How to Buy Commercial Property and Pay Less Tax

Commercial property investing isn’t just about the property. It’s also about the structure—and getting it wrong could mean losing over $200,000 unnecessarily.

In this expert-packed episode of the Commercial Property Investing Podcast Australia, Arjun sits down with specialist accountant Charlie from CPACCO to explore:

• Why your entity structure is the most important tax-saving tool
• How to protect wealth and scale commercial portfolios using smart structuring
• The $170K–$220K mistake too many business owners make
• When to use trusts, companies, or SMSFs—and when not to

🎯 Whether you’re an investor, a growing business owner, or both—this is a must-read strategy breakdown.

Why Commercial Property Is Almost Never Bought in Personal Names

In residential real estate, individuals often buy properties in their personal names or via trusts. In commercial, it’s a different story.

Charlie explains why:

✅ Most commercial deals are positively geared, increasing taxable income

✅ Buying personally means zero flexibility with income distribution

✅ High-income individuals get taxed up to 47% on profits

“In your personal name, all that rental income gets taxed at your marginal rate. That could be 47 cents on the dollar—versus 30% or even lower in other structures.” — Charlie

Comparing Structures: Trusts vs Companies vs SMSFs

✅ Trusts

Best for: Flexibility, family income distribution, long-term investors

• Allows distribution to lower-income family members
• Can use corporate beneficiaries to cap tax at ~30%
• Eligible for 50% CGT discount
• Great for positively geared properties and asset protection

💡 Example: Parents earning $190K can stream income to a student child in a lower tax bracket.

✅ Companies & Bucket Companies

Best for: Business owners reinvesting surplus profits

• Fixed tax rate: 25–30%
• Can lend funds between companies without Div 7A implications
• Often paired with family trusts to distribute profits efficiently
• Perfect for reinvesting business cash into hard assets

💸 Warning: Pulling $1M out personally from a company could mean $220K extra tax, versus just $50K if structured correctly via a bucket company and inter-company loan.

“That extra $170K could be the difference between a $2M deal and a $2.5M portfolio game-changer,” says Arjun.

✅ SMSFs (Self-Managed Super Funds)

Best for: Tax efficiency, retirement strategy, business owner premises

• Fixed tax rate: 15%
• Can purchase the property and lease it to your own business (at arm’s length rent)
• Use idle super balances to invest without personal cash outlay
• Powerful for long-term wealth building

📌 Caution: Must meet strict compliance standards and market rental rules.

The $220K Mistake Business Owners Make—And How to Avoid It

The biggest error Charlie sees?

Pulling business profits into personal names to fund deposits—before setting up the right structure.

The Result:

• $1M withdrawn as dividends = $220K extra tax (top-up from 25% to 47%)
• Worse still, you may have to use business income to pay that tax, creating a loop of inefficiency

The Smart Play:

• Leave profits in the business (already taxed at 25%)
• Set up a new investment company (Company B)
• Use an inter-company loan to fund the deposit
• Purchase the commercial asset inside Company B
• Pair with a family trust as shareholder to optimise future distributions

🎯 Result: Protected assets, efficient tax planning, and a scalable structure.

Depreciation: Why Commercial Wins Again

Thanks to legislative changes in 2017, commercial investors can often claim substantially more depreciation than residential buyers.

• Commercial properties—even older ones—still qualify for high-value depreciation
• Helps offset rental income and reduce taxable profits
• Boosts net returns, especially for higher-yielding assets

Structuring Case Study: The $1M Cashflow Trap

Scenario A – Poor Structuring

• Business owner pulls $1M out personally
• Pays top-up tax: 22% = $220,000
• Left with $780K to invest

Scenario B – Smart Structuring

• Leaves $1M in company
• Uses inter-company loan to new investment entity
• Pays only $50K top-up tax via family trust flow
• Left with $950K+ to invest

🧠 That’s a $170,000 win—just from using the right structure.

Asset Protection and Treasury Management for Business Owners

Commercial property investing is a treasury strategy, not just a wealth strategy.

✔️ Keep business and investment risk separate✔️ Avoid drawing large dividends just to fund growth✔️ Turn idle business cash into income-producing, appreciating assets

“Too many owners sit on millions in cash like it’s a badge of honour. But they’re stunting both their business and property portfolio growth.” — Arjun

Summary: Structure BEFORE You Invest

Charlie’s top advice?

✅ Don’t make structuring an afterthought✅ Use trusts, SMSFs, or company structures appropriately✅ Avoid drawing large dividends to fund purchases✅ Speak to professionals early to maximise outcomes

Want to Avoid a $220K Tax Mistake?

🏢 Ready to invest in commercial property? Start your journey here