Home Loan Through a Company: Why It's Rarely the Right Move

The 30% Tax Rate That Catches Business Owners Off Guard

Rental income earned inside a company is passive income. That matters more than most business owners realise.

If passive income exceeds 80% of your company's total assessable income, the company does not qualify as a base rate entity. That means it's taxed at 30% on all taxable income, not the lower 25% rate. If your Pty Ltd exists primarily to hold property, you're almost certainly hitting that threshold.

Here's a simple example. Say your company earns $50,000 in net rental income and that's its main income source. At 30%, that's $15,000 in tax. Now compare that to an individual earning $90,000 in total income including the same rental amount. After deductions and offsets, the individual's effective rate on that rental income is likely lower, especially if the property is negatively geared.

And that's the other catch. Even if your company qualifies for the 25% base rate, rental losses are trapped inside the company. You can't offset them against your personal income the way you can when you hold the property in your own name. For a company structure investment property, negative gearing effectively doesn't work the way most investors expect.

No CGT Discount Means You Pay Tens of Thousands More When You Sell

This is the one that really hurts.

Individuals and trusts that hold an asset for more than 12 months get a 50% CGT discount. Companies get nothing. The full capital gain is taxed at the corporate rate.

Let's put real numbers on it. Say your property grows by $200,000 over a decade.

• Company: Pays tax on the full $200,000 at 30%. That's $60,000 in tax.
• Individual on the 37% bracket: Pays tax on $100,000 after the 50% discount. That's approximately $37,000 in tax.
• Trust distributing to a lower-income beneficiary: The tax bill can drop to $20,000 to $25,000, depending on the beneficiary's marginal rate.

The difference between company and individual in this example is over $23,000. Distribute through a trust to the right beneficiary and the gap widens to $35,000 or more.

This isn't a minor technicality. On a property held for 10 or more years with solid growth, the CGT difference alone can cost tens of thousands of dollars. It's one of the most financially significant reasons to think twice about company vs trust property investment.

Fewer Lenders, Higher Rates, Tougher Terms

The tax story is bad enough. The lending story makes it worse.

Most major lenders treat a company home loan as a commercial or business loan, not a standard residential loan. That means lower LVR (loan-to-value ratio) limits, often capped at 70-80% instead of the 90-95% available to individuals (with Lenders Mortgage Insurance, or LMI). It means higher interest rates. And it means more restrictive lending criteria across the board.

Directors will almost always need to provide personal guarantees. So you carry the personal risk anyway, without the structural benefits you assumed the company would provide.

Compare that to borrowing as an individual or through a trust. Far more lenders, competitive residential rates, higher LVRs, and simpler application processes. At Stryve, we have access to 40+ lenders, but the available panel shrinks significantly when the borrowing entity is a Pty Ltd.

Company-held property can also reduce your borrowing capacity for future purchases because lenders assess the company's obligations differently. If you're planning to build a portfolio, this structural choice can slow you down from the start. As specialists in self-employed applicants, we see this scenario regularly with business owners.

Division 7A: The ATO Compliance Trap Most Business Owners Don't See Coming

This is where buying property through a company gets genuinely dangerous if you're not careful.

Division 7A of the Income Tax Assessment Act 1936 is an ATO provision that treats loans, payments, or use of company assets by shareholders or their associates as deemed dividends. In plain English: if your company lends you money to buy property, or lets you use a company-owned property without paying market rent, the ATO can tax you on that amount at your personal marginal rate, without franking credits.

To avoid deemed dividend treatment under Division 7A, a loan must meet three requirements:

• Written agreement documenting the loan
• Interest charged at the ATO's benchmark interest rate (updated annually)
• Repayment within 7 years for unsecured loans, or 25 years if secured by a registered mortgage over real property

Miss any of these requirements and the full outstanding loan amount can be treated as assessable income in that financial year. That's not a small penalty. On a property purchase, the amounts involved are substantial.

This catches business owners because they're used to moving money between themselves and their company informally. A few thousand here and there might fly under the radar. A property purchase worth hundreds of thousands will not. The ATO scrutiny that follows a Division 7A breach on this scale is significant.

When a Company Structure Actually Makes Sense for Property

There are narrow situations where a company structure works. They're the exception, not the rule.

Commercial premises your business operates from. If your company is buying the building it trades out of, that's a genuine business asset, not a passive investment. Different rules, different logic.

Deliberate, accountant-led tax strategies. Some companies already hold significant assets and an accountant has structured a specific strategy around the entity. This is planned, not accidental.

Development projects. When property is trading stock rather than a capital asset, CGT rules don't apply in the same way. Profits are taxed as ordinary income regardless of structure, which can neutralise the CGT discount disadvantage.

In every one of these cases, an accountant has made a specific recommendation. If your accountant hasn't specifically told you to buy this property through your company, it's almost certainly not the right move.

Company vs Trust vs Individual: Which Structure Wins for Investment Property?

Here's how the three main structures compare across the dimensions that matter most.

For most business owners buying investment property, a trust comes out on top. It offers the CGT discount, flexible income distribution, strong asset protection, and far better lender access than a company. If you're weighing up your options, start by understanding how buying property through a trust works in practice.

Discretionary (family) trusts are the most common alternative to a company for business owners. Want the full breakdown? Compare owning property in your own name vs a trust to see which fits your situation.

Individual ownership is the simplest option with the best lender access, but it lacks asset protection and income distribution flexibility.

Already Bought Through a Company? Here's What to Know

If you've already purchased property in a company name, you're not stuck forever. But restructuring out of a company is harder and more expensive than restructuring out of individual ownership.

The costs are real. Transferring property out of a company triggers a CGT event and may attract stamp duty in the receiving state. If the transfer isn't handled correctly, Division 7A implications can add another layer of cost. The combined bill can be significant.

That said, the ongoing tax disadvantage of holding in a company, especially the lost CGT discount, can outweigh the one-off restructuring cost over time. The right move depends on your numbers. Speak to both your accountant and a broker to understand the full picture. If you're exploring this path, read more about transferring property from a company to a family trust.

Get the Structure Right Before You Sign Anything

Getting the structure right at the start is dramatically cheaper than fixing it later. A 30-minute conversation now can save tens of thousands in tax and restructuring costs down the track.

At Stryve, we understand business owner structures. Not just the loan, but how the entity you borrow through affects your tax position, your lending options, and your future borrowing capacity. We work with self-employed applicants every day, with full lender commission transparency and no hidden fees.

Talk to a Stryve broker about your investment property structure before you sign anything in the company's name. We'll help you find the right structure and match you with the right lender.

This article is general information only and does not constitute tax, legal, or financial advice. Your situation is unique. Confirm specifics with your accountant and mortgage broker before making any structural or lending decisions.

Frequently Asked Questions

Can I get a home loan in a company name in Australia?

Yes, but fewer lenders offer it. Most treat it as a commercial loan, which means lower LVR limits, higher interest rates, and more restrictive criteria. Directors typically need to provide personal guarantees, so you carry the personal risk regardless.

What is Division 7A and how does it affect property?

Division 7A is an ATO provision that treats loans or benefits from a company to its shareholders as deemed dividends unless strict complying loan rules are followed. If your company buys property you live in or use without paying market rent, Division 7A can apply, and the amount can be taxed at your marginal rate as an unfranked dividend.

Is it better to buy investment property through a company or a trust?

For most investors, a trust is the better structure. Trusts offer the 50% CGT discount via distribution to individual beneficiaries, flexible income distribution, and better lender access than a company. Companies lose on tax rate, CGT discount, and lending terms in almost every comparison.

Can I transfer property from a company to a trust?

Yes, but it triggers a CGT event and may attract stamp duty in the relevant state. The cost of restructuring needs to be weighed against the ongoing tax disadvantage of holding in a company. Speak to your accountant before making any decisions.