What you should consider about buying property as a company

Buying property as a company2

Buying an investment property as a company can offer asset protection and taxation advantages, but it also has its fair share of downsides.

Before you buy a home or investment property, it’s important to consider whether using a different ownership structure might be beneficial. One structure worth considering is buying property as a company – not only does this offer personal liability protection for shareholders, but it can also offer some tax benefits in certain situations.

There are, however, several disadvantages you should be aware of before you decide to buy property as a company. This guide looks at everything you need to know about buying property as a company so you can decide if it’s right for you.

What are the advantages of buying property as a company?

The biggest benefit of buying property as a company is that it offers limited liability to the shareholders, i.e. the company owners. So if the company gets into trouble and runs up a debt, the extent to which you will be liable for that debt is limited to the amount you’ve invested in it. The company’s creditors are also unable to target your personal assets if they try to recoup their debt.

From a taxation perspective, there are certain circumstances where buying as a company may also have benefits. For example, let’s say a property is purchased by a group of investors, some of whom live or work outside Australia. If the property is bought in their own names then they may have to later pay capital gains tax (CGT) on the property not only in Australia, but also in the country where they reside. Buying the property as a company and paying corporate tax to the ATO could simplify the process.

The corporate tax rate in Australia is 30%, which is substantially less than the highest marginal rate for individuals. You could also claim franking credits on dividends the company pays from its after-tax profits.

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What are the disadvantages?

The main disadvantage to owning property through a company is that you can’t access the 50% CGT discount available to individuals when they hold assets for more than a year. This could potentially result in a larger tax bill at the end of the financial year. Any losses you incur will also need to be offset against the income the company earns.

There’s also the issue of home loans to consider. It’s usually harder to get approval for a home loan under a company name than it is under your own name. There’s also the chance that you will be referred to a bank’s business banking division, rather than being offered access to a standard home loan. As a result, higher interest rates and fees may apply.

Other options

There are several other ownership options you should consider when buying an investment property, including:

  • Owning property in your personal name. This often presents a simple approach and makes it easy to obtain financing. You can borrow a large percentage of the purchase price and take advantage of negative gearing, but there is limited asset protection available.
  • Owning property through a trust. This increasingly popular ownership structure is tax effective, allowing you to split the profits however you like, and provides protection for your assets. It can also make estate planning a whole lot easier, but on the downside it doesn’t allow you to take advantage of negative gearing.
  • Owning property through a self-managed super fund (SMSF). Buying property through a SMSF allows you to take advantage of low tax rates and excellent asset protection. But SMSFs can be complicated to maintain and you will typically need a larger deposit and attract higher interest rates when borrowing.

Each ownership option has its own benefits and drawbacks, so it’s important to seek professional advice tailored to your situation.

Choosing the right ownership structure

Choosing the right ownership structure for a home or investment property can be a complicated process. There are a number of financial, tax and legal complications that need to be considered, along with your own investment and ownership goals.

The best thing you can do when deciding on an ownership structure is to seek professional advice from a taxation or investment expert. He or she will be able to consider your goals and your financial situation before helping you decide whether buying property as a company is the right approach.

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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.89%
4.24%
$0
$0 p.a.
80%
Fix your rate and minimise repayments for 2 years with this interest-only investor mortgage.
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3.99%
$0
$0 p.a.
80%
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
3.99%
4.13%
$0
$10 monthly ($120 p.a.)
80%
A competitive variable rate home loan with no application fee.
3.84%
3.91%
$0
$0 p.a.
80%
Get instant online approval and flexible repayment options with this fixed rate mortgage for investing.
3.79%
3.82%
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80%
An essentials variable investor mortgage with a high borrowing amount so you can fund a large purchase.
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4.13%
$600
$0 p.a.
90%
Fund your investment purchase and offset up to $15,000. Available with a 10% deposit.
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3.99%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate loan to fund their property portfolio. Take advantage of split and redraw facilities.
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3.79%
$499
$0 p.a.
80%
Competitive variable investor mortgage to fund your property portfolio. You can add a 100% offset account for just $10 a month.
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3.94%
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$0 p.a.
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3.99%
5.35%
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90%
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4.03%
3.92%
$499
$0 p.a.
80%
A competitive 3 year investor rate with principal and interest repayments. Optional offset account with a $10 monthly fee.
4.05%
4.22%
$0
$10 monthly ($120 p.a.)
90%
Lock in your interest rate on your investment property for 2 years. For a limited time you can earn double Velocity Frequent Flyer Points.
3.91%
3.92%
$0
$0 p.a.
80%
Investors can go from application to approval in as little as 20 minutes with this innovative online lender.
4.43%
4.28%
$600
$0 p.a.
90%
An interest only investor mortgage that lets you offset up to $15,000. Available with a 10% deposit.
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3.98%
$0
$0 p.a.
70%
Investors can get a 100% offset account and a low rate if they have a big deposit. 100% online application process.
4.09%
4.87%
$0
$395 p.a.
90%
Buy your investment property and set your repayments for the first year. Available in QLD, NSW and ACT only.
4.24%
4.00%
$0
$0 p.a.
80%
Buy an investment property and enjoy the certainty of a 3-year fixed rate with interest-only payments.
4.09%
4.40%
$0
$0 p.a.
70%
Forget about rate rises for two years and minimise your investment repayments with this interest only mortgage. Requires a 30% deposit.
4.54%
4.59%
$600
$0 p.a.
80%
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3.97%
3.99%
$0
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80%
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4.29%
5.33%
$0
$395 p.a.
90%
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4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.29%
4.31%
$0
$0 p.a.
80%
Investors will pay no application or ongoing fees for this interest-only loan.
4.18%
4.18%
$0
$0 p.a.
80%
Investors get a 100% offset account and pay no application or ongoing fees on this loan from an innovative online lender.
4.14%
3.96%
$0
$0 p.a.
80%
Investors can go from application to full approval in as little as 20 minutes with this innovative online lender.
4.13%
4.14%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
4.29%
4.31%
$0
$0 p.a.
80%
A simple, variable rate investor loan from an online lender that keeps fees to a minimum.
3.99%
4.62%
$395
$0 p.a.
80%
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4.90%
4.31%
$0
$0 p.a.
80%
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4.68%
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Fix your investment repayments for 1 year. You can get this loan with a 10% deposit. Available in QLD, NSW and ACT only.
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4.19%
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3.95%
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80%
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5.39%
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4.27%
$0
$198 p.a.
70%
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$0
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80%
Lock in your interest rate for 2 years and enjoy flexibility, an optional offset account and a fast online application process.

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4 Responses

  1. Default Gravatar
    NutanJune 20, 2018

    Hi,

    Need help. Which is the better option, buying property under the name of PTY.Co or buying it under the name of a family trust?

    • finder Customer Care
      JeniJune 21, 2018Staff

      Hi Nutan,

      Thank you for getting in touch with finder.

      Regarding your enquiry, that really depends on your situation and things that you consider when buying a property. While we are not allowed to provide specific recommendation, let me give you general information to help you make a better choice.

      Buying investment properties within companies has become less common over the years, because companies are not eligible for the 50% CGT discount that individuals receive if they hold a property more than 12 months while benefits of trusts include increased asset protection, particularly when using a corporate trustee, and you can access negative gearing benefits for unit trusts if your loans are structured correctly. You may want to read more on things you need to know about buying property in a trust on this page.

      I hope this helps. Please feel free to reach out to us if you have any other enquiries.

      Thank you and have a wonderful day!

      Cheers,
      Jeni

  2. Default Gravatar
    LJune 1, 2018

    Property in company name, can I refinance it out to me as an individual? I would like to refinance like a trust to an individual.

    • finder Customer Care
      JeniJune 3, 2018Staff

      Hi L Grubb,

      Thank you for getting in touch with finder.

      The process of refinancing a business mortgage might be really complicated and a lot of Australian lenders refuse to offer refinance loan products to trusts so I suggest that you seek professional help from a paralegal, as well as mortgage brokers regarding your enquiry. You may also want to read more on refinancing a business loan on this page.

      I hope this helps.

      Have a great day!

      Cheers,
      Jeni

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