A guide to buying property through a trust

There are more than one million trusts in Australia holding almost $3 trillion dollars in gross assets. Around 80% of these are family or discretionary trusts, widely used for asset protection and wealth management.

In the 2026-27 federal budget, handed down in May 2026, the government announced changes to trust tax rules, applying a minimum 30% tax rate on taxable income of some trusts, taking effect from 1 July 2028. (At the time of writing, the details are still being legislated.)

This will see many Australians re-thinking their trusts and is likely to make discretionary trusts far less appealing to those largely using trusts for tax purposes. But not all trusts are the same and some Australians may still choose to buy property, or other assets, through a trust for other reasons. 

What is a trust?

According to the Australian Taxation Office, a trust is an obligation for a person or other entity to hold property, or other assets, for beneficiaries. It essentially means one person (or company) will look after the property and distribute the wealth from the asset to the other people in the trust.

Trusts tend to sound more complicated than they are in practice, probably because of the jargon involved with them. Here's a few terms you may come across and what they mean:

• The settlor is the person, or company, who sets up the trust and names the trustee and beneficiaries. They’re not permitted to be a beneficiary and are usually a lawyer or accountant who has no ties to the trust after creating it.

• The trustee is the person or company who owns and controls the asset in the trust. There can be more than one trustee in a trust and they are charged with always acting in the best interests of the beneficiaries. Any - and all - transactions are in the trustee's name.

• The beneficiary or beneficiaries are the people or companies for whom the trust is set up for. Assets are owned for them and they receive the income from them, provided there is some.

When a trust is started, the settlor will create the trust deed which sets out how the trustee is to run the trust.

Types of trusts

Trusts can vary greatly in how they’re run and for what purpose, but there are a few main types which include:

• Discretionary trust: The most common type of trust, a discretionary trust is one where the trustee controls the distribution of income from the trust to the beneficiaries, that is, it is at the trustee’s discretion. Discretionary trusts are called 'family trusts' if the members are related. They have been popular in Australia for facilitating what's known as 'income splitting', allowing trustees to distribute income and capital gains among beneficiaries which may minimise tax on them. They are also used to protect family assets from personal liabilities and manage estate succession.

• Unit trust: Unlike a discretionary trust where the beneficiaries do not have a defined income entitlement, the beneficiaries in a unit trust do. The trust’s assets are separated into units for the beneficiaries or unit-holders of the trust, a bit like shares in a company. The trustee must then distribute the income from assets to the beneficiaries in proportion with the number of units they have. This type of trust is common for joint ventures, such as two families owning property together.

• Hybrid trust: This is a mix between a discretionary and unit trust where beneficiaries still hold units but the income they receive from these is at the discretion of the trustee.

• Testamentary trust: This is a legal arrangement created inside a person's will. It only starts to work if the person who made the will dies. Instead of passing inheritances directly to beneficiaries, the assets pass to a trustee (or trustees) to manage on behalf of the beneficiaries. Testamentary trusts are used to protect inherited wealth if a beneficiary faces a lawsuit, relationship breakdown, or bankruptcy. They can also help protect children or adults who may need assistance in managing their inheritances by setting guidelines on how funds are released.

• SMSF: A self-managed superannuation fund (SMSF) is a trust used by people to manage their own super.

Changes to SMSF borrowing for residential investment property puchases

As part of changes arising from the 2026-27 federal budget, SMSFs are no longer permitted to take out loans to finance the purchase of residential investment properties.

The borrowing ban does not apply to the purchase of commercial properties, nor does it ban SMSFs from buying residential properties outright (without a loan).

The ATO details other types of trusts available in Australia.

Why buy property through a trust?

There are a number of potential advantages that can come with buying property through a trust which may be attractive to investors:

Tax benefits

A trust should have its own tax file number and is required to lodge a tax return. However, if the trustee distributes all the income made from an investment property in the financial year to the beneficiaries of the trust, it is considered part of the beneficiaries' income and needs to be declared as such in the personal annual tax returns.

Given that some beneficiaries will be in lower tax brackets than others, this distribution of wealth may effectively provide a tax break and could save a considerable sum compared to if an individual had purchased the investment property in their own name. However, the tax benefits of purchasing via a trust is subject to change.

Changes to discretionary trust tax rules from 1 July 2028

In the 2026-27 federal budget, the federal government announced a minimum 30% tax on the taxable income of discretionary trusts, taking effect from 1 July 2028.

The tax is to apply at trustee level and aims to thwart income-splitting strategies, but some trust structures have been granted exemptions from the tax changes.

These include genuine testamentary trusts, deceased estates, complying superannuation funds (including SMSFs), charitable trusts, special disability trusts, fixed and widely held trusts.

The ATO provides some interim information on the trust tax reform.

Asset protection

The trustee is the legal owner of all of a trust's assets. If you’re a trustee or beneficiary receiving income from an investment property and you, personally, happen to go broke or face legal action, the property may be more protected from creditors. This is one of the biggest advantages of owning assets through a trust.

Profit distribution

Trusts can make it easy to distribute the wealth from investment properties as the trustee is legally obliged to act in the beneficiaries' best interests. This is particularly true in the case of unit trusts, as there is an entitled amount for each beneficiary based on the number of units they own. This can prevent someone in a joint venture from hoarding income or not distributing it correctly.

Estate planning

Trusts can make it relatively simple to transfer the ownership of property when someone is sick, has a disability, or has died. The trust deed outlines how the trustee should proceed in such circumstances, preventing disputes which can sometimes occur, especially within families. In some cases, the transfer of property in a trust when someone has died is exempt from some taxes and government charges.

Finance for buying property through a trust

It’s possible to get a loan to buy an investment property through a trust, but it can also be difficult. That’s because some lenders regard trusts as higher risk borrowers due to the complex legal frameworks which come with them. Additionally, it may be more difficult for the lender to recover the property should the trust default on the loan, due to the asset protection a trust provides.

As a result, some lenders will not lend to trusts at all, while many others take applications on a case-by-case basis.

Generally, prospective lenders will review what kind of trust is applying, the credit data of all of the members of the trust, and the trust itself. Some lenders may also require all the beneficiaries to be guarantors on the loan. They will likely also ask to review the trust deed to understand the purpose of the trust and whether the trustee has the power to apply for a loan, as the loan will be in the trustee’s name.

Given the complexity of trusts, many lenders will process loan applications through their business banking divisions. This can often mean higher rates and higher fees, as well as a longer application processing time.

What to be careful of when buying property through a trust

There are a number of potential pitfalls to be aware of when it comes to buying property through a trust:

No negative gearing tax concessions

If the income you make on an investment property is less than the expenses it incurs, then you’re making a loss. Under certain circumstances (see below for details), owners of residential properties could claim negative gearing tax benefits by offsetting these losses against their personal income, effectively cutting the amount of tax they must pay.

Update on negative gearing of residential properties

As of 7:30pm 12 May 2026, losses made on existing residential properties are no longer permitted to be claimed against salary or personal income. They must be quarantined and carried forward against future residential rental income or property capital gains. This does not apply to investment in new-build properties. Those owning investment properties prior to the cut-off will retain existing negative gearing entitlements until the property is sold.  

However, a trust was never able to do this. If the property makes a loss, that loss is essentially trapped inside the trust. Beneficiaries will have to pay off that loss with cash if required, or that loss will simply be carried forward until income from the trust can recoup the losses.

Related: How is rental income taxed?

Transfer of property

If you purchase an investment property in your own name and then transfer ownership of it into a trust, you’ll have to pay stamp duty on the transfer. You’ll also be required to pay capital gains tax (CGT).

Time constraints of profit distribution

New financial years begin on July 1 each year. If all the profits the trust has made in that time haven’t been distributed to the beneficiaries by June 30, these profits will be taxed at the highest marginal tax rate.

Land tax-free threshold may not apply

Land tax is an annual tax on some investment properties levied by state and territory governments (except the Northern Territory). The laws vary considerably between the jurisdictions but in some states, properties owned by trusts may be excluded from tax-free thresholds.

Number of trustees

Trusts are advantageous for asset protection. However, if there is only one trustee and the tenant of the investment property decides to take legal action against the owners for whatever reason, the trustee will be liable and the property at risk. It can be wise, in some cases, to have more than one trustee for this reason. Seeking comprehensive legal advice when the trust is set up is highly recommended.

Should I purchase an investment property through a trust?

The change in tax rules in the 2026-27 federal budget has some Australians reconsidering the trust structure as an investment and asset-holding vehicle. 

In general terms, purchasing a property via a trust may prove feasible for medium-to-larger scale investors more concerned with asset protection but may be less attractive for smaller scale or 'mum and dad' investors.

This is largely because a minimum tax of 30% will apply to trust distributions will apply from 1 July 2028. This will mean that even if a distribution is made to a beneficiary on a lower tax rate, the distribution will have been taxed at 30%. Essentially, any excess tax credit provided by the trustee is non-refundable and effectively lost.

As well, purchasing a property through a trust involves higher set-up and ongoing accounting costs. It can also make borrowing more difficult. Some lenders choose not to lend to trusts at all.

However, those investors looking to prioritise longer-term asset protection as part of a multi-generational wealth strategy may still choose to purchase through a trust. As well, trusts (and beneficiaries) with high incomes, already paying over the 30% tax rate, may not be as affected by the upcoming tax regime. 

Simply put, the decision to purchase a property through a trust should be made on a case-by-case basis after seeking specialist advice from a financial advisor, tax professional, and/or lawyer.