The Pros and Cons of Borrowing in a Company Name

Borrowing Through a Company Isn't Always the Tax Win You'd Expect

Borrowing in a company name changes how your investment loan is treated, who can claim the interest, and what happens if you need to refinance or access equity later. A company can hold the asset and service the debt, but the tax treatment is different to holding property in your own name, and not every lender will touch a company borrower at the same interest rate they'd offer you personally.

Most property investors along the Far South Coast hold rental properties in their own names or through family trusts. Companies get considered when someone's building a portfolio, wants liability protection, or has been told by their accountant that a company structure suits their long-term plan. Whether that's right depends on your income, your debt position, and what you're trying to achieve with the property.

The Main Reason People Borrow in a Company Name

A company limits personal liability if something goes wrong with the investment. If the property runs at a loss and the company can't meet its debts, creditors generally can't chase your personal assets unless you've given a personal guarantee. That protection matters more to someone holding multiple properties or running an active development than it does to someone buying their first rental unit in Merimbula.

Companies also allow multiple shareholders to hold an interest without the complications of joint ownership. Consider an investor who wants to bring in a business partner or family member partway through the investment cycle. A company structure lets you issue shares and adjust ownership percentages without refinancing the whole loan or triggering a transfer of title.

How the Tax Treatment Changes Under the New Rules

Interest on an investment loan used to acquire or hold rental property is deductible against the income that property generates. From the 2027-28 income year, losses on established residential investment properties acquired after 12 May 2026 can only be offset against other residential property income, not against salary or wages. Properties bought before that date, or new builds acquired after that date, can still offset losses against all income.

A company pays tax at a flat 25 per cent rate for base rate entities or 30 per cent otherwise. It doesn't get the benefit of negative gearing against personal income because it doesn't earn personal income. If your rental property runs at a loss, that loss stays inside the company and can only be used against future company profits, subject to various loss recoupment tests. You don't get to reduce your personal tax bill.

For someone on a marginal tax rate above 30 per cent, holding an investment property in their own name and deducting the loss against salary can deliver a bigger after-tax benefit than holding it in a company, provided the property was acquired before the negative gearing changes or qualifies as a new build. If your income is lower or the property is positively geared, the company's flat rate might work better.

Interest Rates and Loan Features for Company Borrowers

Lenders treat company borrowers differently. Most residential investment loan products are priced and structured for individual borrowers. When a company applies, the loan often gets assessed under a commercial or low-doc framework, even if the security is a standard residential property. That can mean a higher interest rate, a lower maximum loan to value ratio, and fewer options for offset accounts or redraw facilities.

Some lenders will offer standard residential investor rates to a company if the directors provide personal guarantees and demonstrate serviceability through their personal income. Once you've signed a personal guarantee, the liability protection that made the company appealing in the first place is largely gone. In our experience, clients who set up a company for asset protection often find they've paid for a structure they can't fully use without giving away the protection or paying more in interest.

What Happens When You Sell or Refinance

A company doesn't get access to the capital gains tax discount that individuals receive. From 1 July 2027, individuals holding residential investment properties can index the cost base to inflation and pay a minimum 30 per cent tax rate on real gains. Companies pay their full company tax rate on the entire nominal gain with no indexation and no discount. For a property held over ten or fifteen years, that difference adds up.

Refinancing a company-held property also involves more paperwork. Lenders will want up-to-date financials, possibly an accountant's letter, and confirmation that the company is still trading and solvent. If the company structure has been left to go dormant or the directors have changed, you may need to sort out ASIC records and company resolutions before a refinance can proceed.

When a Trust Makes More Sense for Investors Around Bega and Cooma

Family trusts are more common than companies for residential property investors in this region. A trust gives you flexibility to distribute income to different beneficiaries each year depending on their tax positions, and it allows the trustee to claim deductions in much the same way an individual would. Trusts also provide a degree of asset protection, though not as clean as a company in some situations.

Consider an investor who buys a rental property in Bega using a family trust. Rental income can be distributed to a spouse or adult children on lower marginal tax rates, reducing the overall family tax bill. If the property runs at a loss, that loss can be carried forward within the trust and offset against future trust income, including capital gains when the property is eventually sold. The trust itself doesn't pay tax at a flat rate the way a company does, so you keep the flexibility of progressive tax rates across your beneficiaries.

Trusts do have their own costs and compliance requirements. You'll need an annual tax return, trustee resolutions, and proper documentation of distributions. Lenders generally treat a trust borrower similarly to an individual, provided the trustee has adequate income or assets, but you may still face slightly higher interest rates than a standard owner-occupier loan.

The Setup and Compliance Costs That Catch People Out

Setting up a company costs around $500 to $1,500 depending on whether you use an accountant or an online service. You'll also pay an annual ASIC review fee, currently $311 for a proprietary company. The company needs to lodge a tax return every year, even if it had no activity, and you'll need to maintain proper minutes and records of director decisions. Accountancy fees for a company return typically run higher than for an individual or trust return.

Those costs don't disappear if the property eventually sells or you decide the structure isn't working. Winding up a company properly involves deregistering with ASIC, finalising tax obligations, and sometimes dealing with outstanding liabilities or retained earnings. In practice, we regularly see clients who set up a company for a single investment property and find the annual overhead isn't worth it unless they're planning to acquire more properties or run other business activities through the same entity.

Can You Transfer a Property Into or Out of a Company Later?

Transferring a property from your personal name into a company triggers stamp duty in New South Wales, just as if you'd sold the property to a third party. Duty is calculated on the full market value of the property at the time of transfer. For a $600,000 property, that's over $24,000 in duty. You'll also trigger a capital gains tax event if the property has increased in value since you bought it.

Moving a property out of a company back into personal ownership has the same problem. Stamp duty applies again, and the company is treated as having disposed of the asset at market value, crystallising any capital gain. The only clean way to change structures is at the time you acquire the property, which means getting advice before you exchange contracts.

Weighing Up Whether a Company Structure Suits Your Situation

A company structure makes sense if you're buying multiple properties, want clean separation of liability, or plan to bring in other investors over time. It's less useful if you're buying a single rental property, earning a decent salary, and expecting to claim interest and holding costs against your personal income. The tax treatment, borrowing costs, and compliance overhead all need to stack up against the protection and flexibility a company provides.

If you're considering a company structure for an investment property around the Far South Coast, talk through your income, your plans for the property, and what you're hoping the structure will achieve. Most of the time, holding the property in your own name or through a trust delivers a better outcome. When a company does make sense, setting it up properly from the start saves a lot of expense and paperwork later.

Call one of our team or book an appointment at a time that works for you. We'll walk through your situation, check what your lender options look like under different structures, and help you sort out what's going to work without the sales talk.

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