Common Self-Employed Add-Backs Accountants Should Know

Key Takeaways

• Add-backs restore eligible non-cash or non-recurring expenses to your net profit, increasing the income a lender assesses.
• Depreciation is the most commonly accepted add-back because it reduces taxable income without reducing business cash flow.
• Additional superannuation contributions, one-off expenses, retained profits and interest on refinanced business debt may also be accepted.
• Lender policies differ significantly, so the same financial statements can produce different borrowing capacities.

For self-employed accountants, add-backs can make a significant difference to borrowing capacity. Legitimate tax deductions often reduce taxable income but don’t necessarily reflect the cash available to meet mortgage repayments. Many lenders recognise this by adding certain expenses back when assessing income.

Understanding which expenses qualify—and selecting a lender whose policy recognises them—is one of the most effective ways to maximise borrowing power. This guide explains what add-backs are, the most common examples, and how lenders apply them.

What an Add-Back Is

Self-employed borrowers are generally assessed using their taxable business income after expenses have been deducted. While this reflects taxable profit, it does not always represent the true cash available to service a home loan.

An add-back is an expense that legitimately reduced taxable income but is either non-cash, voluntary or unlikely to continue in future years. Adding these amounts back allows lenders to calculate an income figure that better reflects actual earning capacity.

Not every lender recognises the same add-backs, which is why borrowing capacity can vary considerably between lenders using identical financial statements.

The Most Common Add-Backs

Depreciation

Depreciation is the most widely accepted add-back because it represents an accounting deduction rather than an ongoing cash expense. Whether relating to vehicles, office equipment, machinery or instant asset write-offs, most lenders will add depreciation back to assessable income.

Additional Superannuation Contributions

Voluntary superannuation contributions above the compulsory Super Guarantee are frequently accepted because they are discretionary. Mandatory employer contributions generally cannot be added back.

One-Off or Extraordinary Expenses

Costs such as office relocations, legal settlements or exceptional project expenses may qualify if they are genuinely non-recurring. Lenders commonly request an accountant’s letter confirming the expense is unlikely to occur again.

Retained Profits

Where profits remain within a company rather than being distributed, some lenders will include those retained earnings when assessing serviceability, particularly where the applicant controls the business.

Interest on Business Debt Being Refinanced

Interest expenses attached to business debt that will be fully repaid or consolidated into the new lending may also be added back because that expense disappears once the refinance is complete.

How Lenders Apply Add-Backs

Once allowable add-backs have been identified, lenders combine them with business profit to calculate assessable income. Many lenders still average this figure across the last two financial years, while others may assess only the most recent year where a one-year policy applies.

The level of detail within your financial statements also matters. Well-prepared accounts make it easier for lenders to identify depreciation, extraordinary expenses and other legitimate add-backs.

Regardless of the final income figure, lenders still apply APRA’s serviceability assessment using the actual interest rate plus a 3% buffer before approving a loan.

How This Fits with Professional Concessions

Professional lending benefits operate separately from add-back policies. Eligible members of CPA Australia, Chartered Accountants Australia and New Zealand (CA ANZ), and the Institute of Public Accountants (IPA) may still qualify for an LMI waiver while also benefiting from eligible add-backs.

Although the LMI waiver can significantly reduce upfront borrowing costs, your borrowing capacity still depends on the assessable income calculated after any approved add-backs have been applied.

Frequently Asked Questions (FAQs)