How professional practice owners can structure income to borrow more

Most practice owners think the bank cares how profitable their business is. It doesn’t – it cares how much of that profit reliably lands in your personal tax return and how it’s structured.

For doctors, lawyers, accountants, engineers and consultants running practices, structuring income for borrowing power means turning drawings, dividends and profit share into a story that survives a credit assessor’s spreadsheet. Your business might be thriving, but if your returns show low taxable income or erratic distributions, your borrowing capacity can fall by 20–40%.

Here’s the core idea in one paragraph: Australian lenders assess self‑employed and professional borrowers using lodged tax returns, business financials and bank statements, not the “real” cash you feel in the practice. They typically average the last two years’ income or take the lower year if income falls (often by 20% or more), then shade variable income and apply a 3% APRA serviceability buffer. If you want more borrowing power, you need to deliberately shape what shows up on those returns 6–24 months before you apply.

I’ll walk through what that looks like in practice – using examples from medical, legal and consulting practices – and what you can genuinely act on this week.

How your income flows through entities determines how banks see your borrowing power.

How banks actually see your practice income

Drawings, salary and dividends: three labels, one pool

The mistake I see most is assuming banks will just look at practice turnover and trust that “there’s plenty there”. They won’t.

For company, trust and partnership structures, most lenders start from your personal taxable income, then reconcile that back to the business:

• PAYG salary from your practice company
• Director fees
• Partnership distributions
• Dividends
• Trust distributions

Then they check the business tax returns to see your share of net profit and whether profits are being retained.

As I explain in /insights/using-tax-returns-to-prove-income-home-loan, this is where the numbers often break: you might be drawing $450,000 from the practice, but only declaring $260,000 taxable income after aggressive deductions and retained profits. Lenders lend off the $260,000, not what you “could” take.

Partners and principals are usually treated as self‑employed

Even if you get a payslip from the partnership or service trust, once you’re a partner/principal, you’re assessed as self‑employed. Lenders focus on your share of profit from the practice financials, not just drawings.

So for a GP partner, law firm principal or senior consulting partner, the key inputs are usually:

• Your share of net profit before tax (after partner salaries but before distributions)
• Plus allowable add‑backs (e.g. depreciation, one‑off expenses)
• Minus your share of any business debt repayments

Understanding this formula is crucial before you play with salary vs drawings vs dividends.