When it comes to taking out a home loan, self-employed income and employment is a little more complicated than for traditionally employed people.
The trick is to be clear on what kind of employment you have.
If you’re self-employed, you will have an Australian Business Number – usually called an ABN. You’re also responsible for paying your own tax and superannuation, unlike being employed, where your employer pays your tax and superannuation whether you’re full-time, part-time or casual.
So, looking at how you’re employed is important…
At LendFirst we ask some simple questions to get to the answer:
- “Does your employer give you a payslip” = You’re employed (or PAYG as it’s often called)
- “Does your employer give you a Tax Invoice?” = You’re self-employed
Sometimes people change from being employed to being a contract employee. Even if you work at the same company, doing the same work with the same people but your ‘status’ changes from employed to contractor, lenders will look at this as though you resigned from your job and started a new contract role. This can have an impact on whether they will lend to you. And how you are paid is important too!
Being self-employed, your income can vary from week to week. Lenders usually want to see self-employed applicants trade for at least 2 full years before considering their income as stable enough to decide how much they can lend you.
Some lenders will consider self-employed applicants after 6 or 12mths. However the deposit you need will be significantly higher.
- If you’re self-employed, or think you may be, talk to LendFirst and we’ll help you through the maze.
- Make sure you have records for your income. Your tax return is really important.