Borrowing in a company name to buy residential investment property carries different lending rules, tax treatment and asset protection outcomes than borrowing as an individual.
Most lenders treat a company as a different risk category. Loan products marketed to individuals do not always extend to corporate entities, and the ones that do often carry higher rates, lower loan-to-value ratios and stricter servicing tests. The structure you choose affects what you can borrow, what you pay, and how rental losses are treated once the negative gearing changes take effect in July 2027.
Mistake 1: Assuming Company Borrowing Broadens Your Loan Options
Borrowing through a company typically narrows your loan choices, not widens them. Fewer lenders offer residential investment loans to corporate borrowers, and the products available often come with a lower maximum loan-to-value ratio, typically 70 to 80 per cent rather than the 90 per cent sometimes available to individuals. That means a larger deposit is required upfront.
Consider a Hillside investor looking to buy a rental property using a family company. Even with sufficient rental income to service the loan, the lender may cap borrowing at 70 per cent of the property value and apply a higher interest rate margin. The same investor borrowing in their personal name might access 80 per cent loan-to-value ratio and a lower rate, reducing both the deposit needed and the ongoing cost.
Some lenders also require personal guarantees from company directors, which means the asset protection benefit of the company structure can be limited if the loan defaults. If you are providing a personal guarantee, the lender still assesses your personal income and liabilities, so the servicing process is not necessarily simpler.
Mistake 2: Overlooking the Tax Changes That Apply from July 2027
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 quarantines rental losses on most residential investment properties acquired after 7:30pm AEST on 12 May 2026. From 1 July 2027, those losses can only offset residential rental income or be carried forward. They cannot reduce salary, business income or other assessable income.
Companies are not exempt. A company that borrows to buy an established dwelling in Hillside after that date and runs a rental loss will be unable to use that loss to reduce company tax on other income streams. The loss must be quarantined and carried forward until the property generates a profit or is sold, at which point it can offset residential rental income or capital gains.
Where the property qualifies as an eligible new build, constructed on previously vacant land or as part of an increase in dwelling numbers, the company can still offset rental losses against other income. That carve-out applies regardless of whether the borrower is an individual, trust or company. Widely held unit trusts also retain access to negative gearing under existing rules.
Mistake 3: Ignoring the Capital Gains Tax Treatment for Corporate Entities
Companies do not receive the 50 per cent capital gains tax discount that applies to individuals, trusts and partnerships. A company pays tax on the full capital gain at the company tax rate, currently 25 per cent for base rate entities and 30 per cent for others.
From 1 July 2027, individuals and trusts holding affected residential investment properties will lose the 50 per cent discount on gains accruing after that date and instead use cost base indexation with a 30 per cent minimum tax rate on real gains. For a company, the treatment does not change, because companies never had access to the discount in the first place.
In a scenario where a company buys a Hillside rental property, holds it for ten years and sells at a gain, the entire nominal gain is taxable at the company rate. An individual holding the same property acquired before the changes would have received the 50 per cent discount on gains accrued before 1 July 2027, and indexation with a 30 per cent minimum rate on gains accrued after. The outcome depends on holding period, inflation and individual marginal tax rates, but the company structure removes the discount option entirely.
Mistake 4: Setting Up a Company Structure Without Reviewing Borrowing Capacity and Compliance Costs
A company has its own borrowing capacity, separate from the directors. Lenders assess the company's capacity to service the loan based on rental income, existing company debts and sometimes director guarantees. If the company is newly formed or has limited trading history, some lenders will not lend at all, or will require a larger deposit and personal guarantees from all directors.
Compliance and administration also add cost. A company must lodge annual tax returns, maintain ASIC registration, prepare financial statements and hold director meetings. Accountancy and legal fees are higher than for an individual investor. If the only reason for using a company is perceived tax savings, those savings may not materialise once negative gearing is quarantined and compliance costs are factored in.
Hillside sits within the growth corridor west of Melbourne, where land releases and new residential estates have attracted both owner-occupiers and investors. New builds in the area may qualify for the negative gearing carve-out and the CGT discount election, making structure choice particularly relevant. Borrowing in a company name may suit investors with multiple properties, asset protection concerns or business income flowing through the same entity, but it should not be adopted purely for lending flexibility or assumed tax benefits that no longer apply.
If you are weighing up whether to borrow in your own name, through a trust, or via a company, speak to a licensed accountant about the tax implications and compliance obligations before you apply for finance. Once the structure is in place and the loan is approved, changing it later can trigger capital gains tax, stamp duty and refinancing costs.
Call one of our team or book an appointment at a time that works for you. We work with lenders that offer investment loan products to individuals, companies and trusts, and we can help you understand what borrowing structure fits your circumstances and what loan options are available before you commit to a purchase contract.
Frequently Asked Questions
Can I borrow in a company name to buy an investment property in Hillside?
Yes, but fewer lenders offer residential investment loans to companies, and they often require a larger deposit, charge higher rates and cap the loan-to-value ratio at 70 to 80 per cent. Personal guarantees from directors are usually required.
Do the negative gearing changes apply to companies?
Yes. From 1 July 2027, rental losses on most residential properties acquired after 12 May 2026 are quarantined for companies, trusts and individuals. The losses can only offset residential rental income or be carried forward, unless the property is an eligible new build.
Do companies get the capital gains tax discount on investment property?
No. Companies pay tax on the full capital gain at the company tax rate. Individuals, trusts and partnerships receive a discount, but companies have never had access to that concession.
What are the main costs of holding investment property in a company?
Companies must lodge annual tax returns, maintain ASIC registration and prepare financial statements. Accountancy and legal fees are higher than for individual investors, and compliance obligations are ongoing.
Should I use a company or borrow in my own name for a Hillside investment property?
It depends on your asset protection needs, income structure and whether the property is a new build. Speak to a licensed accountant about tax treatment and compliance costs before committing to a structure.
