Yes, you can buy property with a trust, and thousands of Australian investors do exactly that every year. A trust is a legal structure that holds assets on behalf of its beneficiaries, and it can be a powerful tool for building a property portfolio, protecting wealth, and managing tax obligations. But trusts also come with real complexity, additional costs, and state-based land tax implications that can quickly erode the benefits if you are not careful. This guide breaks down how trusts work for property ownership, why investors use them, and what the tax and land tax consequences actually look like.

What Is a Trust and How Does It Work for Property Ownership?

A trust is not a legal entity in its own right. Instead, it is a legal relationship in which a trustee (a person or company) holds and manages assets for the benefit of named beneficiaries. When you buy property through a trust, the title is registered in the trustee’s name, but the economic interest belongs to the beneficiaries according to the trust deed.

In Australian property investment, there are four main trust structures used:

• Discretionary (Family) Trust: The trustee has full discretion over how income and capital are distributed among beneficiaries. This is the most common structure for family wealth planning.
• Unit Trust: Beneficiaries hold fixed units, similar to shares in a company. Income and capital are distributed proportionally. Often used in joint ventures or among unrelated investors.
• Hybrid Trust: A combination of discretionary and unit trust features, though these have attracted ATO scrutiny and are used less frequently today.
• Self-Managed Super Fund (SMSF) Trust: A separate structure governed by superannuation law. If you are curious about how superannuation can be used to purchase real estate, our guide on buying property with your Super covers the rules and restrictions in detail.

According to the Australian Taxation Office (ATO), there are approximately 800,000 trusts operating in Australia at any given time, with discretionary trusts being the dominant form. A significant proportion of these hold real property assets.

Why Do Investors Buy Property Through a Trust? What Are the Benefits?

Investors choose trust structures for several well-established reasons. The benefits are most compelling when you have multiple beneficiaries, a long investment horizon, or a genuine asset protection concern.

Income Splitting and Tax Flexibility

With a discretionary trust, the trustee can distribute rental income to beneficiaries in lower tax brackets each financial year. For example, if a trust earns $40,000 in net rental income, and there are four adult beneficiaries (including adult children or a lower-income spouse), the trustee may distribute $10,000 to each, potentially keeping all distributions within the 19% marginal tax bracket rather than having the full amount taxed at the top rate of 47%. Over a decade, this flexibility can represent a substantial after-tax advantage compared with holding property in a single high-income individual’s name.

Asset Protection

Because the trust (not you personally) owns the property, it can offer a layer of protection against personal creditors in certain circumstances. This is particularly relevant for business owners, professionals exposed to litigation risk, or anyone in a financially volatile industry. Note that asset protection is not absolute: courts can and do look through trust structures if they were established specifically to defeat creditors.

Estate Planning and Succession

Property held in a trust does not form part of a deceased person’s estate in the same way personally held assets do. This can simplify succession, reduce the risk of contested estates, and allow wealth to pass to the next generation without triggering a capital gains tax (CGT) event on death in some circumstances. A qualified estate planning solicitor can advise on how this applies to your situation.

Multigenerational Wealth Building

Trusts can continue for up to 80 years under the rule against perpetuities (depending on state law), making them a vehicle for genuinely long-term wealth accumulation. For investors thinking about buying their first investment property and building a portfolio over time, establishing the right structure from the outset is far simpler than restructuring later and potentially triggering stamp duty and CGT.

What Are the Tax Implications of Buying Property in a Trust?

The tax treatment of trust-held property in Australia is nuanced. Here are the key points every investor must understand before proceeding.

Capital Gains Tax (CGT)

Trusts are eligible for the 50% CGT discount on assets held for more than 12 months, provided the beneficiaries receiving the capital gain are individuals (not companies). This is a significant advantage. However, losses made inside a trust cannot be distributed to beneficiaries to offset their personal income. They must be quarantined inside the trust and carried forward to offset future trust gains.

Negative Gearing Does NOT Work Inside a Trust

This is the single most important tax point for new trust investors. If your investment property runs at a loss (i.e., it is negatively geared), that loss cannot be passed through to individual beneficiaries to offset their personal wage or salary income. The loss stays trapped in the trust. For investors who rely on negative gearing as a tax strategy, purchasing in a trust defeats that purpose entirely. Positively geared properties, or a portfolio expected to be cash-flow positive from day one, are much better suited to a trust structure.

The 30% Company Tax Rate Risk

If a discretionary trust fails to distribute all of its income by 30 June each year, the ATO taxes the undistributed amount at 47% (the top marginal rate, as a penalty). Trustees must be diligent about passing formal resolutions before each financial year end to avoid this outcome.

Trusts and the Main Residence Exemption

Individuals can generally access the full CGT main residence exemption on the family home. A trust cannot access this exemption. If you intend to live in the property you are purchasing, buying it in a trust is almost always the wrong choice from a tax perspective.

What Are the Land Tax Implications of Buying Property in a Trust?

Land tax is where trust structures can cause the most financial pain for unprepared investors, and the rules differ dramatically by state.

No Tax-Free Threshold in Many States

In Victoria, for example, trusts that hold residential property are typically classified as absentee owners or special trusts, which means they do not benefit from the same land tax-free threshold available to individual owners. According to the State Revenue Office of Victoria (SRO), the land tax-free threshold for individuals in 2024-25 was $300,000 in site value. For most trust structures, this threshold does not apply, meaning land tax is payable from the first dollar of land value.

The Victorian Trust Surcharge

Victoria imposes a 0.5% trust surcharge on top of the standard land tax rate for discretionary trusts that hold residential land, unless the trustee makes a “beneficial ownership” declaration to the SRO. That declaration requires identifying specific beneficiaries and their proportional interests, which partially undermines the income-splitting flexibility that made the trust attractive in the first place.

Other States Vary Significantly

New South Wales, Queensland, South Australia, and Western Australia each have their own land tax rules for trusts, and the surcharges and thresholds differ considerably. In NSW, for instance, trusts are assessed as a separate taxpayer with their own threshold, which can be advantageous if managed correctly. Before committing to a trust structure, you should obtain state-specific advice, particularly if you plan to hold properties across multiple states.

For a deeper look at how these structures are set up and compared, our detailed overview of trust structures for property walks through each type with worked examples.

How Do You Actually Buy Property in a Trust? What Are the Practical Steps?

The process of purchasing property through a trust involves several steps beyond a standard purchase. Here is what to expect:

1. Establish the trust deed: Engage a solicitor or accountant to draft a tailored trust deed. A generic deed downloaded online is rarely adequate for property investment purposes. Costs vary but this is a necessary upfront investment in getting the structure right.
2. Appoint a corporate trustee (recommended): Most advisers recommend using a company as trustee rather than an individual. This provides better asset protection, cleaner succession, and avoids complications when individual trustees change.
3. Obtain a Trust ABN and TFN: The trust needs its own Australian Business Number and Tax File Number before it can enter into contracts or open bank accounts.
4. Secure finance in the trust’s name: This is often the hardest step. Lending to trusts is more complex than lending to individuals. Many lenders require personal guarantees from the directors of the corporate trustee. Borrowing capacity is also assessed differently, so it is worth working with a mortgage broker experienced in trust lending.
5. Sign the contract of sale correctly: The contract must name the trustee in the correct capacity, for example “ABC Pty Ltd as Trustee for the XYZ Family Trust.” An error here can be costly to fix.
6. Lodge stamp duty correctly: Each state has its own rules about how trust purchases are assessed for stamp duty. Some states charge additional duty on certain trust acquisitions.

If you are still weighing up your options and timing, it is worth reading whether buying property in 2026 makes sense given current market conditions before committing to any purchase structure.

Is Buying Property in a Trust Right for You?

A trust is not the right structure for every investor. The decision depends on your income level, the number of beneficiaries you can distribute to, whether you expect the property to be positively or negatively geared, your state of purchase, and your long-term wealth strategy.

A trust tends to work best when:

• You have multiple adult beneficiaries in lower tax brackets to distribute income to
• The property is expected to be positively geared or cash-flow neutral
• Asset protection is a genuine concern
• You are building a long-term, multigenerational portfolio
• You are not relying on the CGT main residence exemption

A trust is likely the wrong choice when:

• You need negative gearing to offset personal income
• You plan to live in the property
• You are a sole investor with no other beneficiaries
• Land tax surcharges in your state will erode rental returns
• The additional setup and compliance costs outweigh the tax savings

Always engage a qualified accountant and solicitor who specialise in property before establishing any trust structure. The ATO and state revenue offices scrutinise trust arrangements closely, and the wrong setup can result in unexpected tax bills rather than savings.

Buying property is one of the most significant financial decisions you will make. Whether you choose to purchase as an individual, through a company, via a trust, or inside your superannuation fund, the structure you choose on day one has consequences that last for decades. The team at Collings Real Estate works with investors across Melbourne and inner suburbs every day, and we are happy to point you toward the right advisers and help you find the right property once your structure is set. Reach out to our team to start the conversation.