Understanding investment and other income for servicing

How much investment rental income is considered for servicing?

The type of investment property will determine how we consider the investment income generated from the property. All income will be considered as a percentage of ownership.

Type of property	% of income considered	Treatment of expenses
Residential property	75% of verified rental income	We'll apply a minimum of 20% of gross property income. Where actual expenses exceed 20% of gross property income, we'll apply the actual expense.
Short term stays and room rental properties (e.g. holiday letting)	65% of verified rental income	We'll apply a minimum of 20% of gross property income. Where actual expenses exceed 20% of gross property income, we'll apply the actual expense.
Non-residential property (e.g. commercial)	65% of verified rental income	Where there’s significant reliance is made on rental income from non-residential properties, we’ll request lease agreements will be requested.

Documents required to verify investment rental income

The documents required will vary depending on whether your customer is purchasing an investment property or they already own the investment property.

For proposed purchases:

Where the proposed property is to be used as a security property on their Macquarie home loan, the lesser of:

the rent as per the Macquarie Bank ordered valuation
a licensed real estate agent’s estimate/tenancy management agreement (completed in the 60 days prior to submitting the application), where a range is provided, the lower amount will be used, or
a current executed tenancy agreement, lease extension or variation (arms-length through a real estate agent), showing rent, commencement date and termination date (evidenced also in the contract of sale).

For existing property owned:

The actual rental income as verified from any of the following documents:

Valid rental income statement (last 60 days)
A current executed tenancy agreement (arms-length through a real estate agent), showing rent, commencement date and termination date
Most recent tax return
Annual rental income statement covering the most recent financial year, or
Bank statements showing at least three months of rental credits.

How is investment asset income (e.g. shares) considered for servicing?

To use the investment income from assets, the investment must be in the name of the borrower(s) and/or guarantor(s) and include:

cash in interest bearing accounts (e.g. interest income), which doesn’t include offset accounts
shares (e.g. franked dividends, franking credits and unfranked dividends)
managed funds (e.g. distributions)

We’ll consider 80% of the investment income, which is determined by either:

the lower investment income figure from the two most recent tax returns, or
taking a deeming rate of 3% of the investment asset’s value where actual income is unknown.

Note, the asset’s value must be verified via stock holding reports or bank account statements and to ensure consistency, we consider the lower value from the current statement or a statement from 12 months ago, at the time of approval.

What other income sources are considered for servicing?

There are other income sources that can be considered for servicing if your customer meets the specific requirements. This section covers:

Child support
Family allowance
Superannuation pensions
Foreign income
Disability benefits and income protection insurance.

Child support

We’ll consider 100% of child support as secondary income only if the following applies:

The agreement is registered with the Child Support Agency and a copy is provided. A court order is also considered if a copy is provided and payments are evidenced in line with the order.
Consistent payments over 6 months are evidenced by the borrower’s bank statements.
Maintenance payments are considered permanent for the next 5 years.
The dependent child is under 11 years old at the time of the application.

Family allowance

We’ll consider 100% of family allowance as secondary income only if the following applies:

Payments are verified via government issued family allowance statements.
The dependent child is under 11 years old at the time of application.

Superannuation pensions

We’ll consider up to 100% of superannuation pensions where they’re confirmed as permanent and ongoing by the superannuation provider. This includes government superannuation pensions (e.g. Comsuper and Military pensions).

Foreign income

Acceptable foreign income can be limited to annuity pension, rental or investment income. In specific circumstances we may also consider a PAYG applicant.

Annuity pensions, rental or investment income can’t be the sole source or majority of income to meet loan serviceability. We’ll typically accept 80% of income and consistent performance needs to be evidenced across the past two Australian tax returns.

For PAYG applicants, we’ll accept applicants that are employed by a foreign entity, are paid foreign income and have a valid current Australian residential address. In this scenario, the following guidelines apply:

Employment	Limited to PAYG (ideally the applicant is working for a recognisable organisation)
Income	Income used for serviceability must be verified by payslips in line with PAYG income verification guidelines.
Foreign income haircuts	Where foreign currency is to be converted to Australian dollars, only 80% of the amount (after conversion at current exchange rates) is to be used for loan servicing. For overtime, commission and bonuses (80%), they must be haircut by the required amount for income type variability in addition to the haircut for foreign income variability (80%).
Documentation	All income documents must be in English or translated into English with appropriate translation certificate from a registered licensed translation service domiciled in Australia.

Disability benefits and income protection insurance payments

100% of disability benefits and income protection insurance payments can generally be used in servicing if all the following apply:

It isn’t the predominant source of income.
Payment is ongoing and not subject to medical review.
The benefit is payable for the term of the loan or until retirement age (assumed to be 70 years, unless advised earlier).
These income types are to be treated as taxable income.

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