Should You Gear Property Inside a Company? Core Tax and Lending Rules

Investing in property through a company means the company owns the asset and takes out the loan, while you own the company. This can improve asset protection and sometimes smooth tax, but usually reduces personal borrowing power and can increase tax on capital gains. It is rarely a slam‑dunk for residential property, especially after the 2026–27 tax reforms.

Here’s how to decide, in a week, whether gearing inside a company is worth exploring for your next purchase.

In a company structure, the company owns the property and takes out the loan, while you own the company.

1. How gearing in a company actually works

1.1 Basic structure

1. You set up (or use an existing) Australian company.
2. The company is the borrower on the investment loan and the owner on the title.
3. Rental income and expenses sit in the company tax return.
4. Profits are taxed at the company rate, then passed to you as dividends.

For most small investors, this is a standard private company, not a public or widely held vehicle.

1.2 Where it’s commonly used

Gearing inside a company is most often seen when:

• A trading business buys its own premises.
• A separate “property company” owns commercial property leased to your business.
• Higher‑risk projects (developments, NDIS, specialised commercial) need stronger asset protection.

For standard residential investment property, using a company is much less common – and for good reason.

2. Tax basics: company vs personal ownership

The key question: does a company improve your after‑tax return once you include rental income, interest, other costs and eventual sale?

2.1 Company tax on rental income

Most base‑rate entities (turnover under $50m, mostly active income) currently pay 25% company tax. Non‑base‑rate companies pay 30%.

For residential property after the Federal Budget 2026 changes, you should assume:

• Negative gearing benefits on established properties bought after May 2026 are heavily restricted.
• Rental losses are often quarantined and less useful personally.

That makes the old “big loss now, big tax refund” play weak, regardless of structure. Owning in a company does not fix this. You still want property that is close to cashflow neutral on a pre‑tax basis, as outlined in [/insights/will-tighter-negative-gearing-rules-kill-property-investing-reality-check].

2.2 Capital gains and companies

For individuals and trusts, the 50% CGT discount is being replaced with indexation and a 30% minimum tax on most capital gains from 2027 (per the 2026–27 Budget and reform bill).

Companies already do not get the 50% CGT discount, and they are outside some of the new minimum‑tax settings. This often means:

• Long‑term growth assets (like buy‑and‑hold residential) can be more heavily taxed in a company than in your own name.
• Extracting sale proceeds as dividends triggers another layer of tax in your hands.

In simple terms, companies tend to be worse for big long‑term capital gains on residential property.

2.3 Quick tax comparison (illustrative only)

Actual numbers will vary, but for a long‑term growth play, personal ownership still usually wins on tax.