Investment Loans: What Not to Do When Borrowing in a Company

Borrowing in a company name sounds like wealth protection until you realise half the lenders won't touch it and the other half price it differently.

A company structure can make sense for asset protection, estate planning, or running multiple properties under one entity, but lenders treat company borrowing very differently to personal loans. The choice of entity changes your borrowing capacity, your deposit requirement, your rate, and whether you can claim hardship support if rental income falls.

The single thing to understand before setting up a company to borrow is this: your lending options narrow, your costs increase, and the structure becomes permanent the moment you settle.

Lenders Exclude Company Borrowing from Consumer Protections

Most residential investment loans in a personal name fall under the National Consumer Credit Protection Act, which gives you access to hardship provisions, dispute resolution through AFCA, and responsible lending assessments. When you borrow in a company name, lenders classify the loan as outside the National Credit Code, even if the loan is secured by residential property. You lose access to hardship support under section 72 of the Code, and the lender is not required to conduct a serviceability assessment under the same framework.

Consider a scenario where rental income falls because a tenant leaves and the property sits vacant for three months. If you borrow as an individual, you can formally request a hardship variation, such as switching to interest-only or pausing repayments, and the lender must respond within 21 days. If the loan is in a company name, the lender has no obligation under the Code to offer or consider those arrangements. They may still negotiate, but it becomes a commercial discussion rather than a regulated process.

Company Structures Limit Your Access to Residential Investor Products

Major banks and many tier-two lenders offer residential investor loans only to natural persons, trustees of family trusts, or trustees of self-managed super funds. They do not extend those products to companies, even if the directors personally guarantee the loan and the security is a standard residential dwelling.

In our experience, borrowers who incorporate before speaking to a broker assume they can access the same variable and fixed rate products advertised for individual investors. When they apply, they discover the loan is assessed as a commercial facility, priced on a different rate card, and requires a higher deposit. Investment loan options that work for personal borrowers, such as offset accounts, rate discounts for high equity, or interest-only periods beyond five years, often disappear once the borrowing entity is a company.

Some non-bank lenders and smaller ADIs do lend to companies for residential investment, but the pool is smaller and the rates are typically 0.3 to 0.8 percentage points higher than equivalent personal investor loans. You also face higher application fees and legal costs because the lender's solicitor needs to review the company's constitution, directors' guarantees, and security arrangements.

Interest Deductions Still Apply, but Negative Gearing Rules Have Changed

Interest on a company loan used to acquire or hold a rental property remains deductible under the Income Tax Assessment Act 1997, and holding costs such as insurance, rates, and property management fees are deductible in the same way as they would be for an individual investor. The difference is how losses are treated and how capital gains are taxed when you sell.

For residential properties acquired after 7:30pm AEST on 12 May 2026, losses from negative gearing can only be offset against other residential property income from the 2027-28 income year onward. Excess losses carry forward. Properties held at that date, or under contract at that time, retain full deductibility against all income. Eligible new builds, where construction increases the number of dwellings on the land, are exempt from the restriction and retain full negative gearing.

Companies do not receive the 50 per cent CGT discount that applies to individuals, trusts, and partnerships. From 1 July 2027, individuals can index the cost base of assets and pay a minimum 30 per cent tax rate on real gains, but companies are taxed at the flat company rate on the full nominal gain. If your strategy involves holding property long-term and selling for capital growth, a company structure erodes the after-tax return compared to personal ownership or a discretionary trust.

Deposit Requirements and Lenders Mortgage Insurance Costs Are Higher

Lenders apply higher risk weights to company borrowing under Prudential Standard APS 112, which means they hold more capital against the exposure and pass that cost through to you. Most lenders require a minimum 20 per cent deposit for company-name loans, and some require 30 per cent, regardless of whether you can demonstrate strong rental income or personal serviceability.

Where LMI is available for company borrowing, the premium is higher than the equivalent premium for a personal loan at the same LVR. Some LMI providers do not insure company loans at all, which means if your deposit falls short, you may not be able to proceed even if you are willing to pay the premium.

As an example, a Merrylands investor borrowing personally with a 10 per cent deposit on a residential property might pay an LMI premium calculated at 90 per cent LVR on a standard residential rate card. The same investor borrowing through a company at 90 per cent LVR, assuming they find a lender willing to go that high, would pay a commercial LMI premium or be declined outright. The gap in upfront cost can exceed $10,000 on a loan amount typical for the suburb.

Serviceability Is Assessed Against Company Income, Not Your Salary

When you apply for a residential investment loan in your personal name, the lender assesses your capacity to service the loan using your salary, rental income, and other verifiable income sources. They apply a buffer of at least 3.0 percentage points above the loan product rate, as required by APRA, and they test your ability to meet repayments even if the property is vacant.

When you borrow in a company name, lenders assess serviceability based on the company's income, which in most cases is limited to the rental income from the property being purchased. They do not consider your personal salary unless you commit to injecting funds into the company through a formal loan or equity contribution, and even then, many lenders will not accept personal income as part of the servicing calculation. If the rental income does not cover the loan repayment plus the serviceability buffer, the application is declined regardless of your personal capacity to cover shortfalls.

Merrylands has a median rental yield that sits below the repayment requirement for most variable rate loans at higher LVRs, which means a company structure can prevent you from borrowing enough to settle unless you bring a larger deposit or structure the loan as interest-only. Even with interest-only, the lender applies the buffer to the interest component and may require evidence of how principal will be repaid over the loan term.

You Cannot Refinance Out of a Company Without Triggering CGT and Stamp Duty

Once a property is registered in a company name and the loan settles, transferring the property to your personal name or to a trust is treated as a disposal for CGT purposes and a new acquisition for stamp duty purposes in New South Wales. You pay CGT on any gain since the company acquired the property, and you pay stamp duty again on the full value of the property as if you were purchasing it fresh.

We regularly see investors who set up a company, buy one or two properties, then want to refinance into a personal name to access lower rates or unlock equity for further purchases. The cost of unwinding the structure often exceeds any benefit they would gain from the refinance, so they remain locked in with fewer lender options and higher pricing.

When a Company Structure Does Make Sense

Company borrowing works when you are acquiring commercial property, building a portfolio of multiple residential investments under one entity for succession planning, or operating a property business where rental income and other business income flow through the same structure. It also works if you are a high-income earner with significant personal asset exposure and you need the liability protection that a company provides, provided you accept the higher borrowing cost as the price of that protection.

If you are buying your first or second residential investment property in Merrylands, and your main objective is to build equity and offset rental losses against your salary, a company structure will cost you more and limit your options without delivering a proportional benefit. A discretionary trust with individual trustees or a personal name purchase with appropriate insurance is usually more flexible and more cost-effective.

Before you incorporate, speak to a broker who can show you the difference in borrowing capacity, rate, and deposit requirement for each structure, and speak to an accountant or solicitor who can model the CGT and asset protection outcome over a realistic holding period. Structure decisions are hard to reverse, and the cheapest time to get them right is before you sign anything.

Call one of our team or book an appointment at a time that works for you. We will run the numbers for your situation and show you what each structure costs before you commit.

Frequently Asked Questions