Income Gross UpCalculator

What does "grossing up" income mean for a home loan?

When lenders assess your ability to repay a home loan, they work from gross income figures. PAYG salary is already gross — it's the pre-tax amount on your payslip. But some income types are received after tax, or are tax-exempt entirely. To compare them fairly against PAYG income, lenders apply a "gross-up factor" — effectively inflating the net or tax-free amount to an equivalent pre-tax value.

For example: if you receive $20,000 per year in Family Tax Benefit (which is tax-free), a lender applying a 1.25x gross-up factor would treat that as $25,000 in gross income for the purposes of the serviceability calculation. This increases the income used in the assessment and — all else equal — increases your borrowing power compared to a lender who doesn't gross up.

This is also relevant for property investors receiving rental income — where the gross-up methodology can differ significantly between lenders and have a material impact on approved loan amounts.

Which income types get grossed up?

Not all lenders gross up the same income types, and the gross-up factors applied can vary. The most common income types that may receive gross-up treatment include:

• Rental income: Typically shaded first (to 70–80% to allow for vacancies and costs), then some lenders apply a 1.25x–1.35x gross-up factor. The exact treatment varies widely and makes a significant difference for investors with multiple properties.
• Family Tax Benefit (Part A and Part B): Tax-free government payments. Most lenders accept these as income and gross up by 1.25x. Some lenders require the payments to continue for at least 3 years to include them in servicing.
• Carer's Payment and Carer Allowance: Accepted by many lenders when ongoing; typically grossed up by 1.25x as they are tax-exempt.
• Defence Force tax-free allowances: Certain ADF allowances are tax-free and may receive a gross-up when submitting a loan application.
• Foreign income: Converted to AUD and potentially grossed up depending on the tax treaty between Australia and the source country.

Income types that are already gross figures — such as PAYG salary, ABN income from tax returns, and most business income — do not require grossing up, as the gross amount is already used in the assessment.

How lenders apply gross-up factors in practice

The most common gross-up factor used by Australian lenders is 1.25x (25%), which approximates the gross equivalent of income taxed at the standard marginal rate for many borrowers. However, some lenders apply 1.35x for certain income types, and others do not gross up at all — they simply take the net figure.

The difference matters in practice. On $20,000 of Family Tax Benefit, the assessable income can range from $20,000 (no gross-up) to $27,000 (1.35x gross-up) depending on the lender. On higher rental income amounts, this variation can translate to tens of thousands of dollars in borrowing capacity difference between lenders.

This is why borrowers with complex income structures — rental income, government payments, or tax-free allowances — often benefit most from using a broker. A broker can match you with the lender whose policy treats your income most favourably, rather than the first bank you walk into. Use our borrowing power calculator to see how your grossed-up income feeds into your overall capacity.

Presenting your income for a loan application

How your income is documented and presented can affect how much you can borrow. Some practical tips:

• Maintain consistent hours and minimise large swings in overtime or commission where possible
• Keep clear records of payslips, group certificates and tax returns — lenders typically want the last two years
• For rental income, have current lease agreements and property management statements ready
• For government payments, Centrelink statements showing the payment type and expected duration are usually required
• Get advice early if you're about to change jobs, go on parental leave, or move to self-employment

We can review your income documentation and explain how different lenders would assess your application — then match you with those that offer the most favourable treatment for your income mix.

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