Should You Buy Property in Your Name or a Company? What Business Owners Need to Know
For many Australian business owners, property investment is a smart step towards long-term wealth. But one of the most important decisions you will face is whether to buy property in your personal name or through a company structure.
This decision is not just about preference. It can significantly affect your tax liability, asset protection, borrowing power, and future investment flexibility. Getting the structure right from the start can save you thousands of dollars over the life of the investment — and getting it wrong can be costly to unwind.
At Trinity Accounting Practice, we help business owners across Sydney and Australia choose the right property ownership structure based on their individual circumstances.
Types of Property Ownership
Before exploring the pros and cons of each approach, it is important to understand the main ownership options available to Australian investors.
Individual ownership means you, as a natural person, are the registered owner of the property. Company ownership means a company registered with ASIC holds the property. Trust ownership involves a trust (often a discretionary or family trust) holding the property, frequently with a corporate trustee. SMSF ownership means a self-managed superannuation fund acquires the property under strict regulatory rules.
This guide focuses primarily on personal versus company ownership, with notes on trusts and SMSFs where relevant.
Tax Considerations
The ownership structure you choose has a direct impact on how your property income and gains are taxed. This is often the most significant factor in the decision.
Capital Gains Tax
One of the biggest differences between personal and company ownership is the treatment of capital gains tax (CGT) when you eventually sell the property.
Individuals who hold a property for more than 12 months can access the 50 per cent CGT discount. This means only half of the capital gain is added to your assessable income in the year of sale. Companies, on the other hand, pay tax on the full capital gain with no discount available. However, the base rate entity company tax rate of 25 per cent (for companies with aggregated turnover under $50 million) may be lower than the top individual marginal rate of up to 47 per cent including the Medicare levy.
For example, if you sell a property after two years with a $200,000 capital gain, an individual would be taxed on $100,000 (after the 50 per cent discount), while a company would be taxed on the full $200,000. Depending on the individual owner's marginal tax rate, the individual structure may produce a significantly lower tax outcome despite the higher marginal rate.
Rental Income
Rental income earned by an individual is added to their other assessable income and taxed at their marginal rate, which can be as high as 47 per cent for high-income earners. Rental income earned by a company is taxed at the corporate rate, and profits can be retained within the company for reinvestment without being distributed to shareholders.
However, when company profits are eventually distributed as dividends, the shareholder will pay tax on those dividends (with franking credits reducing the overall tax payable). This means company ownership may defer tax rather than eliminate it.
Negative Gearing
Individuals can offset property losses (where expenses exceed rental income) against their other personal income, such as salary or business income. This is known as negative gearing and can reduce your overall tax in the years when the property runs at a loss.
Companies can also claim losses, but company losses can only be offset against future company income — they cannot be distributed to shareholders as a tax deduction. Company losses are also subject to continuity of ownership and similar business tests.
Asset Protection and Legal Risk
Buying in Your Personal Name
When you own property personally, that asset forms part of your personal estate. This means it may be exposed if you are sued, if your business defaults on its obligations, or if you face personal bankruptcy. For business owners who operate in industries with higher liability risk, this exposure can be a significant concern.
Buying Through a Company
A company is a separate legal entity, which provides a layer of asset protection. Property held by the company is generally shielded from the personal liabilities of the directors and shareholders.
However, it is important to note that lenders often require directors to provide personal guarantees when a company borrows to purchase property. This can reduce the practical asset protection benefit, as the director becomes personally liable for the loan. Courts can also access company-held assets in cases involving fraud, insolvent trading, or illegal activity.
Speak to our team about how to structure your property holdings to balance asset protection with practical lending requirements.
Financing and Borrowing Power
Individual Borrowers
Borrowing in your personal name is generally simpler. Individuals typically have access to a wider range of loan products, lower interest rates, and smaller deposit requirements. The main disadvantage is that you carry full personal liability for the debt, and your borrowing capacity may be limited by existing personal debts and commitments.
Company Borrowers
Companies with strong business cash flow may find it easier to demonstrate serviceability. Property held by the company stays off the director's personal balance sheet, which can preserve personal borrowing capacity for other purposes. However, company loans often require director guarantees, higher deposits, and may attract slightly higher interest rates with fewer loan products available.
Our mortgage brokerage division, Nexus Wealth Partners, can help you compare lending options across both personal and company structures to find the most suitable arrangement.
SMSF Property Rules
Self-managed superannuation funds can purchase property as an investment, but strict rules apply. The property cannot be lived in by you or any related parties. Borrowing to acquire property within an SMSF requires a Limited Recourse Borrowing Arrangement (LRBA). All related party transactions must be conducted at arm's length and meet market terms. The property must be held solely for the purpose of providing retirement benefits to fund members.
SMSF property investment can be a powerful wealth-building strategy when done correctly, but the penalties for non-compliance are severe. Professional advice is essential before proceeding down this path.
Land Tax Implications
Individual Ownership
Land tax thresholds and rates vary by state and territory. In New South Wales, individuals can access exemptions for their principal place of residence, which means the home you live in is not subject to land tax. Investment properties are assessed based on their unimproved land value above the relevant threshold.
Company Ownership
Companies cannot claim the principal place of residence exemption for land tax purposes. Land tax is typically higher for company-owned properties because every property held by the company is assessed as an investment. This is an often-overlooked cost that can significantly affect the overall return on a company-held property.
Succession Planning and Exit Strategy
Personal Ownership
Property held in your personal name can be passed on through your will. This is relatively straightforward, and certain CGT concessions may apply on death. However, the property may be subject to probate delays and potential family disputes.
Company Ownership
Shares in a company can be transferred more easily than real property, which can make succession planning cleaner. A business owner can transfer shares to family members over time as part of an estate planning strategy. However, CGT still applies on the transfer of shares, and there are ongoing compliance obligations including ASIC annual reviews and separate company tax returns.
Costs and Ongoing Compliance
Personal Ownership
Buying in your personal name has lower setup costs and simpler ongoing compliance. You report rental income and expenses in your individual tax return, and property management and reporting requirements are straightforward.
Company Ownership
Company ownership involves additional costs and compliance obligations. These include ASIC registration and annual review fees, a separate company tax return each year, additional accounting and legal work, and corporate secretarial requirements such as maintaining registers and minutes. Our corporate secretarial services can handle the ongoing ASIC compliance so you can focus on your investment strategy.
.jpg)
Trusts: A Hybrid Option
Some investors choose to hold property through a discretionary (family) trust, often with a corporate trustee. This structure can offer benefits including the ability to distribute income to beneficiaries in lower tax brackets, improved asset protection through the separation of legal and beneficial ownership, access to the 50 per cent CGT discount (unlike a company), and flexibility in estate and succession planning.
However, trusts are complex to establish and administer. They require careful attention to trust deeds, distribution resolutions, and annual tax compliance. It is also important to be aware of Section 100A, which targets arrangements where trust distributions are made to low-income beneficiaries but the economic benefit flows to someone else. Professional advice is essential when considering a trust structure for property investment.
Choosing the Right Structure
The best ownership structure depends on your individual circumstances, including your current and expected future tax bracket, your level of risk exposure and need for asset protection, your investment timeline and whether you plan to hold the property long-term, your estate and succession planning goals, land tax implications in your state, and your superannuation and retirement strategy.
There is no one-size-fits-all answer. The right structure for one business owner may be entirely wrong for another. At Trinity Accounting Practice, we work with business owners across a range of industries to assess their circumstances and recommend the most appropriate structure. Whether you are in construction, healthcare, hospitality, or professional services, we tailor the strategy to your specific situation.
Changing Structures After Purchase
It is possible to change the ownership structure of a property after purchase, but this can be an expensive exercise. Transferring property from your personal name to a company (or vice versa) may trigger stamp duty on the transfer, capital gains tax on the deemed disposal, and additional legal and conveyancing costs. This is why getting the structure right from the beginning is so important. If you are considering a property purchase, speak to us before you sign any contracts.
Trinity Accounting Practice
Accounting Firm in Beverly Hills, Sydney
Phone: 02 9543 6804
Address: 159 Stoney Creek Road, Beverly Hills NSW 2209
Website: www.trinitygroup.com.au
Weekend and after-hours appointments available
Our Virtual CFO division, VCFO Australia, provides strategic financial management, budgeting, forecasting, and compliance support for growing businesses and not-for-profits.
Learn more about what we offer
Discover the industries we specialise in
Read more tax and accounting tips on our blog
Our mortgage brokerage division, Nexus Wealth Partners Pty Ltd, assists clients with home loans, refinancing, and business finance.
Disclaimer: Information provided on this website is intended as a general overview only and does not replace professional advice tailored to your personal circumstances.
