How Lenders Treat Bonus, Overtime And Commission Income

When a borrower’s pay includes bonus payments, overtime or commission, lenders do not automatically count the full amount when calculating borrowing capacity. The way this income is treated depends on how consistent it has been, how long it has been received, and how it is documented.

Why Variable Income Is Assessed Differently

Lenders treat bonus, overtime and commission as variable income because it is not guaranteed. Unlike base salary, these payments can change or stop depending on employer decisions, business performance or role changes. As a result, most lenders apply a more cautious approach when including this income in serviceability calculations.

Evidence Window

Most lenders require at least two years of evidence before variable income components are fully recognised. This is typically demonstrated through two consecutive years of PAYG payment summaries or tax returns, along with recent payslips confirming the income is still being received.

If the evidence window is shorter — for example, 12 months or less — lenders may apply a shading factor, accept only a portion of the income, or exclude it entirely depending on their credit policy.

How Lenders Calculate The Includable Amount

The includable portion of variable income is typically averaged over a period and then reduced by a percentage to account for variability. Each lender applies different rules, which is why outcomes can vary significantly between lenders for the same borrower.