The Pros and Cons of Borrowing in a Company Name

Should You Borrow in Your Company Name or Your Own?

Borrowing in a company name means the company is the legal borrower, not you personally. The company appears on the loan contract, the company owns the property, and the company is responsible for repayments. You can still sign as director and provide personal guarantees, but the debt sits with the entity, not on your personal credit file.

Why Painters Consider Company Borrowing

Most painters who run a company consider this option for two reasons: asset protection and tax flexibility. If your painting business operates through a company structure, buying investment property in that same company can keep your assets separate from your personal name. In our experience, painters who have built solid turnover through commercial contracts or who run crews often prefer this separation.

Consider a painter who operates through a company with two other directors. The business turns over $1.2 million annually and has strong retained earnings. The directors want to buy a rental property as a business investment. Borrowing in the company name means the property sits within the business structure, rental income flows to the company, and any liability from the loan stays with the company. If the business faces a claim or dispute, the directors' personal assets remain separate. The company secures the property, pays the interest from company income, and claims the interest as a deduction against company income at the 25 per cent or 30 per cent company tax rate, depending on turnover.

The Lending Cost Difference

Investment loans in a company name attract higher interest rates than loans in your personal name. Lenders view company borrowing as commercial or business lending, which falls outside residential lending rules. At current variable rates, you might pay 0.3 to 0.8 percentage points more on a company loan compared to a personal investment loan. On a $500,000 loan, that difference costs an extra $1,500 to $4,000 per year in interest.

Lenders also apply stricter serviceability tests. Where a personal investment loan is assessed using your income, a company loan is assessed using the company's financials. That means recent trading statements, profit and loss, balance sheet, and sometimes a director guarantee backed by personal income as well. Some lenders will not lend to companies at all for residential property. Others cap the loan amount or require higher deposits. Access to products is narrower.

The Tax Position Under Current Law

Companies cannot access the 50 per cent capital gains tax discount that individuals receive on properties held for more than 12 months. A company pays tax on the full capital gain at the company tax rate. From 1 July 2027, individuals who buy established residential property will move to an indexed cost base model with a 30 per cent minimum tax rate on real gains, but the 50 per cent discount remains available on any gain accrued up to that date, and eligible new builds retain access to the discount indefinitely.

Companies miss out on both the discount and the indexed model. The company pays company tax on the entire nominal gain when the property is sold. For properties that appreciate significantly, this cost can outweigh the upfront asset protection benefit. Interest is still deductible against rental income, but the company cannot negatively gear the property against your personal wages. The loss stays within the company and can only offset company income or be carried forward as a company loss.

When Lenders Treat Company Loans as Commercial

Once a loan is in a company name, most lenders classify it as a commercial loan, even if the property is a standard residential dwelling. That means the loan is not covered by the National Consumer Credit Protection Act. You lose access to the hardship provisions that apply to personal borrowers, and the loan may not be subject to the same responsible lending obligations. Lenders have more flexibility to vary terms, and if you refinance, you will be refinancing a commercial facility, which can limit your options or increase your cost.

Some lenders will still offer residential-style products to companies, especially if the company is a family trust corporate trustee or a small trading entity with strong director income. Others will only offer commercial terms: higher rates, shorter loan terms, progress payments, and regular reviews. You need to understand which category your loan falls into before you sign, because changing lender later can be difficult if your loan has been classified as commercial from the start.

Asset Protection and the Director Guarantee Reality

Asset protection sounds good in theory, but most lenders require personal guarantees from all directors when lending to a company. A director guarantee makes you personally liable for the debt if the company defaults. If the company cannot pay, the lender can pursue you personally, including your home and other personal assets. The loan is in the company name, but your personal liability is still there.

The protection works in one direction: it keeps the property separate from personal creditors, but it does not keep personal assets safe from the lender. If you are a sole director or the only director with significant income, the guarantee effectively removes most of the protection you were hoping to gain. In a scenario like this, the benefit is limited to keeping the property outside your personal estate and managing tax within the company, not true asset protection from the lender.

Selling or Refinancing Later

When you want to sell or refinance, the property is still owned by the company. You cannot refinance the property into your personal name without triggering stamp duty and capital gains tax as though you have sold the property. The company sells to you, and you pay the transaction costs. If you want to access equity in the property to buy another investment, the lender assesses the company's position, not just yours. If the company has wound down or stopped trading, getting finance can become impossible, even if your personal income is strong.

If you decide to close the company, you will need to transfer the property out first. That transfer is a disposal for tax purposes and a purchase for stamp duty purposes in most states. The costs can run into tens of thousands of dollars. The structure that looked flexible at the start becomes rigid when your circumstances change.

What Works for Painters Who Want Growth

Painters who plan to build a property portfolio of three or more investments usually borrow in their personal name or through a trust structure, not a company. Personal borrowing gives you access to lower rates, more lenders, and simpler refinancing. You can claim interest against your personal income (subject to the negative gearing changes that apply from the 2027-28 income year for established properties purchased after 12 May 2026), and you retain access to the capital gains discount on any gain that accrues before 1 July 2027.

If asset protection is a genuine concern, a discretionary trust with a corporate trustee gives you more control and better tax outcomes than direct company ownership. The corporate trustee provides limited liability, the trust can distribute income to beneficiaries in lower tax brackets, and you retain residential lending rates and terms. That structure costs more to set up, but it works better once you move beyond a single property. Before choosing any structure, speak to an accountant who understands property investment and business structures, not just business tax.

Borrowing in a company name suits a narrow set of circumstances: you have strong company income, you plan to hold the property long term, you do not need flexibility, and you understand the tax cost at sale. For most painters, a personal investment loan or trust structure will give you more options and lower costs. The choice depends on what you want the property to do and how you run your business.

Call one of our team or book an appointment at a time that works for you. We will go through your company financials, your personal position, and the lending options that match your structure.

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