dividends | Personal returns | Counted when paid consistently, usually averaged over two years |
| Company net profit | Company returns and financial statements | Some lenders add your share, after company tax and with add-backs |
| Retained profits | Company balance sheet | Some lenders count them, many don’t. The biggest difference between lenders |
| Trust distributions | Trust returns, personal returns | Counted when consistent for two years and supported by trust profit |
How a home loan calculator treats company profit
Online borrowing calculators ask for one income figure, so they can’t tell salary from company profit. A lender can. If you type in your salary, you may be understating what some lenders would count. If you type in the company’s profit, you may be overstating what others would count.
The example above shows the gap: $90,000 if the lender counts your salary only, and $225,000 if it adds your share of the company’s after-tax profit. Lenders that count company profit usually want two years of company returns and a profit that isn’t falling.
Retained profits: why some lenders can lend more
Many directors leave profit in the company for good reasons: cash flow, tax, or saving for equipment. A lender that only counts what reached your personal return sees a lower income than the business really earns.
Some lenders recognise that you control those profits and could pay them to yourself. They count your share, which is why the same director can get a very different answer from two lenders.
They may also check that the company could actually pay that money out: that it has the cash, and isn’t relying on it to pay its own debts.
Trust distributions
If a family trust distributes income to you, lenders want to see that it does so consistently. Most ask for two years of the trust’s returns and your personal returns, and look for distributions at a similar level each year.
Where lenders differ: distributions to a company beneficiary, distributions declared but not yet paid, and distributions that jump around from year to year. If your trust distributes to several family members, only your share counts for you.
Loans from your company
If you’ve borrowed money from your company, the loan may need minimum yearly repayments under Division 7A. Some lenders count those repayments as a commitment, the same as a car loan. Your accountant will know how yours is set up.
Directors’ guarantees
If you’ve personally guaranteed the company’s debts, lenders may count some of that debt against you. Bring the details of any business loans, equipment finance or overdrafts you’ve guaranteed.
What directors get asked for
- Two years of personal tax returns and notices of assessment.
- Two years of company returns and financial statements, and trust returns if a trust is involved.
- Recent BAS, or year-to-date management accounts if the year is well advanced.
- An ATO statement for the company, and any payment plan.
- Your accountant’s details. Some lenders want to confirm the figures with them.
Company director in NSW?
Lender policy for directors is national, so it works the same in NSW as anywhere else. What changes by state is stamp duty and first home buyer concessions. I work those out for the state you’re buying in.
Where my accounting background helps
I’m a Chartered Accountant, so a set of company financials is home ground. I can see where the add-backs are, what the balance sheet says about retained profits, and which lenders will read your structure best. Your accountant decides the structure. I make sure lenders read it properly.
FAQ Questions clients ask
How do lenders assess company director income?
Lenders look at what you pay yourself and at the company itself, because you control it. Most use your salary or dividends from your personal returns, and some also add your share of the company’s profit, after tax and with add-backs, from the company’s returns.
Can retained profits in my company count as income for a home loan?
With some lenders, yes. Profit left in the company is profit you could have paid yourself, so some lenders count your share of it. Others only count what reached your personal return. That difference can change what you could borrow a great deal.
Do lenders accept trust distributions as income?
Many do, if the distributions have been paid to you consistently, usually for two years, and the trust’s own returns show the profit to support them. Lenders differ on distributions paid to a company beneficiary and on entitlements that haven’t been paid out.
If I pay myself a salary, am I treated as self-employed?
Usually, yes. Even with payslips, most lenders treat you as self-employed when you own the company paying you, and ask for the company’s returns as well as yours. A few lenders accept payslips alone for directors in some cases.
Does a loan from my company affect my home loan?
It can. If you’ve borrowed from your company, some lenders count the minimum yearly repayment as a commitment. Your accountant can tell you how the loan is set up, and I’ll tell you how lenders are likely to treat it.
Should I change my company structure before applying?
That’s a question for your accountant, not me. Structure decisions are tax decisions. I can show you what lenders would make of the structure you have, and your accountant can weigh that against everything else.
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