Pros and Cons: Buying Property as a Company

While most buyers purchase a property under their name, some choose to buy a property through a company. But can a company buy a house? Yes, it certainly can. 

Doing so can offer tax benefits and asset protection but may come with added costs and complexity. So, before deciding if purchasing a property through a company is the best route, you should weigh its pros and cons. 

Why Buy Property Through a Company?

Companies in Australia can legally own real estate. When the property is treated as a company asset, the ownership is separate from the business owner’s personal finances. This distinction can provide several advantages, especially for those looking to protect personal assets from risks associated with property ownership. Buying a property through a company can also open up potential tax benefits. Let’s explore these several upsides further below. 

Pros of Buying Property as a Company

1. Asset Protection

Having the capability to separate personal and business assets is one of the biggest advantages of acquiring a property through a company. If your company faces legal action or financial trouble, you don’t have to worry about your personal assets being at risk—and vice versa. Company-owned properties aren’t likely at risk if you face financial difficulties as an individual unless you used these business assets as security for loans. 

2. Tax Benefits and Deductions

Companies may be eligible for tax deductions that individual property owners cannot claim. These can include:

• Loan interest on investment properties

• Depreciation of the building and assets

• Maintenance and management expenses

On top of that, the company tax rate (currently 25% for small businesses) may be lower than personal tax rates for high-income earners.

3. Property Portfolio Growth

A company structure makes it easier to hold multiple properties under one entity. This can simplify record-keeping, tax reporting, and financial planning, especially for investors managing several properties.

Lenders may also assess company finances differently, sometimes allowing businesses to borrow more than an individual.

4. Succession Planning

Instead of transferring property ownership directly, shareholders can transfer company shares, making it easier to pass property investments to future generations or business partners.

Cons of Buying Property as a Company

1. Higher Costs and Compliance Obligations

Operating a company comes with ongoing expenses and administrative responsibilities, including:

• ASIC registration and annual review fees

• Business tax returns and financial reports

• Legal obligations under Australian corporate laws

For small-scale investors, these costs may outweigh the benefits of company ownership.

2. Stricter Lending Requirements

While they may allow companies to borrow more than individuals, lenders and banks often have tighter lending criteria for company-owned properties, such as:

• Higher interest rates than personal mortgages

• Lower loan-to-value ratios (LVR), so a larger deposit is required

• Director guarantees, which can put personal assets at risk

These factors can make financing more complicated than buying as an individual.

3. No Capital Gains Tax (CGT) Discount

Individuals selling an investment property held for more than 12 months qualify for a 50% CGT discount. Companies do not receive this benefit, so any capital gains are taxed at the full company rate, reducing potential profits.

4. Limited Personal Use

If a company owns residential property, using it for personal purposes can lead to tax complications, including fringe benefits tax (FBT). This makes company ownership less practical for those looking to live on the property.

Who Benefits from Buying Property as a Company?

Buying property through a company can be strategic for various individuals and entities. The following groups may benefit most from this structure:

• Investors Managing Multiple Properties

Those expanding a property portfolio may find company ownership more structured and tax-efficient.

• Businesses Purchasing Commercial Real Estate

A company that owns its office or retail space can claim tax deductions. Doing so also helps the owner keep their business and personal assets separate.

• People Focused on Asset Protection

A company structure offers an extra layer of protection when you want to shield personal wealth from potential legal or financial risks.

Who Might Avoid Buying Property as a Company?

While buying property through a company can offer many benefits, it’s not always the best fit for everyone. The following groups might find that individual ownership is a better option for their needs:

• First-Time Buyers or Small-Scale Investors

If you’re buying a home or a single investment property, personal ownership is often simpler and allows access to tax benefits like the CGT discount.

• Those Wanting Flexible Ownership

Selling, refinancing, or transferring company-owned properties can be more complicated than personal property transactions.

• Anyone Looking to Minimise Costs

Company ownership involves extra fees and paperwork, making it less attractive for individuals who don’t need the added structure.

Final Thoughts 

Deciding whether to buy a property through a company depends on your financial situation, investment goals, and risk tolerance. While it offers asset protection and tax benefits, it also comes with more paperwork and potential tax implications.

Ultimately, the choice depends on your unique situation and objectives. 

Regardless of the path you choose, speak with a buyer’s agent or financial advisor, as they can help assess whether the advantages outweigh the challenges in your specific situation.

Need Expert Guidance on Property Investments?

Considering property ownership through a company? Having expert guidance can make all the difference. 

At U Buyers Agents, we specialise in providing expert guidance on all aspects of property investment. Whether you are considering structuring a property purchase through a company or need support in making informed decisions, our services can help you navigate the process confidently.

Our services include:

• Property acquisition and investment strategy

• Market research and due diligence

• Structuring advice for company-owned property

• Negotiation and purchasing support

Contact us today for consultation and expert advice on maximising your investment.