The short answer
Banks typically assess bonus income over two financial years, though some lenders may accept 12 months. Learn how it affects your borrowing power.
Most lenders will count bonus income if it is regular and you can prove it, usually with two years of history. Many average the last two years, and some only use a percentage of the bonus. A one-off or brand-new bonus is often excluded, so the base salary does most of the work in your application.
Do banks count bonuses as income?
Yes, but with conditions. A bonus is variable income, so lenders want evidence it is likely to continue. They will normally look at:
Your last two years of bonuses, on payslips, PAYG summaries or tax returns
A letter from your employer confirming the bonus structure
How long you have been in the role
How do lenders calculate bonus income?
It varies by lender, which is why lender choice matters:
Two-year average: the most common approach. If you received $20,000 last year and $10,000 the year before, the lender uses $15,000.
Lower of the two years: some take the more conservative figure.
Percentage of the bonus: some count only 80% (or less) of the averaged amount.
Most recent year: a few lenders will use the latest year if your history is strong and the bonus is contractual.
What if my bonus is new?
If you have only received one bonus, or you have just joined a company with a bonus scheme, many lenders won’t count it yet. A few will consider a guaranteed or contractual bonus with an employer letter. Otherwise you may need to wait until you have a second year of history.
Are commissions and bonuses treated the same?
They are similar but not identical. Commission is usually paid more often and can make up a big share of your income, so lenders look closely at its consistency. Bonuses tend to be annual and are often treated more conservatively. Both are assessed as variable income.
A typical Melbourne scenario
Kate is a project manager in Richmond on a base salary of $120,000. She received bonuses of $18,000 and $12,000 over the past two years. Lender A averages them and uses $15,000, so her assessed income is $135,000. Lender B only counts 80% of the average, so it uses $12,000, giving $132,000. Lender C ignores bonuses entirely and uses $120,000. On a home loan, that difference can change her borrowing power by tens of thousands of dollars.
How can you make your bonus count?
Keep two years of payslips or PAYG summaries showing the bonus.
Ask your employer for a letter confirming the bonus structure.
Don’t apply right after changing jobs if your bonus is a big part of your income.
Use a broker who knows which lenders are generous with variable income.
Key takeaways
Most lenders want two years of bonus history.
The calculation varies: average, lower year or a percentage.
New or one-off bonuses are often excluded.
Choosing the right lender can lift your borrowing power significantly.
Read how banks assess commission income and overtime income, try the borrowing power calculator, or talk to our mortgage brokers.
General information only. This article does not take into account your objectives, financial situation or needs, so consider whether it is appropriate for you and seek personal advice before acting. Elephant Financial Pty Ltd trading as Elephant Advisory is an authorised credit representative (ACR 487962) of Yellow Brick Road Aggregation Pty Ltd (formerly Vow Financial Pty Ltd) (ABN 66 138 789 161), Australian Credit Licence 390261.
Gav is the person you want in your corner when it comes to property finance. After years in banking and motor trade finance, he joined Elephant early and never looked back. He's passionate about combining property and finance to help clients achieve their goals through tailored financial structuring, and he's very serious about snacks at meetings.
