Base Salary
The fixed regular component of a PAYG employee income, excluding overtime, bonuses, commissions, and allowances.
In detail
Base salary is the guaranteed component of an employee pay, typically expressed as an annual figure in an employment contract. Lenders take base salary at 100 per cent for serviceability because it is considered reliable and ongoing. Variable components like overtime, bonuses, and commissions are shaded because they are not guaranteed.
Some employment arrangements blur the line. Salary packaging, car allowances, and meal allowances may or may not count as base salary depending on how they are taxed and whether they are guaranteed. Shift loadings for employees on permanent rosters are sometimes accepted as base while casual loadings are not.
Why it matters for brokers
Getting the base salary right determines how much of the income feeds into serviceability at full weight. Misclassifying an allowance as base salary can cause policy breaches if the lender audit catches it.
Example in practice
A borrower payslip shows base pay of $4,000 per fortnight plus a $200 car allowance and $350 in shift loadings. The broker identifies $4,000 as base salary ($104,000 annual), treats the car allowance at 100 per cent because it is taxed as salary, and treats the shift loadings at 80 per cent due to their variable nature.
Related terms
PAYG Income
Income received as a Pay As You Go employee where tax is withheld by the employer before the wage is paid.
Year to Date (YTD) Income
The cumulative gross income an employee has earned since the start of the financial year, shown on each payslip.
Overtime Income
Pay received for hours worked beyond a standard contract, usually at a penalty rate above base hourly pay.
Bonus Income
Discretionary or performance based payments made in addition to base salary, usually paid annually or biannually.
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