Your recent payslips are essential in giving banks accurate information about your current financial situation.
Here is everything you need to know about which types of payslips are accepted by most banks and how you can go around should your payslips not meet the standard eligibility requirements:
Why do lenders require payslips?
Banks and non-bank lenders require payrolls as income evidence for your home loan application. They assess your year-to-date income to help them estimate if you’ve had consistent income for a certain year and whether you can pay off your loan.
Moreover, the payslip should display your employment status and other relevant work info, such as a breakdown of your regular or overtime pay, bonuses, and commissions.
Acceptable Payslips: What they look like
Here are a few standard requirements your payslips must have before they are accepted:
- Old payments are not accepted. The latest payslip should be up to 6 weeks old from the date of application.
- Your payslip should indicate the date range and payday
- Must show your name (as an employee), your year-to-date (YTD) income, your employer’s Australian Business Number (ABN) or Australian Company Number (ACN)
- You must indicate your net and taxable income, as well as any deductions or debts you’re paying directly (salary package expenses, etc.).
Note that some payslips do not indicate service and annual/personal leave, even if you work full-time.
For those cases, you need to provide a letter from your employer confirming that you’re a full-time employee and issue an ATO notice indicating that you’ve paid your taxes.
What payroll types should I avoid?
Your employer may have issued handwritten payslips, especially if you work in a family business. Payslips like these are not acceptable since lenders and banks would require computer-generated payslips produced using a reputable accounting system.
That means payslips printed as a Word document or spreadsheet are not eligible either!
Moreover, handwritten or typed payslips are very prone to spelling mistakes, font issues, or date errors (April 31 or February 30).
Online payslips are generally allowed but can be problematic
If you have downloaded your payslip from your online human resources (HR) portal and it indicates all the necessary details in one print, then it should be allowed.
In other cases, other pay details, such as YTD and leave entitlements, are not included in the first copy and are split up into other tabs or documents.
With that, you need to ask your employer for a hard copy, indicating all the necessary pay details in one page—or a letter from your employee confirming the pay in the subject.
We’ve encountered situations where an employer transitions to a new payslip system in the middle of each consecutive pay. That means you may submit two payslips to your bank that completely look different to each other.
Another situation is when the applicant has a hard copy of the previous month’s payslip but hasn’t been sent the latest pay via email, so they have printed it off the HR portal.
For those situations, as long as the corresponding payslip details match up, they shouldn’t be much of a problem.
What if I can’t provide a payslip?
It is not uncommon for employees to receive cash-in-hand, especially when working for a small business. Alternatively, you may receive a payslip, albeit handwritten and not eligible as a proof of income.
Here are some alternatives you can provide to verify your income:
- ATO Income Statement or group certificate
- Employee letter confirming your employment, YTD pay, ABN or ACN
- Last year’s tax return
- Bank statements for the latest 3 consecutive months, ideally showing regular repayments to your account
Note that not all banks and non-bank lenders accept alternative documents. But if you’re borrowing well within 80% or less of the property’s value, then you may be eligible without as many documents to prove your income.
Do Banks make mistakes when verifying income or checking payslips?
While banks have a proven standard for verifying income or checking payslips, the plethora of applications they process daily causes a few errors to slip under their tight systems.
Besides, even common payslips from police officials and nurses can be complicated to evaluate and are often prone to banks making mistakes when checking.
Here are some instances where a bank makes an error when checking your payslip:
- Lenders may fail to account for allowances and overtime pay, causing an incorrect income assessment
- They fail to account for the superannuation payments that you can cancel
- They have no clue about the specifics of your salary packaging and would often fail to account for your employee benefits over the total income
- They simply miscalculated your annual salary from your YTD income.
Basically, banks would choose a more conservative approach to assess your income. This is where our mortgage brokers stand out, as we are keen on understanding your total borrowing power and will thoroughly discuss this with your bank to negotiate the best loan rates.
We have years of experience working in senior banking positions and fully understand what banks look for in loan applicants. We can even go the extra mile and help fix the bank’s mistakes.