Can You Use Dividend Income for a Home Loan in Australia?

Using Dividend Income for a Home Loan in Australia

Yes, you may be able to use dividend income for a home loan in Australia.

Some lenders may accept dividends from shares, managed fund distributions, franked dividends, unfranked dividends, interest income from cash investments and other non-property investment returns. Others may only use part of the income, require tax returns, ask for investment statements, exclude capital gains or apply a conservative deeming rate if the actual income cannot be proven.

This is where many investors get caught.

You may have a large share portfolio and receive regular dividends, but the lender may not simply add all dividends to your income. They may check whether the investments are in your name, whether the income is ongoing, whether it was declared in your tax returns, whether the portfolio balance still exists and whether any margin loan is attached to the shares.

This guide explains how Australian lenders may assess dividend income, share income, managed fund distributions, interest income and investment portfolio income for a home loan, based on current policy research.

Can dividend income be used for a home loan?

Yes, some lenders may use dividend income for a home loan.

A lender may consider dividend income if:

• the investments are owned by the borrower or guarantor
• the dividend income has been received previously
• the income is shown in tax returns or investment statements
• the portfolio still exists
• the income is not a one-off capital gain
• the income is likely to continue
• the lender can verify the investment assets
• the lender’s policy accepts investment income
• any margin lending or investment debt is declared
• the loan passes servicing using the accepted income amount

Dividend income can help borrowing power, but lenders usually assess it conservatively.

What counts as dividend income?

Dividend income generally refers to income paid from shares or company investments.

For home loan purposes, lenders may consider income from:

• Australian shares
• franked dividends
• unfranked dividends
• listed company dividends
• dividend reinvestment plans
• exchange-traded funds
• managed funds
• investment portfolio distributions
• unit trust distributions
• listed investment companies
• cash management accounts
• interest-bearing deposits
• other non-property investment income

Some lenders group these under investment income rather than separating dividends, distributions and interest income.

Dividend income vs investment income

Dividend income is one type of investment income.

Investment income may include:

• share dividends
• managed fund distributions
• ETF distributions
• interest income from savings or term deposits
• listed investment company dividends
• trust distributions
• superannuation pension income
• annuity income
• fixed interest income

For a home loan, the lender may classify the income based on where it comes from and how it is verified.

A dividend from shares may be treated differently from a trust distribution, business dividend, capital gain or superannuation pension payment.

Related research: Can You Use Investment Income from Shares or Managed Funds for a Home Loan?

Why lenders assess dividend income carefully

Dividend income can fluctuate.

A company can reduce, pause or cancel dividends. A managed fund can pay different distributions each year. A share portfolio can fall in value. An investor may sell shares before settlement. A dividend received last year may not continue at the same level this year.

A lender may ask:

• who owns the shares?
• are the shares still held?
• how much dividend income was received in the last two years?
• was the income declared in tax returns?
• are the dividends franked or unfranked?
• is the income from shares, managed funds or a business?
• were any capital gains included?
• is there a margin loan?
• is the investment income needed to pass servicing?
• does the lender use 100%, 80% or a deeming rate?

The lender’s goal is to avoid relying on investment income that may not continue.

How much dividend income will lenders use?

There is no single rule across all lenders.

Based on current policy research, lenders may use different methods to calculate investment and dividend income.

A lender may use:

• 100% of verified investment income
• 80% of verified investment income
• the lower investment income figure from the two most recent tax returns
• the average income over a period
• the actual amount declared in the most recent tax return
• 12 months of credits into a bank account
• an investment statement showing income paid over 12 months
• a conservative deeming rate based on portfolio value
• no dividend income if the evidence is insufficient

This can create very different borrowing power results between lenders.

Why some lenders only use 80% of dividend income

Some lenders shade investment income because it may not be guaranteed.

For example, if your dividend income is $20,000 per year, a lender that uses 80% may assess only $16,000.

This shading allows for the risk that:

• dividends may reduce
• share prices may fall
• managed fund distributions may vary
• the portfolio may be sold
• income may not repeat
• franking credits may not translate to cash flow
• interest rates may change for cash investments

A reduced figure can still help borrowing power, but it may be less than the income you actually received.

Can franked dividends be used?

Yes, some lenders may consider franked dividends.

Franked dividends are dividends that include franking credits because tax has already been paid at the company level.

For home loan purposes, the lender may focus on the income that can be verified and used in servicing.

A lender may ask:

• are the dividends shown in your tax return?
• are franking credits included separately?
• does the lender use gross dividend income or cash dividend income?
• are the shares still held?
• is the income consistent over time?
• does the dividend income appear in your investment statement?

Not every lender treats franking credits the same way.

Can unfranked dividends be used?

Yes, unfranked dividends may be considered if they are verified and ongoing.

A lender may review:

• tax return income
• dividend statements
• investment portfolio statements
• bank credits
• shareholding evidence
• consistency over time
• whether the shares are still held

The lender may still shade the income or use a conservative figure if the income varies.

Can franking credits be used for borrowing power?

Sometimes, but lender treatment varies.

Franking credits may appear in your tax return as part of investment income, but they are not the same as cash deposited into your bank account.

Some lenders may consider franked dividend income and franking credits as part of investment income. Others may focus more on cash income received.

A lender may ask:

• were franking credits included in taxable income?
• did you receive a tax refund because of franking credits?
• does the lender’s calculator recognise franking credits?
• is the income treated as fully taxable?
• is the cash dividend enough without franking credits?

This is a technical area, and the lender’s calculator treatment matters.

Related research: Do Credit Card Limits Affect Your Home Loan Borrowing Power?

Can managed fund distributions be used?

Yes, managed fund distributions may be used by some lenders.

A managed fund may pay income from:

• dividends
• interest
• realised gains
• trust distributions
• foreign income
• rental income inside the fund
• other investment returns

The lender may ask whether the distribution is recurring investment income or partly capital gains.

Some lenders specifically exclude capital gains because they are not considered ongoing income.

Can ETF distributions be used?

Yes, ETF distributions may be considered if they are verified.

ETF income may include:

• dividends
• distributions
• interest income
• foreign income
• capital gains components
• franking credits

A lender may want to see:

• tax return evidence
• annual tax statements
• portfolio statements
• bank credits
• current holding statement
• evidence the investment still exists

If the ETF distribution includes a large one-off capital gains component, the lender may exclude that part.

Can share portfolio income be used?

Yes, share portfolio income may be used if the lender accepts investment income.

A lender may assess:

• portfolio value
• shareholding statements
• dividend history
• tax returns
• bank credits
• stockbroker reports
• current holdings
• holdings from 12 months ago
• whether the portfolio has reduced
• whether any shares are pledged to a margin loan

A large portfolio can help support the income, but the lender still needs an acceptable calculation method.

Does the share portfolio need to be in your name?

Usually, yes.

Lenders typically want the investment assets to be owned by the borrower, guarantor or relevant applicant whose income is being used.

This means the lender may ask whether the shares are owned by:

• you personally
• your spouse
• both borrowers jointly
• a guarantor
• a company
• a family trust
• a self-managed super fund
• another related entity

If shares are held by a company, trust or SMSF, the income may be assessed differently from personal dividend income.

What if the shares are owned jointly?

Jointly owned shares may still be accepted, but the lender may only use the borrower’s share of the income.

For example, if you own the portfolio 50/50 with another person, the lender may only use 50% of the dividend income unless the other owner is also part of the loan structure.

The lender may check:

• ownership percentage
• who receives the dividend income
• whether the co-owner is a borrower
• whether the co-owner is a spouse
• whether the income is declared in each tax return
• whether the portfolio statement confirms joint ownership

The ownership structure matters.

What if the shares are owned by a family trust?

If shares are owned by a family trust, the income may be treated as trust income rather than ordinary personal dividend income.

The lender may ask for:

• trust tax returns
• distribution statements
• personal tax returns
• trust deed
• financial statements
• evidence of actual distributions
• accountant letter
• beneficiary details
• company trustee details

Trust distributions can be accepted by some lenders, but the evidence is usually more complex.

What if the shares are owned by a company?

If shares are owned by a company, the lender may not treat the dividends as your personal income unless they are distributed or paid to you.

The lender may assess:

• company financial statements
• company tax return
• personal tax return
• dividends paid to you
• shareholder structure
• ownership percentage
• retained profits
• business debts
• accountant confirmation

For borrowers with a minority shareholding, some policies may only allow company profits to be used if supported by actual dividends received.

What if you have a minority shareholding in a company?

This can be important.

If you hold a minority shareholding, a lender may not allow you to use company profit as if it were your personal income.

They may require evidence of actual dividends received.

This is because a minority shareholder may not control whether profits are distributed.

A lender may ask:

• what percentage do you own?
• are other shareholders related to you?
• were dividends actually paid?
• are the dividends shown in your tax return?
• are the dividends expected to continue?
• does the company have a history of paying dividends?
• are there retained earnings but no cash distribution?

Company profit and personal dividend income are not the same thing.

Can business dividends be used?

Business dividends may be used if they are paid to you and properly verified.

However, business dividends are often assessed under self-employed, company or trust income policy.

A lender may need:

• personal tax returns
• company financial statements
• company tax returns
• dividend statements
• bank credits
• shareholding details
• accountant letter
• evidence dividends are ongoing

If the dividend is a one-off distribution of retained profit, the lender may not treat it as ongoing income.

Can retained company profits be used instead of dividends?

Sometimes, but this is different from dividend income.

If you own a business, some lenders may use company profit in servicing based on your ownership rights, business financials and add-backs.

However, if you are a minority shareholder, retained profits may not be usable unless dividends have actually been paid.

A lender may be cautious because retained profits are not necessarily available to you personally.

They may ask:

• do you control the company?
• what is your ownership percentage?
• are other shareholders involved?
• can you access the funds?
• have dividends been paid before?
• is the profit recurring?
• are there business debts or commitments?
• are profits being retained for business operations?

This is why actual dividend payments can be important.

Can dividend income from overseas shares be used?

Possibly.

Foreign dividend income may be considered by some lenders, but it can be more complex.

The lender may need to consider:

• currency
• country of investment
• tax documents
• foreign income statements
• Australian tax return treatment
• exchange rate conversion
• whether the income is ongoing
• whether the shares are still held
• whether foreign withholding tax applies

Some lenders may shade foreign income or only accept income from certain currencies or countries.

If foreign dividend income is material, lender selection becomes important.

Can interest income be used for a home loan?

Yes, some lenders may accept interest income from cash investments.

This may include income from:

• savings accounts
• term deposits
• cash management accounts
• interest-bearing investment accounts

Some lenders may exclude interest from offset accounts because the offset benefit reduces loan interest rather than creating separate investment income.

A lender may ask for:

• bank statements
• tax returns
• interest statements
• term deposit statements
• account balance evidence
• evidence the cash is still held

Interest income may be lower or higher depending on rates, so lenders may assess it conservatively.

Can term deposit interest be used?

Yes, term deposit interest may be used by some lenders if it is ongoing and verified.

A lender may review:

• term deposit balance
• interest rate
• maturity date
• interest payment frequency
• ownership
• whether funds will be used for deposit
• whether the investment will remain after settlement
• tax return evidence

If the term deposit will be used as the home loan deposit, the interest income may not continue after settlement.

Can offset account interest be used?

Usually, offset accounts are treated differently from interest-bearing investment accounts.

An offset account does not normally pay interest to you. It reduces interest charged on your home loan.

For that reason, some lenders may specifically exclude offset accounts when considering interest income.

A lender may still consider the cash balance for funds to complete or savings, but it may not be treated as investment income.

Can capital gains be used as income?

Usually, no.

Capital gains are generally not treated as ongoing income for servicing.

For example, if you sold shares and made a $50,000 capital gain, that may increase your cash position, but it may not help borrowing power as recurring income.

A lender may treat sale proceeds as:

• savings
• deposit funds
• funds to complete
• debt reduction funds
• investment asset conversion

But they may exclude capital gains from ongoing income because the gain depends on selling an asset and may not repeat.

Why capital gains are treated differently from dividends

Dividends are paid by an investment while the investment is still held.

Capital gains usually occur when the investment is sold.

This matters because a home loan needs ongoing repayment capacity.

Dividend income may continue if the investment remains held and companies keep paying dividends. Capital gains usually require selling assets and cannot be assumed every year.

A lender may exclude:

• share sale profits
• managed fund capital gains components
• one-off realised gains
• crypto trading gains
• asset sale proceeds
• business asset sale proceeds

These may help your deposit, but not necessarily your income assessment.

Can dividend reinvestment plan income be used?

Possibly, but the lender may ask whether you receive cash or reinvest the dividends.

A dividend reinvestment plan means dividends are used to buy more shares instead of being paid to your bank account.

A lender may still see dividend income in tax records, but it may not improve cash flow in the same way as cash dividends.

The lender may ask:

• are dividends paid in cash or reinvested?
• can the reinvestment be stopped?
• is the income shown in tax returns?
• is the portfolio still held?
• does the lender treat reinvested dividends as usable income?
• is cash flow available for loan repayments?

If dividends are automatically reinvested, the lender’s treatment may vary.

Can dividend income be used if it is not in your bank account?

Maybe.

Dividend income may appear in a tax return even if it was reinvested, credited to a brokerage account or paid to a cash management account.

A lender may still consider it if the income is verified and acceptable under policy.

However, the lender may ask for evidence showing:

• the dividend was paid
• where it was paid
• whether it was reinvested
• whether the asset still exists
• whether the income is ongoing
• whether cash flow is available

Bank credits can be helpful, but they are not always the only way to verify dividend income.

What if you recently sold the shares?

If you sold the shares, the dividend income may no longer continue.

The lender may ask:

• were the shares sold?
• how much of the portfolio remains?
• did you use the proceeds for deposit?
• will dividend income continue after settlement?
• was the income from investments no longer held?
• does the current portfolio support the same income?

If the income was generated by assets you no longer own, the lender may exclude it.

What if you plan to sell shares for the deposit?

Selling shares can help with deposit funds, but it may reduce future dividend income.

For example, if your borrowing power relies on $20,000 of annual dividends, but you sell half the portfolio for the deposit, the lender may reduce the income.

A lender may need to know:

• how much of the portfolio will be sold
• which shares will remain
• whether dividend income will reduce
• whether capital gains tax applies
• whether sale proceeds are enough for settlement
• whether the remaining income still supports the loan

You should not assume the lender will use dividend income from shares that will be sold before settlement.

What if you borrow against the share portfolio?

If you have a margin loan or other investment loan secured by shares, the lender may assess both the income and the debt.

A lender may consider:

• margin loan balance
• margin loan limit
• interest cost
• gearing level
• whether dividends are used to service the margin loan
• whether the shares are security for the loan
• whether income should be discounted
• whether the margin loan could be called

Some policies may require dividends from shares held as security for a margin loan to be discounted.

Investment debt cannot be ignored just because the portfolio also produces income.

Can margin loan dividends be used?

Possibly, but the income may be treated conservatively.

If shares are held as security for a margin loan, the lender may consider that dividends are linked to an investment debt.

A lender may not want to count the full dividend income while ignoring the margin loan risk.

They may ask:

• is there a margin loan?
• what is the limit?
• what is the balance?
• what interest is paid?
• are dividends used to cover margin interest?
• what happens if the portfolio value falls?
• is the margin loan being refinanced or retained?

If you have a margin loan, disclose it early.

Can dividend income be used if you are retired?

Yes, dividend income may be considered for retired borrowers, but the lender may assess age, loan term and retirement income strategy carefully.

A retired borrower may have income from:

• dividends
• managed funds
• term deposits
• superannuation pension
• annuities
• Age Pension
• rental income
• investment portfolio drawdowns

The lender may consider whether the investment income is ongoing and whether there is a realistic exit strategy.

For older borrowers, lenders may also consider loan term, asset position and how the debt will be repaid over time.

Can dividend income be used for an investment loan?

Yes, dividend income may be used for an investment loan if accepted by the lender.

The lender may assess:

• dividend income
• employment income
• rental income
• existing debts
• proposed investment loan repayments
• living expenses
• margin loans
• share portfolio value
• assessment buffers
• property expenses

Dividend income can help, but it may be shaded and may not be enough to overcome high existing commitments.

Can dividend income be used for refinancing?

Yes, dividend income may be used for refinancing if the lender accepts it.

A refinance may involve:

• switching lenders
• lowering the rate
• consolidating debt
• accessing equity
• releasing cash out
• refinancing after retirement
• removing a guarantor
• changing loan structure

The lender may still need current investment evidence and may check whether the dividend-producing assets remain held.

If the refinance includes cash out, the lender may ask whether any funds will be invested and whether future income is being relied on.

Can dividend income help first-home buyers?

Yes, dividend income may help first-home buyers if it is acceptable under lender policy.

This may apply to first-home buyers who have invested before buying property.

A lender may review:

• share portfolio value
• dividend history
• tax returns
• bank credits
• deposit source
• whether shares will be sold for deposit
• genuine savings
• HECS or HELP debt
• living expenses
• LVR
• mortgage insurance

If shares are being sold for the deposit, the remaining dividend income may need to be recalculated.

Can dividend income be used with PAYG income?

Yes, dividend income may be added to PAYG income if accepted.

This may help borrowers such as:

• salaried professionals with share portfolios
• employees with employee share scheme dividends
• executives with investment portfolios
• retirees with part-time work
• investors with multiple income sources
• borrowers with passive income

The lender may assess each income source separately.

PAYG salary may be used at 100%, while dividend income may be shaded or averaged.

Can dividend income be used with self-employed income?

Yes, but the application can be more complex.

A self-employed borrower may have:

• business income
• company dividends
• trust distributions
• personal share dividends
• interest income
• managed fund income
• retained company profits

The lender may need to separate personal investment income from business income.

They may ask:

• is the dividend from a personal investment?
• is it from the borrower’s company?
• is it a trust distribution?
• is it already included in business income?
• would using it double-count income?
• is it recurring?
• is it supported by tax returns?

Double-counting is a common risk in complex income applications.

Related research: Self-Employed Home Loans: Which Australian Lenders May Accept 1-Year Financials, 1-Year ABNs or Alt Doc Income?

What documents do lenders need for dividend income?

The exact documents depend on the lender, but you may need:

• two most recent personal tax returns
• Notices of Assessment
• investment portfolio statement
• shareholding statement
• dividend statement
• managed fund annual tax statement
• ETF annual tax statement
• bank statements showing dividend credits
• stockbroker holding report
• cash management account statement
• term deposit statement
• evidence of current portfolio value
• statement from 12 months ago, where needed
• margin loan statement, if applicable

The lender may use a combination of income evidence and asset evidence.

What should an investment statement show?

An investment statement should ideally show:

• account holder name
• portfolio value
• holding details
• income paid
• dividend history
• distribution history
• date of statement
• current balance
• investment provider or broker
• whether the holdings are still current
• whether income has been paid over 12 months

Some lenders may require statements to be recent, such as within the last few months.

Why current portfolio value matters

Current portfolio value matters because the lender needs to know the income-producing asset still exists.

If dividend income was declared in last year’s tax return but the shares have since been sold, the income may not continue.

A lender may ask for current evidence such as:

• stockbroker holding report
• share registry statement
• managed fund statement
• investment portfolio statement
• cash management statement
• bank statement
• term deposit statement

Some lenders may compare the current investment balance with the balance from 12 months ago and use the lower value when applying a conservative deeming approach.

What is a deeming rate for investment income?

Some lenders may use a deeming rate when actual investment income is unknown or difficult to verify.

A deeming rate is a conservative assumed rate of return applied to the investment asset value.

For example, if the lender uses a 3% deeming rate on a verified $500,000 investment portfolio, the assumed income may be $15,000 per year before any further lender shading.

A deeming rate can be useful where:

• actual income is hard to prove
• dividend history is limited
• investments have recently changed
• income statements are not available
• the lender wants a conservative estimate

The asset value still needs to be verified.

What if actual dividend income is higher than the deeming rate?

If actual dividend income is higher than the deeming rate, the lender may still use the lower or more conservative figure depending on policy.

For example, your portfolio may have produced a 6% dividend yield last year, but the lender may use a 3% deeming rate if they cannot verify ongoing income or if policy requires it.

This can reduce borrowing power.

To improve the chances of using actual income, you may need:

• tax returns
• dividend statements
• portfolio reports
• bank credits
• evidence of consistency
• evidence the shares are still held

What if actual dividend income is lower than the deeming rate?

If actual income is lower than the deeming rate, a lender may use the lower actual income or a conservative calculation.

Lenders are generally cautious with investment income.

They may prefer the lower of:

• actual historical investment income
• deemed investment income
• current portfolio-supported income
• recent bank credits
• tax return income

This is why a high-value portfolio does not always mean high assessable income.

What if dividend income is inconsistent?

Inconsistent dividend income can still be used by some lenders, but the figure may be reduced.

A lender may look at:

• two years of tax returns
• whether income is increasing or decreasing
• whether one year included a one-off payment
• whether companies changed dividend policy
• whether the portfolio changed
• whether investments were bought or sold
• whether distributions included capital gains

If income varies, a lender may use the lower figure rather than the average.

What if dividend income increased this year?

A recent increase may help, but the lender may not use it in full.

Dividend income may increase because:

• you bought more shares
• companies paid higher dividends
• special dividends were paid
• managed funds made larger distributions
• interest rates increased
• the portfolio changed
• one-off capital gains were distributed

The lender may ask whether the increase is sustainable.

If the increase is due to a one-off special dividend or capital gain, it may be excluded.

What if dividend income decreased this year?

A decrease can reduce borrowing power.

Dividend income may decrease because:

• companies cut dividends
• shares were sold
• portfolio value fell
• managed fund distributions reduced
• interest rates changed
• investments were moved to lower-yield assets
• margin loan costs increased

A lender may use the lower current income if the decrease appears ongoing.

Can special dividends be used?

Special dividends are usually treated cautiously.

A special dividend may be a one-off payment by a company.

A lender may ask:

• was it a normal dividend or special dividend?
• has it happened before?
• is it likely to continue?
• was it linked to an asset sale?
• is it included in tax return income?
• would using it overstate ongoing income?

If the special dividend is not expected to repeat, the lender may exclude it.

Can share trading income be used?

Share trading income is different from dividend income.

If you buy and sell shares actively, the lender may not treat profits as ongoing passive income.

Share trading may be assessed as:

• self-employed income
• investment gains
• capital gains
• speculative income
• unacceptable income, depending on evidence and policy

The lender may ask for tax returns and evidence that the income is recurring.

Capital gains from selling shares are usually not treated the same as dividend income.

Can crypto income be treated like dividend income?

Usually, no.

Crypto staking rewards, trading gains or token distributions are not the same as traditional dividends from listed shares.

Some lenders may not accept crypto-related income because it can be volatile and difficult to verify.

If crypto income is relevant, the lender may need:

• tax returns
• transaction statements
• exchange records
• bank credits
• evidence of recurring income
• accountant confirmation

But many lenders may exclude it or treat it conservatively.

Can employee share scheme income be used?

Employee share scheme income can be complex.

A borrower may receive:

• shares
• options
• performance rights
• restricted stock units
• dividends on employee shares
• taxable employee share scheme income
• capital gains when shares are sold

The lender may separate cash dividend income from equity grants or sale proceeds.

They may ask:

• are dividends paid in cash?
• are shares vested?
• are options exercisable?
• is income taxable but not cash?
• are shares still held?
• has the income repeated?
• is it a one-off vesting event?

Employee share scheme benefits may not be treated like ordinary salary.

Does dividend income affect borrowing power?

Yes, dividend income can improve borrowing power if the lender accepts it.

It may help if:

• you have consistent dividend income
• the income is declared in tax returns
• the portfolio remains held
• the lender uses a fair percentage
• debts are manageable
• LVR is acceptable
• bank statements are clean
• the income is not one-off

Dividend income may not help much if:

• the lender excludes it
• it is heavily shaded
• the portfolio will be sold for deposit
• capital gains are included in the figures
• the income belongs to a trust or company
• margin lending reduces the benefit
• evidence is incomplete

Does LVR matter when using dividend income?

Yes, LVR can matter.

LVR means loan-to-value ratio. It compares the loan amount to the property value.

A dividend-income application may be easier if:

• the LVR is lower
• no lenders mortgage insurance is required
• the borrower has strong assets
• the dividend income is not essential
• the property is standard residential security
• the credit profile is clean
• the income evidence is complete

If the loan is high LVR and relies heavily on dividend income, lender options may be narrower.

Does lenders mortgage insurance affect dividend income?

Yes.

If lenders mortgage insurance applies, investment income may be assessed more conservatively.

This can matter where:

• your deposit is below 20%
• dividend income is needed to pass servicing
• the dividend history is short
• the portfolio has changed
• the income is irregular
• the shares are held through a company or trust
• there is a margin loan
• the property is non-standard

A lender may accept the income, but the mortgage insurer may still require stronger evidence.

Can dividend income be used for a low doc loan?

Possibly, but it depends on the lender and the income structure.

If dividend income is part of self-employed or company income, a low doc lender may request alternative evidence.

This may include:

• accountant letter
• business bank statements
• BAS
• company financial evidence
• dividend statements
• tax portal evidence
• portfolio statement

However, passive personal dividend income is often easier to support with tax returns and investment statements than through low doc methods.

Can dividend income be used without tax returns?

Sometimes, but options may be limited.

Some lenders may accept investment statements, bank credits or a deeming approach where actual income is unknown.

However, tax returns are often useful because they show declared investment income.

Without tax returns, a lender may ask for:

• 12 months of dividend credits
• investment statements showing income paid
• current portfolio balance
• stockbroker reports
• managed fund annual statements
• term deposit statements
• evidence of ownership

A lender may still use a conservative figure.

What if dividend income was not declared in your tax return?

This can be a problem.

Lenders usually prefer income that is declared and verifiable.

If dividend income is missing from your tax return, the lender may ask why.

Possible explanations might include:

• the income was earned after the tax year
• the return has not yet been lodged
• the income belongs to another entity
• the dividend was reinvested but not correctly recorded
• an amendment is needed
• the income is not actually yours

Undeclared income may not be accepted.

What if the latest tax return is not available?

If the latest tax return is not available, the lender may use other evidence depending on policy.

This may include:

• previous tax returns
• ATO income statements
• annual tax statements
• investment statements
• bank credits
• stockbroker reports
• managed fund statements
• accountant letter

However, if the income is variable or important for servicing, waiting until the latest tax return is available may improve options.

Can dividend income be grossed up?

Some investment income may appear as gross taxable income, including franking credits, while cash received may be different.

The lender’s calculator will determine whether the income is treated as taxable or non-taxable and whether any gross-up is allowed.

Some policies treat investment income as fully taxable for servicing.

This means the lender may include the income, but then tax it in the serviceability calculation.

Do not assume that the tax return figure, cash dividend or franked-up amount will all produce the same borrowing result.

10 common mistakes with dividend income

1. Do not assume all dividend income will be used at 100%.
2. Do not include capital gains as ongoing dividend income.
3. Do not rely on dividends from shares you plan to sell for the deposit.
4. Do not assume franking credits are treated the same by every lender.
5. Do not ignore margin loans.
6. Do not assume company profits are the same as personal dividends.
7. Do not use trust distributions without proper trust evidence.
8. Do not rely on a one-off special dividend.
9. Do not apply without current portfolio statements.
10. Do not assume a large portfolio automatically means high borrowing power.

How to improve your chances of using dividend income

Before applying, it helps to prepare the investment evidence clearly.

Useful steps include:

• collect your two most recent tax returns
• collect Notices of Assessment
• collect dividend statements
• collect managed fund annual tax statements
• collect ETF annual tax statements
• collect current portfolio statements
• collect stockbroker holding reports
• collect bank statements showing dividend credits
• identify any capital gains components
• identify whether dividends were franked or unfranked
• disclose any margin loans
• confirm whether shares will be sold for deposit
• avoid double-counting company or trust income
• compare lender policy before applying

The clearer the income evidence, the easier it is for the lender to use the correct figure.

Should you wait before applying?

Sometimes waiting can help.

Waiting may improve your options if:

• the latest tax return is almost ready
• your dividend income has just started
• a new investment statement will soon be available
• you recently bought shares and have no dividend history
• you recently sold part of the portfolio
• your dividend income increased due to a one-off payment
• your managed fund annual tax statement is not ready
• your margin loan statement needs updating
• you need the income to pass servicing

You may not need to wait if:

• dividend income has been consistent for two years
• current portfolio value is documented
• the income is not essential for servicing
• the lender can use a deeming rate
• your tax returns already verify the income
• the shares will not be sold for deposit

A broker can compare whether applying now or waiting would improve your lender options.

Example scenarios

Scenario 1: PAYG employee with share dividends

You earn a salary and receive $12,000 per year in dividends from Australian shares.

Some lenders may include part of the dividend income if your tax returns and current portfolio statements support it.

Scenario 2: Retired borrower with investment portfolio income

You are retired and receive dividends, managed fund distributions and interest income.

The lender may consider the income, but may also review loan term, age, exit strategy and portfolio sustainability.

Scenario 3: Shares sold for deposit

You received dividend income last year but plan to sell the shares for the home deposit.

The lender may exclude or reduce the dividend income because the asset will no longer produce the same income.

Scenario 4: Company shareholder with retained profits

You own 25% of a company that made a profit but did not pay dividends.

The lender may not allow you to use the company profit as personal income unless actual dividends were received and verified.

Scenario 5: Managed fund with large capital gains distribution

Your managed fund paid a large distribution that included capital gains.

The lender may exclude the capital gains component and use a lower ongoing income figure.

Scenario 6: Portfolio with margin lending

You receive dividends from shares held under a margin loan.

The lender may consider the margin loan commitment and may discount the dividend income linked to the secured shares.

So, can you use dividend income for a home loan?

Yes, you may be able to use dividend income for a home loan in Australia.

The strongest applications usually have:

• consistent dividend income
• two years of tax return evidence
• current investment statements
• assets still held by the borrower
• clear separation of dividends and capital gains
• no undisclosed margin loan
• no reliance on one-off special dividends
• manageable debts
• suitable deposit or equity
• lender policy that accepts investment income

Dividend income can help borrowing power, but the lender may use a conservative figure rather than the full amount received.

Need help using dividend income for a home loan?

A mortgage broker can help compare lenders that may consider dividend income, franked dividends, managed fund distributions, ETF income, term deposit interest, investment portfolio income and shareholder dividends.

We can review your tax returns, investment statements, portfolio value, margin loans, LVR, deposit and borrowing power before you apply.

If you receive dividend income and want to buy or refinance, speak with a mortgage broker who understands how different lenders assess investment income.