The 2026–27 federal budget has changed the tax equation for property investors. If the changes are passed into law, negative gearing on established residential properties purchased after 12 May 2026 will be restricted from 1 July 2027, and the capital gains tax (CGT) discount for individuals will be overhauled. For high-income investors who use rental income to offset taxable income, those changes raise a question: Does buying through a company make more sense?
The answer depends on your circumstances, and it requires careful advice from both your accountant and a mortgage broker who understands how lenders assess company borrowers. For Melbourne investors who already run a business through a company, it is a question that now deserves a proper look.
This article is general information only and does not constitute financial, legal or tax advice. We recommend seeking advice from a qualified accountant and solicitor before making any decisions.
What the Budget changed for individuals
Under the new rules, investors buying established residential properties in their own name after Budget night will lose the ability to offset rental losses against wages and other income from 1 July 2027. The existing 50% CGT discount is also being replaced with an inflation-based indexation model and a 30% minimum tax rate on real gains accrued after that date.
For someone paying the top marginal rate of 47%, the impact is big.
Negative gearing was, for many investors, a way of managing the tax burden of holding property that runs at a loss in the short term. Without it, the numbers around your cash flow and tax bill change significantly.
What the Budget did not change for companies
Corporate tax settings were not part of the Budget's property reforms. A company investing in residential property is not subject to the same negative gearing restrictions that apply to individuals purchasing established properties after Budget night.
There is also a difference in tax rates that’s important to know. The top marginal rate for individuals is 47%, including the Medicare levy. The standard company tax rate is 30%, and for base rate entities – broadly, companies with an aggregated annual turnover below $50 million and whose passive income does not exceed 80% of total assessable income – the rate is 25%.
This is not new. For an investor already in the top tax bracket, that difference has always existed. But the Budget's changes to what individuals can do with property losses make the rate comparison more relevant than it was before May 2026.
The business owner's advantage
For business owners who already operate through a company structure, there is an additional dimension to consider. Rather than drawing funds from the company as a salary or dividend – and paying personal income tax on that distribution – some investors look at using retained earnings inside the corporate structure to fund or service an investment property loan.
In simple terms, if earnings are already sitting inside a company, deploying them through the same structure to acquire an investment property may avoid the need to draw taxable income at all. The capital stays in the structure rather than moving through the personal tax system first.
This can be a complex strategy, and it needs careful accounting advice to execute correctly. But for business owners thinking about where to put retained earnings, it is a legitimate consideration. But speak with your accountant before you act.
What about trusts?
Discretionary trusts are a common structure that Melbourne investors use when they want to hold property outside of their personal name. The flexibility to distribute income to beneficiaries at lower tax rates has historically made them an attractive option.
However, the Budget has introduced a change here too. From 1 July 2028, a 30% minimum tax will apply to discretionary trust distributions that are currently taxed at lower rates. That reform is aimed specifically at the income-splitting benefit that has made discretionary trusts popular. There is also a double-taxation risk with trusts in certain configurations, particularly where corporate beneficiaries are involved, that requires professional analysis before you proceed.
This does not mean trusts are off the table. The right answer depends entirely on your circumstances. But it does mean that a discretionary trust is no longer the obvious default it once was. For some investors, a proprietary limited company or a fixed trust may be a cleaner vehicle, particularly in light of the new rules.
How lenders assess loan applications from companies
Financing an investment property through a company works differently from a standard residential investment loan.
Lenders typically assess company borrowers more carefully than individuals. They want to understand the company's financial position, its income sources, the purpose of the loan and the relationship between the directors and the corporate entity. As a result, the application process is can be a little more involved.
Loan-to-value ratios (LVRs) can vary. Some lenders are more conservative with company borrowers, particularly for residential property, and may lend at lower LVRs than they would for an individual. This affects how much deposit or equity you need to bring to the table.
Serviceability is assessed differently, too. A lender looking at a company loan will want to understand how the loan will be serviced – whether that is through rental income, retained earnings, director income or a combination. Getting this documented clearly from the outset is important.
Interest rates can also differ. Not all lenders offer loans to companies for residential investment properties, and the rate you are offered will depend on the lender, the LVR, the asset and the structure of the application. Working with a broker who has access to a broad panel of lenders and who knows which of them are competitive for your specific situation can make a difference.
At AXTON Finance, we work with a panel of more than 30 lenders and regularly assist clients who are buying investment properties through corporate structures. Getting the structure and the loan right at the same time, rather than locking in a property purchase and then working out the finance, is the approach we recommend.
Structure first, then borrow
Structuring a loan through a company after the fact can be difficult, and unwinding a structure that was set up incorrectly is often more expensive than getting it right from the start. The question of which entity should hold the property, and how the loan should be structured to support that, needs to be answered before you commit to a purchase, not after.
That means having the right professional team in place early. Your accountant should be advising on the tax and structural questions. Your solicitor should be reviewing the purchase documentation. And your mortgage broker should be across how lenders will assess the borrowing in the structure you have chosen.
The Budget has made the structure conversation more relevant for a wider group of Melbourne investors than it was before. For self-employed people and high-income earners in the top income tax bracket, for business owners with retained earnings and for anyone who was relying on negative gearing in their personal name, now could be a good time to review how you are set up.
This article is general information only and does not constitute financial, legal or tax advice. We recommend seeking advice from a qualified accountant and solicitor before making any decisions.
Thinking about buying investment property through a company or trust? Speak to the team at AXTON Finance today on 03 9939 7576, email getabetterrate@axtonfinance.com.au or get in touch.
