What Are the Pros and Cons of Using a Family Trust to Buy Property in Australia?
A family trust changes who's taxed, how losses and land tax work, and CGT — the trade-offs for an investment property, as at July 2026.
What are the pros and cons of using a family trust to buy property?
A family trust is one of several ways to hold an investment property in Australia, alongside buying in your own name, through a company, or inside a self-managed super fund (SMSF). None of these structures is universally “better.” Each carries a different result for who’s taxed, how a loss is treated, and how much land tax you pay — and the right one depends on your own circumstances.
At a glance, as at July 2026:
| Family trust | |
|---|---|
| Income | The trustee can split rental profit among beneficiaries, generally taxed at each beneficiary’s own rate |
| Losses | A trust’s net loss can’t be distributed to beneficiaries — it stays in the trust and carries forward to offset the trust’s own income later — see below |
| CGT discount | Currently 50% for an eligible trust held ≥12 months — this ends for CGT events from 1 July 2027 |
| Land tax | Some states set a lower tax-free threshold for trusts than for individuals — see below |
| Set-up | A trustee, a trust deed, and ongoing administration a personal purchase doesn’t need |
Tax outcomes depend on your circumstances — speak with a registered tax agent before acting.
The rest of this guide works through each of those points, then compares a family trust with buying individually, through a company, and inside an SMSF.
What is a family trust, and how is it different from buying in your own name?
A family trust is usually set up as a discretionary trust. A trustee — a person or company appointed to hold and manage the trust’s assets — holds legal title to the property. The trust deed gives the trustee discretion each year over how much of the trust’s income goes to which beneficiaries, usually a defined group of family members.
Under the ATO’s trust income guidance, a trust’s net income is taxed in the hands of the beneficiaries who are “presently entitled” to it — meaning they have a right to demand payment of their share — in proportion to that entitlement, rather than being taxed to the trust itself. That’s different from buying in your own name, where the rental income and any capital gain sit with you directly and are taxed at your own marginal rate, regardless of who else benefits from the property.
What are the potential advantages of a family trust?
Splitting income among beneficiaries. Because the trustee decides each year how the trust’s net income is distributed, a family trust can spread rental profit across several beneficiaries — for example, family members on lower marginal tax rates — rather than it all landing on one person’s tax return. Each beneficiary is taxed on their own share at their own rate.
Access to the CGT discount, for now. An eligible trust currently gets the same 50% capital gains tax (CGT) discount as an individual on a property held at least 12 months — CGT being the tax on the profit made when an asset is sold for more than it cost. As set out below, this discount is scheduled to end for individuals, trusts and partnerships alike for CGT events happening on or after 1 July 2027.
Legal title sits with the trustee, not one person. The trustee, rather than any individual beneficiary, holds title to the property. Whether — and how — that changes an investor’s asset-protection position depends on the specific trust deed and personal circumstances. No ATO or Moneysmart page ranks trust ownership as safer or riskier than buying individually, and this guide doesn’t rank it either.
What are the drawbacks and risks of a family trust?
A trust’s loss stays in the trust — it doesn’t flow through the way a direct owner’s does. A property bought in your own name that runs at a loss — known as negative gearing, where the rental income is less than the deductible expenses, including loan interest — currently lets an individual owner claim a deduction for that net rental loss against their other income, or carry it forward if their other income isn’t enough to absorb it. A family trust doesn’t get the same result: as at July 2026, the ATO is explicit that a loss made by a trust in an income year can’t be distributed to beneficiaries — instead it stays inside the trust and is carried forward to reduce the trust’s own net income in a later year, subject to the trust loss tests in Schedule 2F of the Income Tax Assessment Act 1936. This is a genuine structural difference from owning directly, and one to raise with a registered tax agent before you commit to a trust for a negatively geared property.
Land tax can bite a trust sooner than an individual. In more than one state, a property held in a trust faces a different — and commonly lower — tax-free threshold than the same property held by an individual. See the table below.
Running costs and complexity. A trust adds a trustee (often a corporate trustee), a trust deed, and ongoing accounting and administration that a straightforward purchase in your own name doesn’t require. No government source in our facts file publishes a typical dollar figure for setting up or running a trust — treat any figure you’re quoted as a commercial, product-specific cost, and get it in writing from your accountant or lawyer.
A family trust is not an SMSF. A self-managed super fund is governed by superannuation law, with its own rules again — see the comparison table below.
Tax outcomes depend on your circumstances — speak with a registered tax agent before acting.
How is land tax different if a family trust holds the property?
Land tax is set by each state and territory individually — there’s no national land tax and no single comparison page, so every figure below needs its own check against that jurisdiction’s revenue office. As at July 2026:
| State/territory | General threshold (individuals) | Trust position |
|---|---|---|
| Victoria | $50,000 of taxable land value | Trust surcharge threshold: $25,000 — lower than the general threshold |
| South Australia | $936,000 of taxable site value (2026-27 land tax year) | Trust threshold: $25,000 — substantially lower than the general threshold |
| Queensland | $600,000 of taxable freehold land value | Companies and trustees use a different (and lower) threshold — check directly with the Queensland Revenue Office before relying on a figure |
| Northern Territory | No land tax at all | No land tax at all, for any ownership structure |
These thresholds move with state budgets, so don’t treat them as fixed beyond the date above — re-check the relevant revenue office before acting. This table reports only the jurisdictions where a trust-specific position is confirmed; other states and territories set their own general thresholds, covered in our wider land tax coverage.
Tax outcomes depend on your circumstances — speak with a registered tax agent before acting.
How does the 2027 tax reform affect a family trust’s property?
Update, as at July 2026: since this guide was first put together, the government has legislated further changes that matter for a trust-held property. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received royal assent on 26 June 2026. Two of its changes affect the points above, from set future dates — see the ATO’s overview of the reform for the primary plain-language reference.
The CGT discount ends for trusts too, from 1 July 2027. Right now, an eligible trust gets the same 50% CGT discount as an individual. For CGT events happening on or after 1 July 2027, that discount ends for individuals, trusts and partnerships alike — it’s retained for new residential dwellings and qualifying affordable housing, and complying super funds keep their own, smaller 33.33% discount. Assets still held on 30 June 2027 are, by default, treated as sold and immediately reacquired at market value just before that date, so the pre- and post-reform periods are worked out separately.
A new negative gearing quarantine starts from the 2027-28 income year — and its exemption looks narrow for a family trust. From that year, a new rule quarantines residential rental deductions that exceed residential rental income: the excess won’t be deductible against other income, though it can still be used against residential capital gains, or carried forward against future residential rental income. Interests acquired before 7:30pm AEST on 12 May 2026 are grandfathered under the current rules. The Act names “widely held unit trusts” and complying super funds as exempt from the quarantine — categories describing large, broadly held investment vehicles, not an ordinary family or discretionary trust set up to hold one property. On the plain wording of that exemption, a family trust looks unlikely to qualify for it, though how it applies to any specific trust is a question for a registered tax agent.
Tax outcomes depend on your circumstances — speak with a registered tax agent before acting.
How does a family trust compare with other ways of holding an investment property?
| Structure | Who’s taxed | CGT discount (currently) | Notable constraint |
|---|---|---|---|
| Individual | You, at your marginal rate | 50% (≥12 months held) | None structure-specific |
| Company | The company, at company tax rates | None | Profits and losses stay at the company level |
| Discretionary (family) trust | Beneficiaries presently entitled to the income, at their own rates | 50% (≥12 months held) | See losses and land tax above |
| SMSF | The fund, at a concessional 15% tax rate | 33.33% (≥12 months held) | Sole purpose test, in-house asset limits, and other superannuation-law constraints |
No ATO or Moneysmart page ranks these structures against each other, and this guide doesn’t either — the right structure depends on your goals, your family situation, and professional advice.
Tax outcomes depend on your circumstances — speak with a registered tax agent before acting. Superannuation rules are complex and penalties for breaches are significant — seek advice from a licensed financial adviser before making SMSF decisions.
Where do fractional interests fit in?
Some investors weighing up a trust are really weighing up how much structure they want to take on to get exposure to property at all. A fractional interest — such as a Brix on MyBrix’s platform — is a different thing again: a financial product representing an economic interest in a property, not legal ownership of land and not a loan. How a distribution from a fractional interest is taxed depends on that product’s own legal structure, not automatically on how a directly owned property held in a family trust would be taxed — so the two aren’t a straight swap for one another, and each still needs its own professional advice.
What should you do next?
None of this is a recommendation to use, or avoid, a family trust. The points above — income splitting, the CGT discount, negative gearing, and land tax — pull in different directions depending on your circumstances, your state, and how the 2027 changes land once further guidance is published.
The reliable next step is the same whichever way you’re leaning: raise the structure question directly with a registered tax agent before you sign a contract, ideally alongside whoever is drafting or reviewing the trust deed. For the fundamentals of property investing generally, see our guide to property investment in Australia, and for more on how negative gearing itself works, our guide to cash flow positive vs negatively geared property.
Tax outcomes depend on your circumstances — speak with a registered tax agent before acting.
