We understand for consultants their clients come first, and time is precious – whether it be the demands of balancing work, life and travel, or preparing for the next steering committee meeting. Just as you are focused on getting the “right” answer for your clients, or developing that winning strategy, let us help you achieve your financing goals.
Why do banks like helping Consultants?
Banks view consultants on par with other professionals, such as accountants, doctors, lawyers and engineers. Consultants have several attractive qualities to a bank:
- Highly educated
- Strong analytical skills
- Transferable skills and readily employable
- Client and career focused
- Stable and high income
- Recipients of bonus income
- Responsible and disciplined
How is my bonus income assessed by different lenders?
Typically, lenders will require you to have 2 years track record from the same employer of receiving a bonus. Usually 80% of the bonus is applied (i.e. a 20% shading) to deal with the variable nature of receiving a bonus. However, there are some lenders that only require you to show one year’s bonus, and others – typically non-bank lenders – can apply 100% of your bonus to loan servicing.
Examples from some lenders we have selected are set out below.
| Lenders | % Bonus income applied | Minimum time in job required | Calculation method |
|---|---|---|---|
| ANZ | 80% | 1 Yr | Lower of latest year or average of 2 yrs |
| Bankwest | 80% | 1 Yr | Most recent year |
| CBA | 80% | 2 Yrs | Average of 2 yrs |
| Macquarie | 80% | 6 Months | Most recent year |
| NAB | 80% | 2 Yrs | Lower of latest year or average of 2 yrs |
| St George /WBC | 80% | 2 Yrs | Bonus received in last 12 months |
| Bluestone | 100% | 1 Yr | Lower of latest year or average of 2 yrs |
| Firstmac | 100% | 1 Yr | Most recent year |
| Liberty | 100% | 2 Yrs | Lower of latest year or average of 2 yrs |
| MA Money | 100% | 6 months | Most recent year |
I am a partner of a consulting firm, what are my options to get a loan?
As a partner in a consulting firm, the way you receive your total remuneration may have changed from how you were paid earlier in your career. You may also qualify for Private Bank if your income and / or required loan amount is high enough.
For salaried partners, you will need to provide:
- Latest pay slips – if still applicable
- If not, last 3 months salary credits
- Your partner agreement or employer letter to verify your fixed vs non-fixed components of your pay
The bank will typically apply 100% of fixed income and 80% of non-fixed income are considered.
If you are an equity partner, the bank will likely treat you as self-employed but apply simpler requirements compared to their normal “full verification” assessments. You will need to provide:
- 1 – 2 year’s Individual Tax Returns and NOA
- 1 – 2 year’s Trust Tax Returns and Financial Statements (if income is first received in the name of your family trust)
If you work for a very large consulting firm, then it is possible that your annual distribution advice can replace financial statements, but 2 years Individual Tax Returns and NOA’s will be required.
I work as a PAYG contractor – how is my income assessed?
Rather than being locked into a role and a firm, some consultants have chosen to become PAYG or independent contractors (below). While you give up the stability of fixed employment, you get the ability to earn higher hourly or daily rates as well as more time and career flexibility.
As a PAYG contractor, your income is assessed similarly to full-time employees, but with some variations based on the length of your contract, the availability of leave entitlements, and the consistency of your income. If your contract is shorter-term or irregular, lenders will require more detailed evidence to verify ongoing income sustainability.
For contracts less than 12 months, you may be asked to provide additional documents like tax returns or employment contracts to support the sustainability of your income. However, there are limited lenders that accept contractors with contracts less than 12 months.
If you are a casual or seasonal contractor, some lenders may assess your income differently. This may include verifying your income against seasonal work letters, tax returns, or PAYG income statements.
I work as an independent contractor under an ABN – how is my income assessed?
Independent contractors are essentially viewed as self-employed by the banks.
If you are billing via your own personal ABN as a sole trader, then most banks will require seeing 2 years Individual Tax Returns and Notice of Assessment. These banks usually take an average of your last 2 year’s income if your last year’s income is higher, or will take the latest year’s income if it is lower.
If your income has been growing year-on-year and you want to borrow more, some banks will be able to accept your latest year’s income for servicing – please contact us to see if you are eligible for these banks.
I work as an independent contractor under a Company or Trust – how is my income assessed?
If you provide your consulting services through a Company or Trust, you will still need to provide your last 2 years Individual Tax Returns and Notice of Assessment.
However, in addition, you will need to provide your last 2 years Company and / or Trust
- Financial Statements
- Tax Returns
This is because the bank wants to see the source of where your income is being earned, and your full “flow of income” – how it is billed by your company or trust, and then distributed to you personally. Importantly, if your income and financial statements are being presented the right way, the profits in your business can be added to your personal salary to derive your total servicing income, in turn boosting your borrowing capacity.
I only just became a contractor – how will the bank look at me?
If you have become a PAYG contractor, the bank will look at:
- How long the contract is offered for
- The gap between your former employment
- How many hours or days per week are offered
The longer the PAYG contract, the more likely that your income can be accepted for servicing. However, if the contract length is very short, it’s likely that you will have to wait up to 1 year for a full year’s income to be accepted.
If you are Independent Contracting, whether through an ABN, company or Trust, it is even harder for your income to be accepted. Technically, you will fall under a bank’s self-employed requirements which require your business to be ABN and GST registered for 18 months or more.
It is possible to have some exceptions to this (e.g. 12 months) but you will still need to present at least one full year’s Tax Returns and Financial Statements for your business and personally, for the income to be accepted for loan servicing.
What are my loan options for a new independent contractor?
If you have only recently become a freelance consultant, or newly established your consulting business, then it may still be possible to get a loan, but will need to consider
- Starting to pay yourself a regular wage from your company or trust, and waiting at least 6 months
- Alt Doc loan options which may have higher interest rates, but may be more flexible in considering your scenario
Note, these options are only suitable for independent contractors with a company or trust set up, not sole traders or PAYG Contractors.