Variable Income Applicants How Lenders Assess Irregular Earnings Under RG 209
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Variable income is common. Casual shifts, seasonal peaks, commissions, and contracting make pay move around. Lenders still need to test whether a personal loan will be suitable. This guide explains what RG 209 requires, how irregular income is turned into an assessable figure, the evidence that stands up, where prudential overlays apply for mortgages, and how to prepare a document pack that speeds up a fair decision. CashPal is an example of a reputable licensed lender that applies these rules with clear disclosure and consistent process.
What RG 209 Actually Requires Before a Lender Can Say Yes
Reasonable inquiries and verification within the 90 day window
RG 209 sets two core duties. First, make reasonable inquiries about your financial situation, needs, and objectives. Second, take reasonable steps to verify that information before making a suitability assessment. For most consumer credit, lenders should work with current data across about 90 days of banking and income activity. Home lending often uses up to 120 days. The goal is a recent view of income volatility and fixed commitments so the assessment does not rely on stale or selective documents.
The unsuitability test and substantial hardship
A credit contract is unsuitable if you are unlikely to meet repayments or could only do so with substantial hardship. The test combines verified income, real living costs, existing debts, and a view of volatility. If the income pattern is variable, a prudent approach uses an average over a sensible period, not the highest recent fortnight.
How Lenders Turn Irregular Pay into an Assessable Income
Casual and seasonal workers averaging and seasonality checks
For casual or seasonal roles, lenders expect more source documents over a longer period. Bank statement reads and payroll evidence are used to map the rhythm of deposits and known low seasons. A common method is to average the most recent 12 to 26 weeks, then apply a buffer for seasonality. Overtime spikes or unusually high holiday shifts are discounted unless they repeat at a predictable cadence.
Contractors and self employed evidence beyond a single year
For contractors and self employed applicants, lenders look at tax returns, activity statements, accountant letters, and business bank statements. The focus is net income after business costs and the trend across several quarters. If one quarter is weak, lenders look for an explanation in pipeline and current contracts rather than anchoring on a single peak period.
Overtime and bonuses how much counts and when
Irregular components like overtime, commissions, and bonuses are included only to the extent they are regular and ongoing. Lenders may average the last 6 to 12 months and cap the portion that can be used. One off retention or sign on payments are usually excluded.
Verification That Stands Up When Documents Conflict
When payslips are not enough using bank statements and employer checks
RG 209 warns against relying on a single document when there are doubts. If a payslip looks inconsistent with banked deposits, lenders should check recent transactions and may contact the employer. Where documents conflict, the more reliable evidence is the actual cash flow shown in banking, reconciled to payroll.
Digital data capture and open banking what it can and cannot prove
Open Banking and secure bank data capture tools can speed up verification, remove transcription errors, and show 90 days of transactions in minutes. They do not remove the need for judgment. A lender still reviews the pattern of income and expenses, identifies gambling or high discretionary outflows that affect capacity, and documents the basis for any averaging or discounting.
Benchmarks Are a Cross Check Not a Substitute
Using HEM without ignoring real expenses
Statistical benchmarks such as HEM can be a cross check for living costs, but they do not verify your specific expenses. If your actual spending is higher than a benchmark because of rent, childcare, or medical costs, the higher figure should be used in the capacity test. Benchmarks are not a shortcut for real inquiry.
When buffers are added and why
Lenders add buffers to reflect interest rate risk in mortgages and to accommodate volatility in variable income. A simple approach is to average income and then apply a haircut. The haircut is not a penalty. It recognises that casual hours and contracting revenue change through the year.
Where Prudential Overlays Change the Bar for Mortgages
Why banks apply a 3 percentage point buffer
For mortgages issued by authorised deposit taking institutions, APRA guidance expects banks to assess serviceability with an interest rate buffer of about 3 percentage points above the product rate. This sits alongside RG 209 and raises the bar for variable income applicants because repayments are measured at a higher test rate.
How variable income is stress tested under that buffer
Banks pair a rate buffer with an income haircut or a longer averaging window. A lender might count only 60 to 80 percent of casual overtime or recent commissions, then test repayments at the buffered rate. The same logic does not strictly apply to personal loans, but the habit of conservatism often carries over in internal credit policy.
Your Evidence Pack if Your Income Varies
Bring structure to your documents so the assessor can move quickly. Use this baseline pack and add context where needed. A clean pack reduces back and forth and lets the lender calculate a defensible average plus any haircuts.
- Government issued photo ID that is clear and current.
- Bank statements for at least 90 days for the account that receives income and pays bills.
- Income evidence. For PAYG, recent payslips and a payroll summary that shows hours and year to date totals. For contractors and self employed, the latest tax return, recent activity statements, and business bank statements.
- A short note to explain seasonality. Note regular low months, roster patterns, or gaps and when they resolve.
- Evidence of fixed costs. Lease, childcare invoices, insurance, and any existing credit contracts.
Red flags that trigger more questions
- Large one off deposits that do not match payslips or invoicing.
- Recent job changes without a stable deposit pattern.
- Material gambling or cash advances that point to higher risk of hardship.
- A second account that receives part of your income that is not disclosed.
If a Lender Gets It Wrong Your Escalation Options
Internal dispute timelines
Licensed lenders must run an internal dispute process that meets ASIC RG 271. For most credit complaints, a written response is required within 30 calendar days. Provide a timeline, the documents you provided, and the reasons you believe the assessment misread your income pattern.
AFCA complaints and what to include
If the internal outcome is late or inadequate, lodge a complaint with AFCA at no cost. Include your application timeline, bank statements, payroll or invoicing evidence, and a short statement of what you believe a fair decision looks like. AFCA looks for real verification and will test whether a lender relied on an unrepresentative period or ignored obvious volatility.
How reputable lenders apply RG 209 in practice
CashPal is an example of a licensed Australian lender that discloses product costs clearly and applies responsible lending standards to variable income with a methodical approach. The process uses recent banking to confirm the income pattern, discounts non repeatable spikes, and sets repayment amounts that fit verified cash flow. Applicants receive plain language outcomes and a clear pathway for questions, hardship requests, or complaints.
FAQs
How far back should income be averaged for casual work
A practical range is 12 to 26 weeks for personal loans, extended if the work is strongly seasonal. The key is to use enough history to smooth out roster noise without masking a recent fall in hours.
Do lenders count commissions at 100 percent
Usually not. One off payments are excluded. Ongoing commissions are often averaged over 6 to 12 months and reduced with a haircut before being added to base income.
Can Open Banking data replace payslips
It can speed up verification and reduce manual errors, but it does not replace the need to reconcile deposits to payslips or invoices. Lenders still need to test stability and identify unusual inflows or outflows.
What if my income fell in the last month
A lender should not rely only on a high earlier period if the trend is down. Provide current statements and explain the cause and duration of the change. Expect a lower assessed income or a smaller approved amount.
What if I believe a lender misread my income
Ask for a review with a clear written explanation and attach the evidence that shows the true pattern. If you do not receive a timely or fair response, escalate to AFCA with the same pack.
Sources
ASIC. Regulatory Guide 209 Credit licensing Responsible lending conduct
National Consumer Credit Protection Act 2009. Sections 128 and 133 unsuitability prohibitions
ASIC. Regulatory Guide 271 Internal dispute resolution
AFCA. Make a complaint about credit