Buying Property in Trust vs Personal Name: The Complete Australian Guide (2026)

A Sydney surgeon buys her second investment property through a family trust on her accountant's advice. Six months later, she receives a land tax assessment for $16,000 — on a property where her neighbour in the same street, with the same land value, paid precisely $0 in land tax. The difference? Her neighbour bought in personal name.

This is the trust trap. And it catches thousands of Australian property investors every year — not because trusts are bad, but because investors choose them without running the actual numbers for their specific state, gearing position, and income level.

The trust-versus-personal-name decision is the most consequential structural choice you will make as a property investor. It shapes your annual tax bill, your ability to borrow, your land tax exposure, how your wealth transfers when you die, and how protected your assets are if something goes wrong. Most investors make the call based on incomplete advice — usually hearing only one side of the ledger.

Neither structure universally wins. Personal name clears the field on negative gearing, land tax thresholds, and borrowing capacity. A family trust leads on income splitting, asset protection, and estate planning. The outcome depends on five factors: whether the property is positively or negatively geared, which state you are buying in, your income and family situation, your asset protection needs, and your time horizon.

In 2026, two additional forces shift the calculation. APRA's debt-to-income rules, active from February 2026, squeeze trust borrowers harder than personal-name borrowers. And at least one major Australian lender paused all new lending to trusts and companies from October 2025. The lending environment has changed.

Before getting to the tax numbers, it is worth understanding what a trust is and how it actually works — because many investors use the term loosely without grasping the structure they are signing up for.

A trust is a legal arrangement where one party — the trustee — holds assets on behalf of another party — the beneficiaries. The trust itself is not a separate legal entity the way a company is; it is a relationship created by a legal document called a trust deed.

In a property investment context, the trust deed sets out who the trustee is (an individual or, more commonly, a company), who the beneficiaries are (typically you, your spouse, children, and potentially other relatives or entities), how income and capital can be distributed, and what happens to the trust assets if the trust is wound up.

A discretionary trust — commonly called a family trust — gives the trustee complete discretion over how income and capital gains are distributed each year among eligible beneficiaries. Every 30 June, the trustee makes a formal resolution deciding who gets what. If your spouse earns less that year, you direct more income to them. If an adult child is studying part-time, you direct income their way. This annual flexibility is the core tax advantage.

The settlor formally establishes the trust by gifting a small sum (usually $10) to the trustee. After that, the settlor has no ongoing role. The appointor is the most powerful role in the trust — the person who can remove and replace the trustee. Control of the appointor position is effectively control of the trust itself, which makes succession planning for this role critical.

The trustee of a family trust can be an individual or a company (a corporate trustee). Most experienced investors use a corporate trustee — a shell company set up specifically to act as trustee — for two practical reasons.

First, if an individual acts as trustee and is sued or dies, the trust assets can become entangled in the legal action or estate administration. A corporate trustee provides clean separation. The company holds trust assets in its capacity as trustee only, not as personal property.

Second, changing control of the trust becomes simpler. You change the directors and shareholders of the corporate trustee company rather than executing a formal change of trustee, which can attract stamp duty in some states. Setting up a corporate trustee costs approximately $500–$1,000. Total trust setup — deed, corporate trustee, ABN, TFN — typically runs $1,000–$2,000.

Rental income earned by trust property is received by the trustee. The trustee's annual resolution then distributes that income to beneficiaries, who include it in their personal tax returns. If your property earns $40,000 in rent, the trustee can direct $20,000 to you, $15,000 to your spouse, and $5,000 to your adult child — each taxed at their personal rates.

Capital gains work similarly. The 50% CGT discount applies after 12 months, and the discounted gain is distributed to beneficiaries and taxed at their personal rates. You can time the distribution to a beneficiary in a low-income year, which is genuinely useful.

Rental losses are the problem. If your property loses money — interest costs of $60,000 against rental income of $45,000 — the trust runs a $15,000 loss. That loss stays inside the trust. It cannot be distributed to beneficiaries to reduce their personal income. It carries forward and offsets future trust profits only.

Most investors encounter four types of trusts in property contexts, each suited to different situations:

• Discretionary (family) trust: The trustee has full annual discretion over distributions. Best for single-family property portfolios where tax flexibility and asset protection are the priorities. This is what most people mean when they say "family trust."
• Unit trust: Beneficiaries hold fixed units, like shares in a company. Income distributes in proportion to unit holdings. Best for joint ventures between unrelated parties — two business partners buying together — where each party needs certainty about their entitlement.
• Hybrid trust (negative gearing trust): The individual borrows funds personally and on-lends to the trust, allowing the individual to claim the interest deduction personally while the trust holds the asset. Legal in principle, but the ATO has issued Taxpayer Alert TA 2008/3 specifically targeting hybrid trust arrangements it considers to be tax avoidance schemes. If the ATO determines the primary purpose is avoiding tax rather than genuine investment, it can deny the personal interest deductions entirely — leaving you with the land tax penalty of a trust and none of the negative gearing benefit. Requires specialist advice from an accountant experienced in this area, not a DIY solution.
• Testamentary trust: Created by a will and activated upon death. Property passes into the trust without a CGT event. A powerful estate planning tool but only available post-death — not for living investors buying today.

Negative gearing is what happens when your property costs more to hold than it earns. The diagram below shows where the $15,000 rental loss goes under each structure — a difference that generates $5,850 in annual tax savings in personal name and $0 in a trust.

In personal name, the loss reduces your taxable income directly. At a marginal rate of 39% (including Medicare levy), a $15,000 loss generates a $5,850 tax refund. The ATO effectively subsidises part of your holding cost.

In a trust, that same loss stays trapped. The trust accumulates a carried-forward loss that can only offset future trust profits — not your personal salary. You pay full tax on your $150,000 and cover the rental shortfall entirely out of pocket.

Over a 7-year negatively geared period, that single difference accumulates to approximately $40,950 in lost tax savings — money you receive as a refund each year in personal name and receive nothing in a trust. This doesn't account for the land tax penalty, which compounds on top.

For more on how negative gearing works and when it makes strategic sense, see our guide on negative gearing for Australian property investors.

Once a property is positively geared, the dynamic flips in the trust's favour. In personal name, all net rental income is taxed at your marginal rate. If you earn $200,000 from your job and your rental property generates $40,000 net profit, that $40,000 is taxed at 47% — costing $18,800 in income tax.

In a trust, the trustee can distribute that $40,000 across family members in lower tax brackets. Say you distribute $20,000 to your spouse (who earns $60,000, marginal rate 34.5%) and $20,000 to your adult child (who earns $25,000, marginal rate 19%). Total income tax: approximately $10,700. Compared to $18,800 in personal name — a saving of $8,100 per year. Over 10 years, that is $81,000 in additional after-tax cash. And the saving grows as rental income rises.

The income splitting benefit is most powerful when you have a spouse or adult children in lower tax brackets, the property is genuinely positively geared, your marginal rate is 39% or 47%, and you have multiple beneficiaries to distribute across.

Both personal name owners and trusts qualify for the 50% CGT discount on assets held for more than 12 months. In personal name, you calculate the gain, apply the 50% discount, and add the result to your taxable income in the year of sale. In a trust, the same 50% discount applies and the discounted gain is distributed to beneficiaries who pay tax at their personal rates. With smart distribution to lower-income beneficiaries, you can reduce the effective CGT rate further.

The one significant personal-name advantage is the main residence exemption. If you live in the property as your primary home, you pay no CGT when you sell. Trusts cannot claim this exemption. If a property held in a trust becomes your home, you will pay CGT on the full discounted gain when you eventually sell.

One 2026 consideration: the Australian Financial Review reported in February 2026 that the federal government was considering changes to the 50% CGT discount ahead of the May budget. If discounts are reduced, both structures are affected — but the uncertainty is a real planning consideration for long-dated transactions.

This is the most underestimated cost of trust ownership and the one that surprises investors most often. Land tax is assessed annually on the unimproved land value of investment properties. Every state gives individuals a tax-free threshold. Trusts receive far less generous treatment.

In New South Wales, family trusts are classified as "special trusts." They receive no land tax threshold at all. Tax applies from the first dollar at a rate of $100 plus 1.6% of the full land value. An investor whose Sydney property has land value of $1,000,000 pays approximately $16,100 in land tax through a trust — while the owner of an identical property in personal name, whose portfolio sits below the threshold of approximately $969,000, pays $0.

Figures are approximate and based on 2025–2026 rates. Consult a tax agent for your specific situation.

In NSW, a trust property with $1M in land value incurs approximately $16,100 in annual land tax. Over 10 years — assuming moderate land value growth — this accumulates to well over $200,000 in additional tax compared to personal name ownership. Most income splitting strategies cannot recover that in NSW at typical portfolio sizes.

The calculation changes when your personal portfolio has already exceeded the state threshold. At that point, additional properties in personal name don't benefit from the threshold either, and the relative land tax penalty of a trust shrinks. This is why high-portfolio investors sometimes find trusts more cost-effective — but it requires running the actual numbers, not assuming.

There is a second land tax trap inside trust structures that almost no one mentions at setup: the foreign person land tax surcharge. This is a distinct additional surcharge — not the standard land tax — that applies in NSW, VIC, QLD, and SA when a trust is deemed to have a "foreign person" as a beneficiary or potential beneficiary.

The catch: state revenue offices in NSW and VIC do not require an actual foreign person to receive income from the trust. If the trust deed does not explicitly exclude foreign persons from the beneficiary class, the trust may be treated as a "foreign trust" for land tax purposes — attracting a surcharge of up to 4% per year of the land value on top of standard land tax. On a $1M land value property in NSW, that is an additional $40,000 per year.

Many older trust deeds — and even some prepared in the last few years by practitioners unfamiliar with the surcharge rules — use broad beneficiary definitions that inadvertently capture foreign persons. The solution is straightforward if caught at deed preparation stage: add an explicit exclusion clause. If the deed already exists without the exclusion, an urgent deed amendment may be needed before settlement.

The lending landscape for trust borrowers has tightened considerably since late 2025, and APRA's 2026 rules add another layer of pressure.

When you borrow in personal name, lenders assess your income, expenses, and liabilities using standard serviceability calculators. The full range of Australian lenders — major banks, regionals, non-bank lenders — are available to you.

When you borrow through a trust, lenders need significantly more documentation: the trust deed in full, corporate trustee company documents, ABN and TFN for the trust, recent trust tax returns, trustee resolutions and distribution history, and personal guarantees from the individual trustee. Not all lenders offer trust loans. As of early 2026, the lending panel for trust borrowers is meaningfully smaller than for personal borrowers.

In a notable development reported by Insights for Accountants (February 2026), one major Australian lender paused all new lending to trusts and companies from 31 October 2025 (existing trust loans were unaffected). The lender did not publicly specify whether this was a temporary risk-weighting adjustment or a more permanent policy shift — but the timing, coming weeks before APRA's DTI rules activated, suggests broader credit risk reassessment for complex borrowing structures. Other lenders have not announced equivalent pauses but have tightened documentation requirements and assessor scrutiny for trust applications. LVR limits for trust borrowers are generally capped at 80% — requiring a 20% deposit regardless of other financial strength. Some lenders will go to 90% LVR with lenders mortgage insurance, but this adds cost and further reduces net return. Interest rates for trust loans can also sit 0.1–0.3% higher at some lenders.

From February 2026, APRA's debt-to-income rules limit authorised deposit-taking institutions to having no more than 20% of new mortgage lending at a DTI ratio of 6 times income or higher — applied separately to owner-occupier and investor portfolios. Trust borrowers face compounded pressure under these rules for two reasons.

First, trust annual compliance costs — accounting fees, corporate trustee ASIC fees, administration — reduce assessable income in some lenders' calculators, lowering the income figure used in the DTI ratio. Second, negatively geared properties in a trust produce no income add-back for serviceability. In personal name, a lender accounts for the tax reduction from negative gearing (partly offsetting the mortgage cost). In a trust, the lender sees only the gross interest obligation with no offset.

The same investor, same income, same property can qualify for materially less borrowing through a trust than through personal name. For the complete breakdown of APRA's 2026 DTI rules, see our guide on APRA DTI rules 2026 for property investors.

Trust lending is still achievable with the right preparation. Work with a mortgage broker who specifically understands trust lending — not all brokers have dealt with this structure, and a misplaced application leaves a credit inquiry on your file without a loan. Prepare trust deed, corporate trustee documents, and at least one year of trust tax returns before applying. Expect assessment to take 2–3 weeks rather than the 24–72 hours typical for personal applications.

Virtually all lenders require the individual trustee (and often directors of a corporate trustee) to personally guarantee the trust loan. This is a real personal obligation — the trust structure does not remove liability to the mortgage lender. For full preparation guidance, see the mortgage pre-approval guide 2026.

Asset protection is often cited as the primary reason to buy in a trust. The argument is mostly correct — but with important qualifications that can significantly limit the benefit.

When property is held in a trust, the legal owner is the trustee. You, as a beneficiary, hold a beneficial interest in the trust — not a direct ownership interest in the property. If a creditor wins a judgment against you personally, they can only access your personal assets. Trust assets, with proper structure, are generally not accessible.

This is genuine value for business owners carrying litigation risk, medical professionals with malpractice exposure, engineers and architects with professional indemnity risk, and company directors with personal liability scenarios. The key requirement is being proactive — a trust set up specifically to place assets beyond the reach of known creditors can be challenged under the Corporations Act 2001 and Bankruptcy Act 1966. Asset protection requires acting before problems arise, not after.

It is also worth understanding that trust asset protection is not absolute, even when properly structured. Courts have pierced the "corporate veil" of a trust in cases where a director of the corporate trustee acted with gross negligence or reckless disregard for beneficiaries' interests, or where the structure was used as part of a broader scheme that the court characterised as unconscionable. A well-drafted trust deed administered correctly provides strong protection — but "strong" is not the same as "bulletproof."

Here is where the protection gets complicated. Almost every lender who provides a trust mortgage requires a personal guarantee from the trustee and, typically, the individual beneficiaries. If the trust cannot service the mortgage, the lender can pursue you personally under the guarantee. The property may be sold, but if proceeds are insufficient, the shortfall falls on you.

So while the trust protects the property from unrelated creditors, the mortgage debt creates a personal liability regardless. Trust asset protection is strongest against professional liability claims, business debts, and lawsuit judgments — not against the mortgage lender whose loan you have personally guaranteed.

Given the land tax cost and negative gearing disadvantage, asset protection alone rarely justifies a trust for straightforward residential property investors. It makes strongest sense when your profession carries significant personal liability risk, you have existing creditor exposure or litigation history, the property is commercial rather than residential, or you are accumulating a portfolio large enough that the total asset value makes specialist advice worthwhile.

For salaried employees and low-litigation professionals without specific vulnerability, paying the trust premium for asset protection may not provide economic value proportional to the ongoing cost.

Estate planning is where a trust provides its clearest structural advantages over personal name ownership — and where the financial benefit can be most substantial over a multi-decade timeframe.

When you own property personally and you die, the property becomes part of your estate. Transferring it to a beneficiary triggers a specific CGT rollover provision — no immediate CGT is payable at the date of transfer. However, the beneficiary inherits your original cost base. When they eventually sell, they pay CGT on the full gain since your original purchase.

Transferring property between personal name and a trust — even within a family, even while alive — triggers both stamp duty at full market value and a CGT event. If you've held a property that has risen significantly in value and want to shift it into a trust for estate planning purposes, the exit costs can be enormous. This is why the structural decision must be made at purchase, not after years of growth.

A trust doesn't die. When an individual trustee dies, control passes to the successor trustee nominated in the trust deed. If the trustee is a corporate trustee, the shares in the trustee company pass to successors without any change in legal ownership of the trust assets. No stamp duty is triggered. No CGT event occurs. The trust property doesn't move.

The beneficiary class can include future generations through broad definitions in the trust deed — for example, "the children, grandchildren, and remoter descendants of [name]." For a family accumulating property over generations, this is a real structural advantage. The portfolio can earn and distribute income to younger family members in low tax brackets without the cost and disruption of transferring ownership at each generational handover.

If you already own property in personal name but want estate planning benefits, a testamentary trust is worth understanding. A testamentary trust is created by your will and only comes into existence when you die. Your property passes into the trust as part of administering the estate — with no CGT event at that transition. From then on, the trust operates like a family trust, distributing income to beneficiaries each year.

A significant benefit specific to testamentary trusts: minor children who receive income through them are taxed at adult marginal rates rather than the punitive rates that normally apply to children's investment income (which escalates steeply above $18,201). This makes testamentary trusts particularly effective for passing property wealth to children and grandchildren.

For investors who've built a portfolio in personal name, updating your will to include a testamentary trust framework captures many estate planning benefits without paying stamp duty or CGT to transfer today. For more on complementary structures for long-term wealth planning, see SMSF property tax implications 2026.

Setting up a trust involves: trust deed preparation at $500–$1,000, corporate trustee company registration at $500–$1,000, and ABN/TFN/GST registration (minimal, typically included by the accountant who sets up the trust). Stamp duty on initial property acquisition is the same whether purchasing in personal name or trust — full market-value stamp duty applies regardless. Total trust setup: $1,000–$2,000 for a straightforward family trust with corporate trustee.

Every year, a trust requires: a separate trust tax return at $1,500–$3,000, formal trustee distribution resolutions at $500–$1,000, and the ASIC annual review fee for the corporate trustee at approximately $310. Total annual ongoing costs: $2,000–$5,000 per year.

At $3,000/year in compliance costs, a trust costs approximately $60,000 over a 20-year holding period — before accounting for any land tax penalty or the opportunity cost of that capital.

If you set up a trust and later decide the structure doesn't work, getting out is expensive. Transferring property from a trust to personal name (or another structure) triggers stamp duty at full market value — on a $1.2M property, this could be $40,000–$60,000 depending on the state. It also creates a CGT event on the difference between original cost base and current market value.

On a property purchased for $800,000 and now worth $1.2M, the gain is $400,000 (discounted to $200,000 under the 50% rule) — taxed at your marginal rate, potentially $94,000 in CGT. Combined with stamp duty, a trust exit on a modestly grown Sydney property can cost $130,000–$180,000. The structure decision must be made correctly before settlement.

• The property will be negatively geared for 3 or more years — lost negative gearing benefits compound quickly and easily exceed future income splitting gains
• You are buying in NSW or SA — the land tax penalty is severe enough to wipe most other trust benefits at typical portfolio sizes
• Your portfolio land value is below the personal threshold — you pay zero land tax in personal name; a trust removes this advantage immediately
• You need maximum borrowing capacity — restricted lender panels, tighter serviceability, and APRA DTI changes all reduce trust borrowing capacity in 2026
• You are a first home buyer — trust ownership disqualifies you from the First Home Owner Grant and most state-based first-home concessions
• The property might become your primary residence — personal name preserves the main residence CGT exemption
• You are in a low-litigation-risk profession — asset protection isn't a real concern, so paying the trust premium makes no economic sense

• The property will be positively geared and you have family members in lower tax brackets — income splitting generates real, recurring value
• You are in a high-risk profession — business owners, medical professionals, and company directors with genuine litigation exposure get real value from the asset protection layer
• Your personal portfolio land value has already exceeded the state threshold — additional properties don't benefit from the personal threshold anyway, reducing the relative land tax disadvantage
• You are building a multi-generation property portfolio — trusts don't die, don't trigger stamp duty on internal transitions, and distribute income to children efficiently
• You have multiple low-income family members — the income splitting benefit scales with beneficiaries
• You are in QLD with land value under $600k — both personal and trust thresholds apply at similar levels for moderate portfolios, reducing the trust land tax disadvantage

The most common investor plan is: "Buy in personal name for the negative gearing, then transfer to a trust once it's positively geared." It sounds reasonable. It rarely works without significant tax cost.

By the time a property has been held long enough to become positively geared — typically 7–12 years in high-growth markets — the property has appreciated substantially. Transferring at that point triggers stamp duty and CGT on a much larger gain than if you had chosen the structure at purchase.

A more practical approach: accept that personal name is the right structure for early, negatively geared holdings. At portfolio review (year 5–7), assess whether new acquisitions should go into a trust from the start. Use a testamentary trust in your will to capture estate planning benefits without a live transfer. Consider the hybrid trust only if the property will be substantially positively geared within 2–3 years of purchase.

The single most common trust mistake is selecting the structure based on what a colleague did, what an investment forum recommends, or what a broker mentioned in passing — rather than specific financial modelling. A structure that works for your colleague in a different state, with a different income, and a different gearing position doesn't transfer to your situation.

The cost of a proper structural analysis from a qualified accountant is $300–$800 for a one-off written assessment. That's money well spent before committing to a structure that costs thousands every year. Getting it wrong costs multiples of that annually, indefinitely.

This mistake is more common than the accounting profession is comfortable acknowledging. An investor signs contracts, settles in a trust, and receives their first land tax assessment in January — discovering a bill they didn't anticipate. Unwinding the structure at that point means paying stamp duty twice, and potentially CGT if the property has moved in value.

The fix: before exchanging contracts, ask your accountant to calculate the annual land tax liability in your target state for both personal name and trust. Request it in writing. Compare it against your projected annual tax saving. Then decide.

An investor earning $200,000 is told that a trust provides tax benefits. They buy a negatively geared property expecting a refund. No refund comes — the losses are trapped in the trust. For the first 5–8 years of holding a negatively geared property at current interest rates, personal name investors receive annual tax refunds. Trust investors in the same property receive nothing.

At a $15,000 annual rental loss and 47% marginal rate, that is a $7,050 annual refund lost every year. Over an 8-year negatively geared period, a high-income investor in a trust has paid approximately $56,400 more in tax than they needed to. Add the land tax penalty and the total cost is substantial.

A family trust carries no tax advantages if administration lapses. The trustee must make a formal written distribution resolution before 30 June each year. If no valid resolution exists, the ATO taxes all trust income at 47%. Additionally, distributions to beneficiaries who are minor children (under 18) are taxed at punitive rates under the tax on excessive income provisions — up to 66% above $18,201. Standard discretionary trusts work for adult beneficiaries, not for directing large income to children under 18 (testamentary trusts operate differently in this regard).

Land tax in every Australian state is assessed on the total value of all investment properties you own in that state. If you own two Sydney investment properties with combined land values of $1.5M, your land tax is calculated on $1.5M minus the threshold — not on each property separately. As your personal portfolio grows, you progressively exhaust the benefit of the individual land tax threshold.

By the time you own three or four properties in a single state, your entire portfolio is likely above threshold and every new personal-name property generates full land tax from the first dollar. At this point, the relative land tax penalty of a trust diminishes. If your NSW portfolio already generates $45,000 in annual land tax, adding a fourth property in personal name versus a trust doesn't change the comparison much.

Many experienced investors adopt a staged approach: first two properties in personal name (negative gearing benefit, under land tax threshold), then third and subsequent properties in a trust (income splitting benefit as portfolio turns positive, reduced relative land tax penalty at scale). This maximises total tax efficiency across the portfolio lifecycle.

As a portfolio grows from one property to five, total rental income rises. At one property generating $30,000 in net rental income, income splitting benefit is modest. At five properties generating $150,000 combined, distributing across a spouse and two adult children at low rates versus all taxed at 47% can save $30,000–$50,000 per year in income tax.

This scaling effect is why high-net-worth investors — with large, predominantly positively geared portfolios — consistently find trusts worthwhile. The income tax saving at scale comfortably exceeds compliance and land tax costs. For earlier-stage investors with one or two properties, that calculation rarely stacks up. The break-even is typically somewhere between properties three and five, strongly dependent on the state and individual tax circumstances.

The trust-versus-personal-name decision is one you'll live with for the entire holding period of the property — potentially 20 or 30 years. It affects your cash flow every year through land tax, compliance costs, and either tax refunds (personal name) or income splitting gains (trust). It shapes your borrowing capacity at every subsequent purchase. And it determines how smoothly your property wealth transfers to the next generation.

Personal name is the right answer for first-time investors, high-income earners with negatively geared properties, investors in NSW, and anyone who needs maximum borrowing capacity. A family trust is the right answer for established investors with positively geared portfolios, those in high-litigation professions, and those building genuinely long-term, multi-generational property wealth.

What's not the right answer is choosing a structure based on informal advice, forum posts, or what a colleague used. Get a written analysis from a qualified accountant who can run the actual numbers for your specific situation — land tax, income splitting, negative gearing impact, annual compliance, break-even timeline. The analysis cost is $300–$800. The cost of getting the structure wrong is multiples of that every year indefinitely.

The decision must be made before you exchange contracts. Once it is settled, changing your mind costs you stamp duty plus CGT — and that conversation is far more expensive than the accountant's fee you're avoiding.