When Banks Add Back One-Off Business Expenses To Boost Borrowing

One-off and non-recurring business expenses can often be added back to your income for a home loan assessment, but only when a lender is convinced they’re truly abnormal and unlikely to repeat. If you can show an expense was a once-off hit — and your business is otherwise stable — banks may ignore it and use a higher, more realistic income figure.

This can materially lift borrowing power for self-employed borrowers, but it needs planning, evidence and the right lender choice.

Identify and highlight abnormal expenses in your financials before talking to lenders.

1. What counts as a one-off or non-recurring business expense?

A one-off or non-recurring expense is a cost that:

1. Is unusual in size or type for your business; and
2. Is not expected to occur again in the foreseeable future; and
3. Is clearly identifiable in your financials.

1.1 Common examples lenders will look at

Typical one-off or abnormal expenses that may be added back include:

• Legal settlements or litigation costs for a unique dispute.
• Major relocation or fit-out costs when moving premises.
• Large write-off of obsolete stock from a one-time issue.
• Redundancy payouts when restructuring your team.
• Major repair from an insured event (e.g. flood, fire) not covered in full.

These sit alongside more standard add-backs like depreciation and other non-cash charges (covered in more depth in /insights/business-interest-lease-payments-add-backs-separate-personal-commercial-debt).

1.2 Expenses banks usually won’t treat as one-off

Lenders typically won’t add back:

• Marketing splurges that you might repeat when things go well.
• Owner lifestyle costs pushed through the business (travel, cars, dining).
• Ongoing consultancy or contractor costs replacing employees.
• Recurring repairs and maintenance, even if irregular in amount.

If something looks like normal business overhead or disguised personal spending, it will usually be treated as ongoing.

2. When will banks add back one-off expenses in practice?

Each lender has its own credit policy, but there are consistent themes in how they treat non-recurring costs.

2.1 The three tests lenders apply

Most banks will consider adding back an abnormal expense if it passes three tests:

1. Materiality – The amount is large enough to affect borrowing power (e.g. $10k+ for a small business, $50k+ for a larger one).
2. Evidence – There’s clear documentation (invoices, contracts, accountant letter) showing it’s genuinely one-off.
3. Business trajectory – Profit in the surrounding years supports the idea that this cost was abnormal.

Lenders typically use your last two years’ tax returns and financials. They may average the two years, or take the lower year, then add back agreed one-off items.

2.2 Simple worked example: how an add-back lifts borrowing

Assume:

• FY 2024 taxable business profit: $180,000
• FY 2025 taxable business profit: $120,000 (includes $40,000 one-off legal settlement)

Without add-backs, an averaging lender might use:

• Average profit = ($180,000 + $120,000) / 2 = $150,000

If the $40,000 is accepted as one-off:

• Adjusted FY 2025 profit = $120,000 + $40,000 = $160,000
• New average = ($180,000 + $160,000) / 2 = $170,000

That extra $20,000 of income can translate into $100,000–$150,000 more borrowing capacity, depending on other debts and your living expenses (which are stress-tested with HEM and APRA’s 3% buffer – see /insights/living-expenses-hem-apra-buffer-self-employed-stress-tested).