Turning Bonuses, Commissions and Profit Share into Real Borrowing Power

Australian lenders will use bonus, commission and profit share income for home loans and investment lending, but they rarely take it at 100%. They usually look for at least one to two years of history, average the figures, and then apply a “haircut” of 20–50% before running serviceability with a 3% APRA buffer on repayments. How your income is structured and documented can easily swing your borrowing capacity by hundreds of thousands of dollars.

This guide shows high‑income professionals, self‑employed clients and investors exactly how banks treat variable income in Australia — and what to change this week to turn complex pay into clean borrowing power.

1. The short version: how banks actually see variable income

1.1 Base vs variable: two different rule books

For lending, your income is split into:

• Base income – your contracted salary or wages, usually taken at 100% if you’re past probation.
• Variable income – bonuses, commissions, profit share, overtime, RSUs, etc. This is what lenders shade and scrutinise.

Most mainstream lenders treat variable income as less reliable by default, even when you and your employer see it as “normal pay”. Their credit policies are written for worst‑case scenarios, not your best year.

1.2 Typical treatment of bonuses, commissions and profit share

Policies differ, but a common pattern looks like this (indicative only):

• History required: 1–2 years, evidenced on payslips, PAYG income statements, tax returns and/or employer letters.
• Averaging: often the lower of:
  • Last year’s variable income, and
  • The 2‑year average.
• Haircut: lenders may only use 60–80% of that averaged figure for servicing.
• Direction of change:
  • Rising income → some lenders may use the latest year only.
  • Falling income → most will use the lower year, or ignore the income altogether.

So a headline package of $350k that’s $180k base + $170k variable might be treated more like $250–280k for borrowing purposes.

1.3 Fast diagnostic: what’s likely to count this week

Your variable income is more likely to be fully counted (within lender rules) where:

• Paid at least annually, ideally quarterly or monthly.
• Two full years showing consistent or rising levels.
• Clearly itemised on payslips and PAYG income statements, or supported by tax returns.
• You’re in the same role or industry over that period.

It’s less likely to be fully counted where:

• It’s new (less than 12 months) or highly lumpy.
• It depends on one‑off events — big deals, special projects, COVID‑era spikes.
• You’ve recently changed employer, business structure or partnership.

We’ll now break it down by income type and show how to stack the odds in your favour.

Clear documentation of bonus income is the first step to turning it into usable borrowing power.

2. Bonuses: annual, quarterly and sign‑on payments

2.1 Types of bonuses lenders see

Common bonus types for executives and professionals:

• Annual performance bonuses (corporate, banking, professional services)
• Quarterly incentives (medical specialists with hospital KPIs, sales leaders)
• Retention or sign‑on bonuses (front‑loaded for a new role)
• Project or transaction bonuses (M&A, capital markets, major projects)

Lenders put these into two buckets:

1. Regular, recurring bonuses – annual or quarterly; tied to role and company results.
2. One‑off or ad‑hoc bonuses – sign‑on, retention, special projects.

Only the first bucket is usually counted as ongoing income.

2.2 What lenders want to see for bonus income

Most banks will consider bonus income where:

• There’s at least one full bonus cycle, often two years preferred.
• Your bonus appears on:
  • Year‑to‑date payslips, and
  • ATO PAYG income statements or tax returns.
• An employment letter or HR confirmation clarifies the bonus structure for more complex cases.

If you’ve just moved roles, lenders might accept evidence from your former employer plus a new contract showing similar or better bonus potential.

2.3 A worked example: bonus haircut in practice

Assume:

• Base salary: $200,000
• Bonuses:
  • FY22: $80,000
  • FY23: $120,000

A conservative lender might do this:

1. Average bonuses over 2 years: ($80,000 + $120,000) ÷ 2 = $100,000.
2. Apply a 20% haircut: 80% × $100,000 = $80,000 usable variable income.
3. Add to base: $200,000 + $80,000 = $280,000 total income for servicing.

If their broad internal multiple is ~6× income (illustrative only), your borrowing capacity might be assessed around $1.68m, not the $1.92m you’d expect if they took your full $320k.

Another lender might:

• Use only the latest bonus year (if clearly rising), then
• Haircut to 70–80%.

That could turn the usable bonus into $84–96k and lift capacity by a couple of hundred thousand dollars. Policy choice matters.

2.4 Sign‑on and retention bonuses

Most lenders treat sign‑on and retention bonuses as:

• One‑off lump sums, not ongoing income.
• Useful for deposit or debt reduction rather than servicing.

If a sign‑on is paid as a higher base or guaranteed year‑one bonus, there’s more scope to treat it as ongoing — but that usually needs a strong employment contract and sometimes a tailored credit submission.

3. Commissions and incentive pay

3.1 Who this affects

Commission and incentive structures are common for:

• Sales and BD professionals
• Real estate agents and mortgage brokers
• Some medical, dental and allied health roles (percentage of billings)
• Financial markets and trading roles

The headline on-target earnings (OTE) in your contract is not what lenders plug straight into their calculators.

3.2 How lenders usually assess commission income

Typical settings (again, policies vary by lender):

• Minimum history: 12 months; many prefer 24 months.
• Income figure used:
  • Lower of: latest year vs 2‑year average.
  • Some may use only the latest year if clearly stable and increasing.
• Haircut: often 20–40% off that figure.
• Very lumpy earnings: lenders may ignore the highest months or years when averaging.

Here’s a simplified comparison of how two notional lenders might treat the same commission earner.

On a crude 6× income lens, that’s the difference between roughly $1.08m vs $1.39m of borrowing capacity — just from lender policy.

3.3 Dealing with big swings year to year

If your commissions swing hard (e.g. $80k one year, $250k the next):

• Lenders will want to understand why:
  • New territory or promotion?
  • A one‑off mega‑deal?
  • Market or product change?
• A good broker will position the spike as structural, not lucky, where that’s genuinely the case.
• Some lenders might:
  • Use only the latest 12 months if you can show it’s repeatable.
  • Ask for year‑to‑date statements to prove the current year is tracking similarly.

If the spike really was a one‑off, you’re usually better off using it to reduce non‑deductible debts and improve your position that way, rather than pushing for maximum borrowing.