OUR SERVICES / COMPANY LOANS
When investing in a company home loan, partnering with experienced brokers is the key to making the right choices at every stage.
Whilst company structures are not usually the default choice for investors, it’s important to understand how and where they might fit into a strategy, so you can ask the right questions and get the right advice. As seasoned mortgage brokers for company loans, this is where Blue Fox Finance can help.
Companies do lots of things when compared to purchasing in your individual name, including:
But the usual question is, why a company instead of a trust?
In NSW, companies get a Land Tax Threshold. Even though they lose the CGT discount, the math still works out in favour of a company sometimes.
Companies-to-company loans can generally be interest-free and indefinite, without triggering Div7A obligations. This means that you may be able to use funds in a trading/bucket company without distributing to you as an individual, and without triggering Div7A (which a trust would do). This can be a massive upfront tax deferral and overall tax saving.
Companies can retain profits:
• 25% for a base-rate entity (less than 80% from passive income)
• 30% for a non-base-rate entity
For cash-flow positive assets where the individuals are already in high tax brackets, this can make a lot of sense.
The obvious solution to the third benefit noted is to just put the asset in a trust and distribute the profits via a secondary/eligible beneficiary clause to a bucket company; but, that may be overkill. A stand-alone company may simplify things and avoid excess structures and accounting/compliance fees.
Lending to a company isn’t actually too difficult. All shareholders/directors need to be servicing guarantors (that’s usually the income for the affordability calculations), but the asset and loan are both under the company. Most lenders don’t deal with company borrowers, but there are competitive and flexible lenders that do.
