What is an addback?

Addbacks are expenses that can be added back to an applicant’s income when assessing serviceability for a self-employed loan application.

These expenses are typically found in tax returns or profit and loss statements. When reviewed correctly, and in line with a lender’s policy, they can be treated as income by an experienced broker.

Types of addbacks

When assessing serviceability (or affordability), lenders take different approaches to addbacks. What one lender accepts, another may ignore.

Common addbacks include:

• Depreciation

• Instant asset write-off

• Interest amortisation

• Non-compulsory superannuation

• Non-recurring expenses

• Abnormal expenses

• One-off expenses

• Director’s fees

• Director salaries

• Payments to family members

• Rent (if paid to yourself)

• Ceased finance commitments

• Certain leasing contracts

• Home office expenses

• Bad debts

Do all lenders accept addbacks?

No. Lenders assess addbacks differently.

Some will accept only a limited number of addbacks (typically 2–4 categories). Others take a more flexible approach, provided there is a clear and reasonable explanation.

Certain credit departments apply what can be described as a “common sense” approach — if the addback is logical, well-supported, and genuinely reflects the applicant’s financial position, they may consider it.

This is where working with an experienced broker matters — someone who can interpret financials properly and present them clearly to an underwriter.

Can addbacks increase borrowing capacity?

Yes.

When accepted and properly justified, addbacks can significantly increase an applicant’s borrowing capacity by providing a more accurate view of their true cash flow.

Which lenders consider addbacks?

For full documentation (full doc) loans, most lenders will consider addbacks as part of their serviceability assessment.

However, not all lenders accept all types of addbacks, and their policies can vary widely.

Depreciation as an addback

Depreciation is the most commonly accepted addback.

This is because it is a non-cash expense — it reduces taxable profit but does not impact actual cash flow.

Depreciation may include:

• Vehicle depreciation

• Machinery depreciation

• Plant and equipment

• Property depreciation

Where deals usually fall apart

These are the most common mistakes:

• addbacks are taken “from a checklist” without proper explanation

• no evidence that the expenses are one-off

• no proof that a liability has been ceased

• business structure is ignored (especially with family payments)

And the most common issue is when

the application is submitted to the wrong lender.

What actually works

If you simplify it into practice:

1. Analyse the P&L like a credit analyst, not an accountant

2. Identify relevant addbacks

3. Prepare justification for each one

4. Match the lender to the scenario, not the other way around

Only then submit the application.

Bottom line

Addbacks are not a hack.

They’re a tool.

In the wrong hands it’s just a list of expenses.

In the right hands it’s a way to increase borrowing capacity without manipulation.

If you have a real case, bring the numbers.

We can look at what can realistically be “brought back to life” and what’s better left untouched to avoid issues with credit

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