Here is a frustration most business owners hit at some point. You have spent years carefully minimising your taxable income, and then you go to borrow, and the lender looks at that low taxable income and offers you less than you expected.
The concept that sits in the middle of this is the add-back. Understanding it explains a lot about why a self-employed borrower’s tax return and their borrowing power can tell two different stories.
This is general information, not credit advice. It is written to help you have a more informed conversation with a licensed mortgage broker, your lender and your accountant.
What an add-back is
When a lender assesses a self-employed borrower, it does not always take the taxable income on the return at face value. Some of the expenses that reduced that taxable income are not really ongoing cash costs of running the household, so a lender may add them back to work out a truer picture of available income.
In other words, an add-back is an item that was deducted for tax purposes but that a lender may treat as income for serviceability purposes.
Common examples
The items lenders may add back vary, but they commonly include things like the following.
- Depreciation, because it is a paper deduction, not cash leaving the business.
- One-off or non-recurring expenses, such as a single large purchase that will not repeat.
- Additional voluntary superannuation contributions above what is compulsory.
- Interest on a debt that is being refinanced or paid out as part of the transaction.
Each of these reduced taxable income but does not necessarily reduce the cash genuinely available to service a loan, which is why a lender may add it back.
Why minimising tax can shrink your borrowing capacity
This is the heart of it. The deductions that make your tax bill smaller also make your assessable income smaller, and assessable income is the starting point for what a lender thinks you can repay.
Add-backs soften that effect, but only partly, and only for the items that qualify. Aggressive deductions that do not get added back will reduce the income a lender sees. So the very planning that is sensible for tax can quietly work against you when you borrow.
This is not an argument to stop minimising tax. It is an argument to be deliberate about it in the year or two before you plan to borrow, with both goals in view at once.
There is no universal rulebook
One of the reasons this area causes confusion is that add-back policies are not standardised. Different lenders add back different things, and they treat the same item differently. An expense one lender adds back, another may ignore.
That is exactly why this is a conversation for a licensed mortgage broker, who works across lenders, rather than something to assume from a single rule.
Where the accountant comes in
Your accountant is central to this, because the way your business income, expenses and structure are presented affects both your tax and the income a lender can see. Getting your accountant and a broker working from the same set of figures, before you apply, tends to produce a much smoother result than discovering a gap halfway through an application.
The tax and structure side, presenting your financial position clearly and planning the trade-off, is Foothold Advisory’s lane. The lending assessment, and any decision about a specific loan, belongs with a licensed broker or your lender.
The bottom line
Your tax return and your borrowing power can disagree, and add-backs are a big part of the reason. The lesson is not to choose between minimising tax and borrowing well. It is to plan for both at the same time, early, with your accountant and a licensed broker in the room.
General information only. This content explains general concepts about loans and finance and is current as at 3 June 2026. It is not credit assistance, a credit recommendation, or a suggestion that you apply for, or remain in, any particular credit product or contract. Foothold Advisory does not hold an Australian Credit Licence and is not a mortgage broker or credit provider. It does not consider your objectives, financial situation or needs. Before making any borrowing decision, speak to a licensed mortgage broker, your lender, your accountant, or another suitably licensed professional.