Payslips provide essential information to the banks about your current income situation, one of the key determiners of whether your home loan application is approved or not.
Use the following guide to ensure that your payslips are acceptable to the bank and what you can do if they don’t meet standard requirements.
What Is An Acceptable Payslip Like?
For your home loan application to be processed, you must provide at least two consecutive payslips.
Below are the standard requirements that payslips must meet before they will be accepted by a lender:
- Must be dated less than four weeks from the date of application (old payslips are not accepted).
- Must show the date range that you’re being paid for as well as your pay day.
- Must include your name as the employee, your YTD income, the name of your employer and your employer’s Australian Business Number (ABN) and/or Australian Company Number (ACN).
- Must show your taxable income and net income
- All deductions are explained including tax, high education debt (HECS-HELP), superannuation contributions and any debts you’re paying direct from your pay such as salary packaging expenses.
Some payslips won’t show annual leave, personal leave and long service leave even though you work full time or part-time. In cases like this, some lenders may require an employment letter confirming that you are in fact employed full time and/or an ATO notice to confirm that you’ve paid tax on the income you’ve earned.
Does your payslip look something like this?
If not, please call us on 1300 889 743 or fill in our free assessment form. One of our mortgage brokers can tell you whether or not you need to provide further income evidence.
Why Do Banks Ask For Payslips?
Banks ask for two consecutive payslips so they can use the Year to Date (YTD) income to calculate if your current income has been consistent throughout the financial year.
The payslip will also show your employment status (whether you’re full time PAYG, contract, casual or part-time) as well as a breakdown of your normal, overtime, bonus and commission pay.
What Forms Of Payslips Should You Avoid?
Handwritten payslips are not acceptable
Some employers, particularly if you work in a family business, will provide you with handwritten payslips.
Payslips in this form are not acceptable to lenders on their own and must be computer generated using an accounting system. That means payslips produced in as a word document or in a spreadsheet are not acceptable either.
You’ll be surprised how often we come across payslips that are poorly typed with spelling errors, different font or show non-existent dates like 31 April!
MYOB or payslips produced from small business accounting software are treated with caution.
Online payslips can be a problem
A lot of businesses and government departments have set up online human resources (HR) portals in which employees download their payslips rather than being emailed one.
In many cases, your pay details will be split-up into different tabs online so important details like YTD and leave entitlements may not be shown all in the one print off.
In some cases, you will need to ask your employer for a hard copy of your payslip that shows all of the necessary pay details on the one page and/or an employer letter confirming your pay.
Sometimes, employers have different systems or a transitioning over to a new payslip system which means the payslips you provide to the bank look completely different to one another.
It could be that you have the hard copy payslip from your last month’s pay but your most recent payslip hasn’t been sent to you yet so you print it off the HR portal. As long as the payslip details match up, it shouldn’t be an issue with most banks.
What If You Can’t Provide A Payslip?
It is common not to receive payslips from your employer, particularly if you work for a small business in which you are paid cash-in-hand.
You may in fact receive payslips but because they are handwritten they will not meet application requirements.
Some alternative ways to verify your income are to provide at least one of the following:
- ATO Income Statement (obtained from myGov website).
- Letter from your employer.
- Group certificate for the most recent year.
- Last year’s tax return.
- Bank statements for the last three months which show regular payments into your account (payments must be consistent).
These alternative documents are only accepted by a few of our lenders. If you are borrowing 80% of the property value or less (80% LVR) then they won’t require as many documents.
For more information on alternative forms of income evidence, check out our no payslips home loan page.
Do Banks Make Mistakes In Reading Payslips?
Banks are terrible at reading payslips! Even common payslips for nurses and police can be very complicated which leads to the banks making mistakes.
- They often get your income incorrect, in particular, if you receive allowances and overtime.
- They forget that you can cancel additional payments to super.
- They have no idea what salary packaging is!
- They miscalculate your annual pay from your YTD income.
As a general rule, if there are two ways to assess your income and one of them is more conservative then the banks will choose that one!
Our mortgage brokers are experts in helping people who have difficulty in proving their income get approved for a home loan. We can even help fix the bank’s mistakes!
Call us on 1300 889 743 or fill in our free assessment form to find out if we can help.