Receipt 1RG 209.61 to 209.64
Income that comes in lumps
ASIC calls a borrower’s income “a key factor” in their capacity to repay, and says a lender needs information about its amount, frequency and source, and about changes that are reasonably foreseeable. A single recent payment is not enough: the lender needs to see whether the income is consistent and likely to stay at that level for the term of the loan. Where reductions are foreseeable, ASIC says a lender is likely to need information about the lower amounts.
The guide gives three examples that fit self-employed and irregular income. ASIC says its examples illustrate and are not rules.
| Example | How the income arrives | What ASIC says a lender could look at |
|---|---|---|
| Seasonal work | A fisherman’s yearly income is earned across the seasons he can work, which cover nine months of the year. | Looking past the fortnightly pay in season to the usual pattern of income and what he sets aside for the months without work, then using the lower amounts across the period the credit is sought for. |
| Gig work | A food delivery worker’s hours and income are highly variable from week to week. | Reading the pattern in his account statements and using the average earned per fortnight over several months. |
| A small business | A business owner’s only income is from her business, and it shows no clear pattern in her personal account statements. | Considering other sources: the business bank account, written advice from her accountant on the business’s profit and loss and the amount available to her as personal income, tax assessment notices and returns, and business activity statements. |
Where each of those papers comes from is in entry 3.
Receipt 2Code s 5 · RG 209.36
Consumer loan or business loan
The responsible lending obligations follow the National Credit Code, which covers credit to a person (or a strata corporation) wholly or predominantly for personal, domestic or household purposes, or to buy, renovate or improve residential property as an investment, among other conditions. Under the Code, the predominant purpose is whichever purpose more than half of the credit is intended for.
ASIC states the consequence plainly. When a loan is wholly or predominantly for a business purpose, none of the responsible lending obligations applies. That holds when the borrower is an individual, and it holds when the loan is secured over the borrower’s home or other personal assets. Its example is a loan to a farmer for essential farm repairs and stock feed, which is for business purposes and not regulated, “regardless of whether it is secured over the farmer’s home.”
Mainly for the household
Inside the Code
Personal, domestic or household purposes, or buying, renovating or improving residential property as an investment, for a person or a strata corporation. The responsible lending obligations apply.
Mainly for the business
Outside the Code
The responsible lending obligations do not apply, even where the borrower is a person and the loan is secured over their home. Other protections still reach small business borrowers: see the last receipt on this page.
Receipt 3Code s 13 · Regulation 68
The business purpose declaration
Before a loan is made, a borrower may be asked to sign a declaration that the credit is to be used wholly or predominantly for business purposes, or for investment other than in residential property. If they do, the Code presumes the loan is not consumer credit unless the contrary is shown. The regulations set the form, and require this warning immediately below it:
“By signing this declaration you may lose your protection under the National Credit Code.”
National Consumer Credit Protection Regulations 2010, regulation 68
The declaration is not the last word. It is ineffective if the lender, or a person such as the broker who arranged it, knew or had reason to believe the money was really for a consumer purpose, or would have known with reasonable inquiries. ASIC gives an example: an application through a broker for $50,000 “for business purposes”, from a borrower who had obtained an Australian Business Number shortly before and gave no details of any business, who then used the money to pay arrears on their home loan. ASIC says the declaration is likely to be found ineffective.
The law also makes it an offence to induce a borrower to make a declaration that is false or misleading in a material particular, with a criminal penalty of 2 years imprisonment, as at October 2026.
Receipt 4RG 209.40
Outside the Code is not outside every rule
ASIC lists protections that small business borrowers keep even though the responsible lending provisions do not apply to them:
- the consumer protection provisions of the ASIC Act, including protections against unfair contract terms;
- rights under the Banking Code of Practice;
- the right to take a dispute to the Australian Financial Complaints Authority, if the lender is a member of AFCA.
What the Banking Code says about a small business in financial difficulty is in entry 6.