The short answer
Borrowing power in Australia is set by serviceability, not salary alone. A lender takes your assessable income, subtracts living expenses and existing commitments, then tests whether you could still repay at an assessment rate roughly three percentage points above the actual rate. Two lenders can differ by well over $100,000 on identical figures.
Borrowing power is not your salary multiplied by a number. Here is what an Australian lender actually counts, what it ignores, and why the figure a calculator gives you is usually optimistic.
01What does a lender actually count as income?
Base salary is the easy part. Everything else is where applications get decided. Overtime, bonuses, commission, allowances, rental income, dividends and government payments are all treated differently by different lenders, and the differences are large enough to change the answer entirely.
A nurse with heavy overtime, a hospitality worker on penalty rates and a salesperson on commission can all present the same gross figure on a payslip and receive three very different borrowing limits. One lender might count 100% of overtime for an essential-services role. Another shades it to 80%. A third wants two years of history before it counts a dollar.
Self-employed income is its own category. Most lenders want two years of financials and will average them, which punishes a business that grew sharply last year. Some accept a single year. Low doc structures use alternative evidence entirely, such as BAS statements or an accountant's declaration.
Counted in full, usually
Base salary, permanent part-time income, and long-standing rental income supported by a lease.
Shaded down
Overtime, bonuses and commission are commonly counted at 80%, and sometimes require two years of history.
Lender dependent
Foreign income, Child Support, Family Tax Benefit, maternity leave payments and casual income within a probation period.
02Why is the assessment rate higher than the rate I am offered?
Australian lenders do not test whether you can afford today's rate. They test whether you could still afford the loan if rates rose. That test uses an assessment rate, which sits a buffer above the actual product rate. The buffer has been around three percentage points in recent years, and it is the single biggest reason people borrow less than they expected.
The practical effect is straightforward. If you are offered a rate near 6% but assessed near 9%, every repayment in the lender's model is materially larger than the one you would actually make. Your borrowing power is calculated against the larger number.
This is also why refinancing to a sharper rate does not automatically unlock more borrowing. The buffer moves with the product rate, so the gap tends to persist.
03How do living expenses and existing debts reduce borrowing power?
Lenders will not simply take your word on spending. They compare what you declare against the Household Expenditure Measure, a statistical benchmark for a household of your size and income, and assess you on whichever figure is higher. Declaring an implausibly low grocery bill does not help; it just gets replaced by the benchmark.
Existing commitments are subtracted next, and one of them catches almost everyone out. Credit cards are assessed on the approved limit, not the balance. A card with a $20,000 limit and nothing owing is still treated as a monthly obligation, and can reduce borrowing power by tens of thousands of dollars. Reducing or closing unused limits before applying is one of the few genuinely fast levers available.
Buy-now-pay-later accounts, HECS-HELP, car finance and personal loans all reduce the surplus the lender is measuring. So do dependants, which lift the expense benchmark.
| Commitment | Typical treatment |
|---|---|
| Credit card | Assessed on the limit, commonly at 3.8% of the limit per month |
| HECS-HELP | Counted as a compulsory repayment while a balance remains |
| Car or personal loan | Actual repayment, deducted in full |
| Buy now pay later | Increasingly counted, and can flag spending patterns |
| Dependants | Raise the living expense benchmark used against you |
04Why do online calculators give a higher number than a lender will?
Most public calculators run a simplified model. They take income and a couple of expense fields, apply a generic buffer, and return a single figure. They do not know which lender shades your overtime, whether your ABN is old enough, how your credit card limits are treated, or whether your visa class narrows the panel.
Treat a calculator result as a bracket, not a number. It is useful for deciding whether you are looking at a $500,000 purchase or a $900,000 one. It is not useful for deciding what to offer at auction.
A broker pre-assessment closes that gap because it runs your actual figures through the specific policies of specific lenders, which is where the variation lives.
05How can I increase my borrowing power before applying?
Most of the effective moves are unglamorous and take a few weeks rather than a few months.
Cut credit card limits
Reduce or close cards you do not use. The limit is what counts, so this frees capacity immediately.
Clear small consumer debts
A nearly-finished personal loan still carries its full monthly repayment in the assessment.
Tidy three months of statements
Lenders read the account your salary lands in. Consistent, explainable spending helps.
Wait out a probation period where possible
Some lenders accept probation, many do not. A few weeks can widen the panel considerably.
Match the lender to the income type
This is the largest single lever, and it is the one a borrower cannot pull alone.
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General information only
This article is general information and does not take your objectives, financial situation or needs into account. Lender policies, government schemes and interest rates change. Confirm current details with the relevant lender or government body, and speak to a broker about your own circumstances before acting.
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