I havent found low doc clients to be any dodgier than other clients.
The real ones to watch out for are the ones trying to do fraud.
They will come to you with payslips, rather than an accountants declaration though.
Some examples of low doc clients;
A tradeperson who spent part of the last financial year PAYG, assessors discount that part of the tax return, even though very similar income PAYG to self employed.
tradie recently returned from overseas. has a bunch of work lined up, sometimes with the same client, but no aus tax return for the previous year, and no formal 'contract'.
Property investors running a rooming house, or self managing properties etc. Income discounted heavily as a normal loan. as low doc it passes
Property investors whose investment income makes up more than 50% of their total income. again, many lenders would only use the taxable income from the return, and still discount to 80% the rental income, rather than the 'true' income of the client.
business owner whose tax affairs are complicated. multiple companies, trusts, partnerships etc. with 12 months BAS or accountants dec they avoid any potential drama's, such as having personal guarantees from some of the parties to the trusts etc etc
yes, there might be a fit with a normal loan for each of these scenarios, with a specific lender, and a specific LVR. However that lender may not suit the client for another reason, meaning low doc is the best option.