Bonus Income
Discretionary or performance based payments made in addition to base salary, usually paid annually or biannually.
In detail
Bonus income sits in the variable category and is typically shaded between 60 and 80 per cent for serviceability. Lenders almost always require two years of bonus history through payment summaries or employer letters before including any bonus in income calculations. Single year bonuses are usually excluded entirely because they lack a track record.
Documentation matters. Lenders usually want either two payment summaries showing the bonus amounts or an employer letter confirming the bonus is regular and ongoing. Short term incentive schemes and deferred bonuses require extra evidence because the timing of payment may not match the calendar.
Why it matters for brokers
Bonus income can significantly boost borrowing capacity for senior corporate clients. Getting the evidence right and choosing a lender that accepts the shading method helps these clients qualify for the loan size they need.
Example in practice
An executive earns $180,000 base salary and received bonuses of $45,000 and $40,000 over the past two financial years. Averaging the bonuses gives $42,500, shaded at 80 per cent to $34,000. Total assessable income is $214,000.
Related terms
Commission Income
Variable income earned as a percentage of sales or deals closed, typically paid on top of a base salary in roles like real estate or car sales.
Base Salary
The fixed regular component of a PAYG employee income, excluding overtime, bonuses, commissions, and allowances.
Overtime Income
Pay received for hours worked beyond a standard contract, usually at a penalty rate above base hourly pay.
Year to Date (YTD) Income
The cumulative gross income an employee has earned since the start of the financial year, shown on each payslip.
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