What Are the Risks and Rewards of Borrowing in a Company?

Borrowing in a company name separates your rental property debt from your personal balance sheet and can open up options for portfolio growth that individual ownership cannot match.

The upside includes asset protection, the ability to bring in partners or investors without triggering ownership restructures, and a structure that suits long-term wealth accumulation. The downside includes higher interest rates, more limited product access, and a less forgiving tax environment under the changes introduced in mid-2026. If you are acquiring a residential investment property on the Gold Coast in a company structure, how you time that purchase and which lender you approach will dictate whether the loan adds to your wealth or becomes a constraint.

Why Investors on the Gold Coast Are Exploring Company Structures

A company structure appeals to investors who already own several properties in their own name and want to quarantine risk or scale further without hitting personal borrowing limits. It also suits buyers bringing in external equity, either through partners or silent investors, where a trust or individual structure would complicate ownership.

Consider a buyer who owns three properties individually and wants to add a fourth rental in Robina. Their personal borrowing capacity is constrained by debt-to-income limits, and they do not want another property attached to their personal name in case of tenant default or legal exposure. Acquiring the Robina property through a company allows them to borrow separately, isolate the asset, and bring in a business partner at a later stage without needing to restructure ownership or trigger stamp duty. The company pays tax on rental income at the corporate rate, and any future sale of the property is taxed at that same rate without access to the individual capital gains discount.

That trade-off works when the investor plans to hold for the long term, reinvest profit into additional acquisitions, and values control and flexibility over immediate tax deductions.

How Lender Policy Has Changed Since the 2026 Reforms

Lenders treat company borrowing as commercial or quasi-commercial lending, even when the underlying asset is residential. That means higher interest rates, lower loan-to-value ratios, and stricter serviceability assessment compared to a loan in your personal name.

Before mid-2026, most major lenders would lend up to 80 per cent of the property value to a company borrower if directors provided personal guarantees and the rental income supported the loan. Since the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent in June, lenders have tightened serviceability assumptions for residential property held in companies. Rental income is now discounted more heavily, and some lenders will not lend at all for established dwellings acquired in a company unless the company has other trading income or the directors can demonstrate alternative repayment capacity.

If you are buying an established unit in Surfers Paradise or Broadbeach in a company name, expect rates between 1 and 2 percentage points higher than the equivalent owner-occupied or individual investment loan, and expect lenders to require a larger deposit or cross-collateralisation with other assets. If you are buying an eligible new build, some lenders will treat the loan more favourably because the property remains eligible for negative gearing under the grandfathering rules and qualifies for the capital gains discount election.

The Negative Gearing Quarantine and What It Means for Company Borrowers

From 1 July 2027, net rental losses on residential properties acquired on or after 7:30pm AEST on 12 May 2026 can only be offset against other residential rental income or carried forward. They cannot be offset against salary, business income, or other assessable income unless the property is an eligible new build.

A company does not pay tax on salary or wages in the way an individual does, so the quarantine affects company investors differently. If the company owns only one residential rental and that property runs at a loss, the company cannot offset the loss against any other income stream unless it owns additional rental properties or the dwelling qualifies as a new build. The loss is carried forward and can be used to reduce future rental profit or offset a future capital gain on the property.

In a scenario like this, an investor purchases an established townhouse in Southport through their company in August 2026. The property generates rental income of $32,000 per year and incurs interest, rates, insurance, body corporate fees and depreciation totalling $38,000. Under the old rules, the company could use that $6,000 loss to reduce tax on other company income. Under the new rules, the loss is quarantined and carried forward. If the company has no other residential rental income, it pays tax on its other income at the full corporate rate, and the quarantined loss sits unused until the property becomes profitable or is sold.

That delay in accessing the tax benefit shifts the economics of gearing and makes cash flow planning more important. Investors expanding their property portfolio in a company structure need to model serviceability and tax outcomes across multiple years, not just at settlement.

When Asset Protection Justifies the Higher Cost

The case for borrowing in a company strengthens when personal asset protection outweighs the interest rate penalty and tax constraints. If you operate a business with material liability exposure, or you work in a profession where you could be personally sued, holding rental property in a company or trust separates that asset from personal risk.

A director who owns a construction business on the Gold Coast and wants to acquire a rental property in Mermaid Waters may choose a company structure to ensure the rental property cannot be claimed by creditors if the trading business fails. The director provides a personal guarantee to the lender, which means they remain liable for the debt, but the property itself is owned by a separate legal entity. If the business enters administration, the rental property is not automatically included in the asset pool available to creditors unless the guarantee is called and the director cannot meet the liability personally.

That separation has value, but it comes with a cost. Interest rates will be higher, product features such as offset accounts and redraw may not be available, and the director will need to demonstrate that the company can service the loan either from rental income or from other sources. Some lenders will also require a second registered mortgage over another property or cash security, particularly if the loan-to-value ratio exceeds 70 per cent.

Serviceability, Director Guarantees and Loan-to-Value Constraints

Lenders assess a company loan on the basis of the company's income, not the director's personal income, unless a personal guarantee is provided and the lender agrees to consider individual capacity. Most lenders require both: they assess the company's rental income and also require the directors to guarantee repayment, which allows the lender to assess personal borrowing capacity as a fallback.

Rental income is typically shaded by a vacancy rate of 5 to 10 per cent, and some lenders apply a further discount if the property is located in a high-density or tourist-driven precinct. A two-bedroom apartment in Broadbeach with a gross rental yield of 5 per cent might be assessed at an effective yield of 4 per cent after shading, and the lender will apply a serviceability buffer of 3 percentage points above the loan rate when calculating whether the company can afford the repayments.

If the rental income alone does not support the loan, the lender will look to the directors' other income, either from the company or from employment elsewhere. If the directors are also servicing other debt, that reduces available capacity. The debt-to-income cap introduced in February 2026 applies separately to investor and owner-occupied lending, but company loans are typically classified as investor lending, and the 20 per cent allocation for loans at or above six times income is shared across all investor lending, not reserved for company borrowers.

Loan-to-value ratios for company borrowing are typically capped at 70 to 80 per cent, depending on the lender, the location, and whether the property is established or new. Lenders Mortgage Insurance is rarely available for company loans, so if you want to borrow above 80 per cent, you will need to provide additional security or a cash deposit held in the lender's name.

The New Build Carve-Out and Why Timing Your Purchase Matters

Eligible new residential dwellings retain access to negative gearing and qualify for an election between the 50 per cent capital gains discount and indexed cost base treatment with a 30 per cent minimum tax rate. If you are borrowing in a company and acquiring a property on or after 12 May 2026, buying a new build rather than an established dwelling can preserve some of the tax advantages that made gearing attractive.

A new build is defined as a dwelling constructed on previously vacant land or a development that increases the total number of dwellings on the site. A knock-down rebuild that replaces one house with one house does not qualify. A duplex that replaces a single dwelling does qualify. If the new build is occupied for more than 12 months before it is sold to you, it loses the carve-out and is treated as established for tax purposes.

On the Gold Coast, eligible new builds are concentrated in growth corridors such as Coomera, Pimpama, and parts of Ormeau, where land subdivision and medium-density development are active. These areas also have higher rental vacancy rates and longer settlement timeframes, which affects serviceability and holding costs. If you are acquiring a new townhouse in Coomera through your company, the lender will assess rental income based on the current vacancy rate in that precinct, not the Gold Coast average, and may require evidence of pre-lease or a larger cash buffer to cover the first six months of ownership.

Timing matters because properties purchased under contract between 12 May 2026 and 30 June 2027 can still be negatively geared under the old rules until 30 June 2027. That transitional period is now closed for new purchases, but if you exchanged contracts during that window and settlement has been delayed, you retain access to the old treatment for the remainder of the financial year.

Refinancing Company Debt and When to Review Structure

A company loan is harder to refinance than an individual loan because fewer lenders compete in that space and each has different appetite depending on the property type, location, and the company's financial position. If you took out a company loan two or three years ago and circumstances have changed, reviewing the loan and the structure is worth the effort.

If the company now owns multiple properties, some lenders will offer better rates or higher leverage because the portfolio generates more income and provides more security. If the company has been profitable and has retained earnings, that strengthens serviceability. If the directors have paid down other debt or increased personal income, that also improves the refinance case.

Some investors move properties out of a company and into a trust or individual name when refinancing, particularly if the tax benefits of individual ownership now outweigh the asset protection benefits of the company. That transfer triggers stamp duty in most states, including Queensland, and may trigger capital gains tax if the property has appreciated. The decision to restructure should be made with legal and tax advice, not just on the basis of the interest rate available.

If you are refinancing your investment property and the existing loan is in a company name, expect the new lender to request up to three years of company financials, director guarantees, and an updated valuation. Some lenders will also want to see the company's other assets and liabilities, particularly if the loan-to-value ratio is above 70 per cent or the rental yield is below 5 per cent.

Speak to a broker who works with company structures regularly. Call one of our team or book an appointment at a time that works for you.

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