Understanding the Basics of Borrowing in a Company Name

Most lenders treat investment loans to companies differently to personal borrowing, and the difference shows up immediately in deposit requirements, interest rates and documentation.

The decision to borrow in a company name typically comes after an investor has acquired one or two properties personally and is now looking at their third or fourth purchase. At that point, asset protection and tax planning often become more important than securing the lowest possible rate. Lenders know this, and their pricing reflects it.

Why Investors in Perth Consider Company Structures

A company structure separates property ownership from personal assets. If the investment property generates a loss or liability, creditors cannot pursue your home, savings or other personal holdings outside the company. This separation matters when building a portfolio across Perth's northern corridor or in higher-yield regional centres where rental income can fluctuate.

Companies also allow multiple directors and shareholders to hold an interest without the complexity of a trust deed. Consider an investor who owns two properties in Baldivis and Byford personally and now wants to bring in a business partner to co-invest in a third property in Ellenbrook. A company structure allows both parties to define their ownership percentage, voting rights and profit distribution in the company constitution rather than entering a joint tenancy or tenancy in common on title.

The taxation treatment differs. Companies pay a flat rate on profit rather than marginal rates, and franking credits flow to shareholders. Losses remain trapped inside the company under the new negative gearing rules from 1 July 2027, but for investors who no longer need to offset rental losses against salary, that quarantine may not matter. What does matter is whether the lender will approve the loan at all.

How Lenders Assess Investment Loan Applications from Companies

Lenders assess company borrowers by looking through the company to the individuals behind it. Every director and shareholder holding 20 per cent or more will be treated as a guarantor, and their personal income, liabilities and credit history will be assessed as if they were borrowing personally.

The difference is that lenders apply a higher interest rate to the company loan and require a larger deposit. Where a personal investment loan might be approved at 80 per cent LVR without mortgage insurance, most lenders cap company borrowing at 70 or 75 per cent LVR. A handful of lenders will go to 80 per cent, but only for established companies with a trading history or where the guarantors have substantial equity in other properties.

In a scenario like this, an investor wants to purchase a unit in South Perth at $550,000 through their trading company. The company has been operating for four years, generates $200,000 in annual revenue, and the investor is the sole director and shareholder. The lender will assess the investor's personal income and liabilities, then apply the company's tax returns and profit-and-loss statements to determine whether the rental income from the new property can service the debt. At 70 per cent LVR, the investor needs $165,000 in cash or equity for the deposit and settlement costs. At 80 per cent LVR with a lender who accepts that risk, the figure drops to around $110,000 but the interest rate increases by 0.20 to 0.40 per cent.

Interest rates on company loans typically sit 0.30 to 0.60 per cent above equivalent personal investor rates. Some lenders also require the company to maintain a business transaction account with them, or they apply higher ongoing fees. Offset accounts are less common, and interest-only periods may be capped at three or five years rather than the ten-year terms sometimes available on personal loans. Lenders justify the margin by pointing to the higher risk weight applied to non-standard residential exposures under APS 112 and the added complexity of enforcing a guarantee if the loan defaults.

Documentation Requirements for Company Borrowers

The application requires company documents alongside personal financial statements. Lenders will request the company's Australian Company Number, a current ASIC extract, the company constitution, two years of company tax returns, recent business activity statements, and a profit-and-loss statement for the current financial year. Each guarantor submits personal payslips, tax returns, bank statements and a list of assets and liabilities.

Where the company is newly registered or has limited trading history, some lenders will decline outright. Others will assess the loan based entirely on the guarantors' personal capacity, effectively treating it as a personal loan with a company as the legal borrower. This approach makes sense for investors who set up a company specifically to hold property rather than to operate a business.

Title insurance is rarely required, but lenders will insist on building insurance in the company name with their interest noted on the policy. If the property is in a strata scheme, the body corporate insurance schedule must list the company as the registered proprietor. For houses, landlord insurance is optional but commonly recommended.

Interest-Only Repayments and Cash Flow

Most investors borrowing through a company choose interest-only repayments to preserve cash flow. The company pays only the interest portion each month, leaving the loan balance unchanged until the interest-only period expires. At that point, the loan switches to principal-and-interest repayments, and the monthly cost increases sharply.

Rental income must cover the interest and holding costs, or the company will need to be funded by the directors. Under the negative gearing changes, rental losses incurred after 1 July 2027 on properties acquired after 12 May 2026 cannot be deducted against the directors' personal income. The company can carry those losses forward to offset future rental income or capital gains, but it cannot distribute them.

Interest-only terms for company borrowers are typically shorter than for personal borrowers. A five-year interest-only period is common, and only a few lenders offer ten years. When the term ends, refinancing to a new lender may reset the interest-only clock, but each refinance attracts discharge fees, application fees and valuation costs.

Structuring Multiple Properties Across Personal and Company Ownership

Investors rarely hold all properties in the same structure. A typical portfolio might include an owner-occupied home held personally, two investment properties held in individual names to access negative gearing on the earlier purchases, and a third or fourth property held in a company for asset protection.

Expanding your property portfolio across different structures requires careful coordination with your accountant and broker. Lenders assess borrowing capacity by aggregating all liabilities regardless of structure, so the company loan will reduce your personal borrowing capacity for future purchases. If you later want to purchase another property in your own name, the lender will include the company loan repayments in your liability calculation, even though the company is the legal borrower and you are only the guarantor.

Equity in existing properties can sometimes be used to fund the deposit for a company purchase. A Perth investor with $300,000 in usable equity across two personally held properties might release that equity to fund the deposit on a third property purchased by their company. The equity loan is held personally, and the investment loan is held by the company, but both loans affect the investor's serviceability.

Tax Treatment and the Impact of the 2027 Changes

Companies pay tax at a flat rate on assessable income, including rental profit. From 1 July 2027, rental losses on residential properties acquired after 12 May 2026 are quarantined and cannot be deducted against other company income. If the company operates a trading business, rental losses cannot reduce the company's trading profit for tax purposes.

Capital gains are included in the company's assessable income and taxed at the company rate without the benefit of the 50 per cent discount or the new indexed cost base rules that apply to individuals. For long-term holds, this can result in a higher overall tax liability, but it may be offset by franking credits distributed to shareholders or by other tax planning strategies.

Interest on the investment loan remains deductible to the extent the property is rented or genuinely available for rent. Other holding costs, including council rates, landlord insurance, property management fees and repairs, are also deductible. Depreciation on the building and fixtures flows through the company tax return in the usual way.

When a Company Structure Does Not Suit the Investor

Borrowing in a company name adds cost and complexity, and it does not suit every investor. If your priority is to minimise the interest rate, maximise negative gearing against salary, or retain access to the 50 per cent capital gains discount on properties acquired before 1 July 2027, personal ownership remains the more appropriate choice.

Company structures work when asset protection, partnership arrangements or tax planning justify the higher borrowing cost. They also work for investors who have exhausted their personal borrowing capacity and need a separate entity to secure additional lending. But they do not reduce the lender's assessment of your liabilities, and they do not bypass the debt-to-income limits that apply from 1 February 2026.

If you are considering a company structure for your next investment property in Perth, your broker should walk through the lending implications before you commit to a purchase contract. Lenders vary significantly in their appetite for company loans, their LVR caps and their rate loadings, and the difference can amount to tens of thousands of dollars over the life of the loan.

Call one of our team or book an appointment at a time that works for you. We will review your current holdings, compare lender policies for company borrowing, and confirm whether the structure delivers the outcome you need before you instruct your solicitor or accountant to incorporate.

Frequently Asked Questions