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Should You Buy Property in Your Name or a Company? Here’s What Business Owners Need to Know

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Author: Trinity Accounting Practice
📍 159 Stoney Creek Road Beverly Hills NSW 2209
☎️ 02 9543 6804
🌐 www.trinitygroup.com.au
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📅 Booking Link: https://calendly.com/ramy-hanna

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Introduction: Property Investment in Australia for Business Owners

For many Australian business owners, property investment is a smart step towards long-term wealth. But here’s the million-dollar question:
Should you buy property in your personal name, or through a company structure?

The decision isn’t just about preference—it can affect your tax liability, asset protection, borrowing power, and even future investment flexibility.

In this comprehensive guide, we’ll explore the pros and cons of each option, unpack ATO guidelines, and show you how Trinity Accounting Practice helps you make informed choices.

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1. Understanding the Basics: Types of Property Ownership

Before diving into strategy, let’s define your main options:

• Individual Ownership (Personal Name): You, as a person, are the registered owner.
• Company Ownership: A company registered with ASIC owns the property.
• Trust Ownership: A trust holds the property, often with a corporate trustee.
• SMSF Ownership: A self-managed super fund acquires the property under strict rules.

For this blog, we’ll focus on personal vs. company ownership, with notes on SMSFs and trusts where relevant.

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2. Tax Considerations: How Ownership Impacts Tax Outcomes

2.1 Capital Gains Tax (CGT)

One of the biggest differences is Capital Gains Tax:

• Individuals can access the 50% CGT discount if the property is held for more than 12 months. That means only half of the gain is taxable.
• Companies pay tax on the full gain—no CGT discount applies. However, the corporate tax rate (25% for base rate entities) may still be lower than the top marginal personal rate (up to 47%).

Example:
You sell a property after 2 years with a $200,000 gain.

• In your name: Taxed on $100,000 (after CGT discount).
• In a company: Taxed on the full $200,000 gain.

2.2 Rental Income Tax

• Individual: Rental income is added to your assessable income. You may pay more if you’re in a higher tax bracket.
• Company: Rental income is taxed at the corporate tax rate (25–30%), and retained earnings can be reinvested more easily.

2.3 Negative Gearing

• Individuals can claim negative gearing losses (where property expenses exceed rental income) against other income.
• Companies can also claim losses, but rules around usage are stricter and subject to continuity of ownership tests.

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3. Asset Protection and Legal Risk

If you’re a sole trader or company director, this section is critical.

3.1 Buying in Your Name

Your personal assets (including investment property) are exposed if:

• You’re sued.
• Your business defaults on a loan.
• You experience bankruptcy or personal financial issues.

3.2 Buying Through a Company

A company is a separate legal entity, which provides a layer of asset protection:

• If your business is sued, the property may be shielded from claims.
• However, directors’ guarantees (common for loans) can reduce this protection.

Important Caveat: The ATO and courts can still access company-held property in cases of fraud, phoenix activity, or illegal conduct.

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4. Financing & Borrowing Power

Getting a loan for property purchase? Ownership structure matters to lenders.

4.1 Individuals

Pros:

• Easier to qualify for home loans.
• Lower interest rates.
• Smaller deposit requirements (as low as 5–20%).

Cons:

• You are personally liable for the debt.
• Your borrowing capacity may be capped by existing personal debt (e.g., credit cards, car loans).

4.2 Companies

Pros:

• Businesses with strong cash flow may get approval.
• Property held in a company may not count against your personal debt.

Cons:

• Lenders often require personal guarantees from directors.
• Higher deposits and interest rates apply.
• Fewer loan products are available for company borrowers.

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5. Superannuation and SMSF Rules

If you're thinking long-term, consider how super fits into your strategy.

5.1 Can Companies Buy Property Through SMSFs?

No. Companies cannot use their own structure to hold residential property inside an SMSF.

5.2 What About Individuals?

An SMSF can buy residential or commercial property, but:

• The property must not be lived in by you or a relative.
• There are strict rules on related party transactions.
• Borrowing is possible via Limited Recourse Borrowing Arrangements (LRBAs).

Trinity Accounting Practice works closely with SMSF auditors and ATO guidelines to ensure compliance.

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6. Land Tax Implications

6.1 Individuals

Land tax thresholds vary by state. For example, NSW land tax applies only to the unimproved land value above a certain threshold. Individuals often qualify for exemptions on their primary residence.

6.2 Companies

Companies do not receive land tax exemptions for primary residences and may pay higher land tax rates in some states (e.g., NSW or VIC).

Tip: Check with your accountant or state revenue office for your specific liability.

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7. Succession Planning and Exit Strategy

7.1 Personal Ownership

Pros:

• Simpler inheritance process via your will.
• Assets can be transferred to heirs with potential CGT concessions.

Cons:

• Probate may delay asset distribution.
• Disputes between heirs can complicate matters.

7.2 Company Ownership

Pros:

• Shares in the company can be passed on.
• The business (and its assets) may be sold or transferred more cleanly.

Cons:

• CGT applies on the sale of shares or transfer of beneficial ownership.
• Ongoing compliance costs (ASIC fees, annual reporting).

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8. Costs & Ongoing Compliance

8.1 Personal Ownership

• Lower setup cost (none required).
• Annual tax return.
• Standard individual property management obligations.

8.2 Company Ownership

• ASIC registration fees.
• Separate company tax returns.
• Accounting and legal fees for maintaining records and compliance.

At Trinity, we offer bundled business packages that include company compliance, tax lodgement, and financial strategy support.

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9. Trusts: A Hybrid Option?

Some investors use a discretionary trust with a corporate trustee to:

• Split income among beneficiaries.
• Reduce CGT through strategic distributions.
• Improve asset protection.
• Retain some land tax benefits.

Trusts come with complexity, so professional advice is essential.

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10. So… What’s the Best Structure for You?

There is no one-size-fits-all answer. Your decision should be guided by:

• 🔹 Your personal tax bracket
• 🔹 Business and financial risk profile
• 🔹 Investment time horizon
• 🔹 Succession and estate plans
• 🔹 Land tax exposure
• 🔹 Superannuation strategy

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Real-World Example: How Trinity Helped a Business Owner

Meet Michael, a Sydney-based builder who wanted to invest in commercial real estate.

We helped him:

• Set up a company structure with a discretionary trust.
• Minimise tax on rental income.
• Protect personal assets from legal exposure.
• Plan an exit strategy that passes shares to his children tax-effectively.

Whether you’re in construction, retail, healthcare, or e-commerce, Trinity Accounting Practice tailors the solution to your needs.

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Final Word: Let Trinity Accounting Practice Help You Invest Wisely

Whether you’re buying your first investment property or scaling a portfolio, getting the structure right from the start is critical.

Our team can help you with:

✅ Tax structuring advice
✅ Business and property accounting
✅ Asset protection strategies
✅ SMSF and trust setup
✅ Finance and lending support

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📅 Ready to Get Started?

👉 Book a free consultation today: https://calendly.com/ramy-hanna

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FAQ: Property Ownership for Business Owners

Q1: Can I change the ownership structure after buying?
Yes, but it may trigger stamp duty and CGT liabilities.

Q2: Can I buy my office through my company and rent it back?
Yes, but you must do so at market rates and disclose it properly in your tax returns.

Q3: Can an SMSF buy residential property?
Yes—but only under strict ATO rules, and the property must be for retirement investment purposes only.

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