A property trust is a legal structure in which a trustee holds property on behalf of beneficiaries. Instead of owning the property in your own name, the trust owns the property and you (and your family or business partners) are the beneficiaries. Property trusts are used by investors to manage tax, protect assets from creditors, and control how property income and capital gains are distributed. There are several types — choosing the right one depends on your strategy.

What are the main types of property trusts?

Discretionary (family) trust

The most common structure for family investors. The trustee has full discretion to distribute income and capital gains to any beneficiary in any proportion each year — allowing income to be directed to the lowest-income earner to minimise tax. Discretionary trusts do not qualify for the 50% CGT discount in some circumstances; get tax advice specific to your situation.

Unit trust

Beneficiaries hold fixed units (like shares) that define their entitlement to income and capital. Unit trusts are used when investors want clearly defined interests — for business partners, joint ventures or external investors. Units can be bought and sold separately, making unit trusts more flexible for co-investors.

Bare trust

Used primarily in SMSF property purchases under a Limited Recourse Borrowing Arrangement (LRBA). The bare trustee holds the property on behalf of the SMSF until the loan is repaid, at which point legal title transfers to the fund. The bare trust has no discretion — it holds the asset purely on the SMSF’s behalf.

Real Estate Investment Trust (REIT)

A listed investment vehicle that pools investors’ capital to buy commercial, industrial or residential property portfolios. REITs are traded on the ASX and offer liquidity that direct property ownership does not. Examples include Goodman Group (industrial), Mirvac (residential/commercial) and Charter Hall.

What are the tax advantages of a property trust?

• Income splitting: A discretionary trust can distribute rental income to low-income beneficiaries (including adult children), reducing overall family tax.
• CGT discount: Trusts held by individual beneficiaries can access the 50% CGT discount on assets held more than 12 months (conditions apply).
• Deductible expenses: Depreciation, interest, rates and management fees remain deductible through a trust structure.

What are the disadvantages of owning property in a trust?

• Trusts cannot access the main residence CGT exemption (only individuals can)
• Land tax thresholds may be lower for trusts in some states (VIC trusts pay land tax from $1 of land value)
• Setup and ongoing accounting costs are higher than personal ownership
• Trusts cannot negatively gear in the same way as individuals (losses are trapped in the trust)

Frequently asked questions

Can I transfer a property I already own into a trust?

Yes, but the transfer triggers stamp duty (at full market value in most states) and may trigger CGT. The costs are significant. Most advisors recommend setting up the trust before purchasing — not after.

Should I buy my investment property in a trust or in my own name?

This depends on your tax position, asset protection needs and long-term plans. If you are negatively geared and in a high income-tax bracket, personal ownership may be more tax-efficient initially. If you are building a portfolio and want income splitting and asset protection, a trust may be better long-term. Get advice from a property tax specialist — not a generalist accountant.

Can an SMSF own a property through a trust?

Yes — an SMSF borrows to buy property using a bare trust structure under a Limited Recourse Borrowing Arrangement. This is the only circumstance where an SMSF can borrow to acquire an asset.

GeeVee verdict: Property trusts are powerful tools for multi-property investors — but the stamp duty, land tax and accounting costs mean they are rarely worth it for a single investment property. Start in your own name, and consider restructuring once you have 2-3 properties and a clear portfolio plan. Always get a specialist property tax accountant involved before setting up any trust structure.

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