Home Loans for Sole Traders in South East Melbourne, Your ABN Income Explained
Running your own business puts you in control of your income, but it also puts you in a lending category where the lender's assessment looks nothing like a payslip. Two tax returns, an accountant's declaration, add-backs, and a business structure that may or may not match what the lender expects — that's the landscape sole traders navigate when applying for a home loan in South East Melbourne.
The good news is that lenders do lend to sole traders, and some do it better than others. Whether you've been operating under your ABN for two years or you're a year in and wondering whether you're close enough, the outcome depends far more on which lender you approach than on your income itself. A nurse on a salary and a sole-trader plumber on the same net income often get very different results from the same bank — not because the plumber earns less, but because the plumber's lender choice matters more.
Our team works with self-employed borrowers and sole traders across South East Melbourne every week, helping them compare options across 60+ lenders. The home loan options available to self-employed borrowers in South East Melbourne vary significantly by lender, and matching the right one to your structure is where most of the work happens.
Key takeaways
- Most lenders want two years of ABN history and tax returns.
- Add-backs can meaningfully lift your assessed income with the right lender.
- South East Melbourne house medians sit above the $950,000 scheme cap — units are the first-home story here.
Can sole traders actually get a home loan in South East Melbourne?
Yes — sole traders can and do get approved for home loans in South East Melbourne, including for properties well above a million dollars. The question isn't whether you qualify in principle, but whether the lender you're approaching reads your income the way it's actually structured. Most major banks use a conservative model that can significantly understate what you earn; a number of specialist and non-bank lenders use a more complete picture.
How do lenders assess sole trader income?
Lenders don't take your turnover and don't just use your net profit. They use your taxable income as the starting point — which, after legitimate business deductions, is often well below what you actually bring in. That gap is where the assessment either works for you or against you, depending on which lender is doing the reading.
Most lenders want to see two years of personal tax returns and two years of business financials, and they average the income across those two years. If your income has grown — a common pattern for sole traders in their second and third year — some lenders will take the most recent year only, which can produce a materially higher assessed figure.
Where add-backs matter:
- › Depreciation: a non-cash deduction that reduces your taxable income but doesn't leave your bank account — many lenders add it back.
- › One-off expenses: a large piece of equipment purchased in one year, or a significant business cost that won't recur — some lenders treat this as addable.
- › Interest on business debt: where business debt is held separately, the interest component may be added back by some lenders.
- › Which add-backs apply: this differs between lenders and is one of the primary reasons two lenders give the same sole trader a different borrowing number.
We see it regularly — a sole trader comes in convinced they can't borrow enough, and once we work through the add-backs with a lender who actually accepts them, the assessed income is fifteen to twenty percent higher than they expected. The lender choice is doing that work, not the income itself.
Evelyn Clark · Director, Mortgage & Finance Broker · Chat to Evelyn →
What eligibility criteria apply to sole traders?
The standard lending criteria still apply — credit file, genuine savings, serviceability — but sole traders face a set of additional verifications that salaried borrowers don't. Here's what lenders will want to see.
What lenders verify for sole traders:
- › ABN registration: most lenders require the ABN to have been active for at least two years, and some require GST registration for a minimum period alongside it.
- › Tax returns: two years of personal tax returns, matched by two years of business tax returns or financials prepared by a registered accountant.
- › ATO Notice of Assessment: confirms that your returns have been lodged and assessed — lenders commonly require the most recent two.
- › Business activity statements: recent BAS statements are used as a real-time income check, particularly where the most recent tax return is more than a year old.
- › Business bank statements: typically three to six months, used alongside BAS to confirm that the income flowing through the business matches the figures in the returns.
- › Accountant's letter: some lenders, particularly where only one year of returns is available, will accept an accountant's declaration of income as a bridge — but not all.
Source: APRA.
How much can sole traders borrow in South East Melbourne?
CoreLogic data shows Moorabbin with a median house price of $1,280,000 and Cheltenham at $1,298,750 — the two most affordable house markets in the approved suburb set. Every approved suburb's house median sits above the $950,000 First Home Guarantee cap. For sole traders buying their first home in the area, the realistic purchase is a unit, where 22 of 28 approved suburbs have a median below that cap.
Borrowing capacity for sole traders works through the same serviceability mechanics as any borrower — income assessed at the actual rate plus the APRA 3.0% buffer, living expenses benchmarked at the higher of declared expenses or HEM, and credit card limits assessed as though fully drawn. What changes is the income figure that enters that equation.
If your taxable income is $90,000 but add-backs bring the assessed figure to $105,000, the difference in borrowing capacity can be meaningful — and the lender that accepts those add-backs is the one worth approaching. That's not a guarantee of a specific outcome; it's the reason comparing across a panel produces better results than going to one lender. APRA also requires that lenders limit high debt-to-income lending, which means a sole trader with an existing business loan needs to factor that debt into the picture early.
Source: CoreLogic (via YIP, June 2026) and APRA.
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What government schemes can sole traders use?
Sole traders aren't excluded from federal schemes on the basis of their business structure alone — eligibility turns on income, property price and whether you're a first home buyer. The area's high medians mean scheme access is largely a unit story here.
The four pathways worth knowing:
- › First Home Guarantee: 5% deposit, no LMI, no income test. The South East Melbourne price cap is $950,000, verified across all approved postcodes — covers units across almost every suburb in the area.
- › Family Home Guarantee: for single parents, 2% deposit, no LMI, no first home buyer requirement needed — the $950,000 cap applies here too.
- › Help to Buy: the federal shared-equity scheme, open to sole traders subject to income caps of $103,000 for singles and $165,000 for joint applicants in 2026-27. The government takes up to 30% equity in an existing home or 40% in a new one — the $950,000 cap applies. Note that the Victorian Homebuyer Fund is closed to new participants, so Help to Buy is the only shared-equity pathway currently open.
- › Victorian First Home Owner Grant:$10,000 for new homes only, price capped at $750,000. In practice this means a new off-the-plan unit in the area — most new builds above that price don't qualify.
- › First home buyer duty exemption: full exemption for properties at or under $600,000, sliding concession to $750,000. Again, a unit market story for sole traders buying their first home here.
Source: Housing Australia and State Revenue Office Victoria.
How do mortgage brokers improve outcomes for sole traders?
The lender choice decides the outcome here, not the rate. Three policy differences move the number for sole traders, and they're not published side by side anywhere.
- › Add-back policy: some lenders accept depreciation and one-off business expenses as add-backs, others don't — and the difference in assessed income can be substantial for sole traders with capital assets.
- › One-year history: a small number of lenders will accept one year of returns alongside an accountant's declaration, where the business is growing and the second year would suppress the average — most won't.
- › Income trending: where income has grown year on year, some lenders weight the most recent year more heavily; others take a straight average — that single policy difference can move borrowing capacity by tens of thousands.
Comparing across a panel finds which of these policies applies to your structure, before you apply and before an enquiry lands on your credit file.
When does applying as a sole trader not make sense yet?
If your ABN is under twelve months old, most mainstream lenders won't have enough history to assess your income at all. Applying now typically means either being declined or accepting a much lower assessed figure than your business actually generates. Waiting until you reach the two-year mark — with clean BAS statements and consistent business bank deposits — usually produces a significantly stronger application.
Similarly, if your most recent tax return shows a loss or a very low taxable income due to heavy first-year investment in the business, that figure enters the lender's average even if your current trading is profitable. In that case, waiting for a second strong year to land before applying is usually the cleaner path. If the purchase timing genuinely can't move, a specialist low-doc lender may be able to assess on BAS alone — but the rate premium is real, and refinancing to a mainstream lender once the returns catch up is the standard next step.
If the timing is flexible and the second year isn't yet lodged, we'd usually suggest waiting. A two-year average that includes a strong second year is worth far more than a rushed application where the lender can only see one — and the rate you get reflects which position you're applying from.
Evelyn Clark · Director, Mortgage & Finance Broker · Chat to Evelyn →
What approval challenges do sole traders face?
Where the application can lose ground:
- › Tax returns not yet lodged: if your most recent return is outstanding, lenders use the prior year only — or decline to assess at all. Lodging before you apply is one of the most straightforward ways to strengthen the file.
- › Business debt on the books: an existing business loan, equipment finance or a business credit card limit all reduce serviceability — the lender counts the repayments as ongoing commitments. A sole trader who has invested heavily in the business may find the borrowing capacity lower than the income suggests.
- › Income falling between years: if year two is lower than year one, the average moves down — and some lenders take the lower of the two years, not the average, as the conservative floor. Knowing which approach a lender uses before applying avoids an unwelcome outcome.
- › Applying to multiple lenders: each application leaves an enquiry on the credit file for five years, and a cluster of enquiries in a short window raises a flag for lenders. Comparing through a broker means one conversation, not five separate applications.
- › ATO payment plans: an active ATO payment plan appears on bank statements and is treated by most lenders as an ongoing commitment, which reduces serviceability — and some treat it as a credit concern. Clearing it before applying, where possible, is the cleaner position.
Frequently Asked Questions
Can sole traders get a home loan with only one year of ABN history?
A small number of lenders will consider one year of returns alongside an accountant's declaration, but most require two. The rate and terms on a one-year application are typically less competitive, and waiting for the second year usually produces a stronger result.
Do sole traders need a bigger deposit than salaried borrowers?
Not necessarily — the minimum deposit is the same, and first home buyers can access the 5% First Home Guarantee regardless of employment type. A larger deposit does reduce lender scrutiny on the income assessment, which is worth factoring in if your income documentation is borderline.
What are add-backs and do all lenders accept them?
Add-backs are non-cash or one-off business deductions — like depreciation — that reduce your taxable income but not your actual cash position. Some lenders add them back to your assessed income; others don't, which is why two lenders can produce significantly different borrowing numbers from the same tax return.
Can sole traders use the Victorian First Home Owner Grant?
Yes — the $10,000 grant applies to new homes priced at $750,000 or less, and a sole trader's business structure doesn't affect eligibility. In South East Melbourne this is effectively an off-the-plan unit purchase, as most new builds in the area exceed that threshold.
Does a low-doc loan suit sole traders in South East Melbourne?
Low-doc loans let lenders assess income from BAS and business bank statements rather than full tax returns, which suits sole traders who can't yet supply two years of returns. The LVR ceiling is typically lower and the rate is higher than a full-doc loan, so most sole traders use it as a bridge rather than a long-term structure.
Is a mortgage broker worth using for a sole trader application?
A mortgage broker, every time. Add-back policies, one-year history acceptance and income-trending approaches all differ between lenders and aren't published anywhere a sole trader can easily compare. A broker who works with self-employed borrowers regularly knows which lenders on their panel will read your structure most favourably, before a single application is lodged.
Your Next Steps
Getting your home loan right as a sole trader isn't about proving you earn enough — it's about finding the lender whose assessment model actually reflects your income structure. The same tax return produces different borrowing capacity at different lenders, and the gap between them is often large enough to change which properties are within reach in South East Melbourne.
Ready to find out which lenders will work best for your sole trader application? Contact the EverLend team or call 03 7036 3356. We'll canvas our 60+ lender panel and find the most suitable options for your circumstances.
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External Resources
EverLend · South East Melbourne · Ever Lend Pty Ltd (ACN 625 080 515), authorised under Australian Credit Licence 517192 · General information only - this article does not constitute financial advice. Please consider your own circumstances and seek professional advice before making any financial decisions.
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