Buying an investment property in a trust can shield the asset from personal creditors and stream rental profit to family members on lower tax rates. But the trade-offs are real: negative gearing losses are trapped in the trust, and in Victoria trust-held land pays a land tax surcharge from a $25,000 threshold. The best answer depends on your situation.

It is one of the most common questions we field from established business owners: “Should I buy my next investment property in a trust, or just in my own name?” It sounds like a simple structuring choice. In practice it touches negative gearing, capital gains tax, land tax, asset protection, borrowing capacity and estate planning all at once, and getting it wrong is expensive to unwind. As a Chartered Tax Advisor (CTA) and CPA, I want to give you the real picture, not a generic pros-and-cons list, so you can have an informed conversation before you sign a contract.

What does it mean to buy a property in a trust?

Buying a property in a trust means the legal owner on title is the trustee, holding the property on behalf of the trust’s beneficiaries, rather than you owning it personally. Most investment property is held in a discretionary (family) trust, where the trustee decides each year who receives the rental profit. The property is a trust asset, not a personal one, which is the source of both the benefits and the drawbacks below.

The trustee is usually a company (a corporate trustee), which adds a layer of protection and makes the structure cleaner to run. The trust deed sets the rules, the class of beneficiaries and the trustee’s powers. In our experience working with business owners, the people who get the most out of a trust are those who already run a family group with multiple income earners, an existing trading trust or bucket company, and a genuine need to separate business risk from personal wealth. If none of that applies, a trust can add cost and complexity without a matching benefit.

The advantages: asset protection and income streaming

The two biggest advantages of holding an investment property in a discretionary trust are asset protection and income streaming. Because the trustee owns the property, it generally sits outside your personal estate, so it is harder for a personal creditor or a business lawsuit to reach. And because the trustee chooses who receives the rental profit each year, the trust can direct income to whichever beneficiary is on the lowest marginal tax rate.

Asset protection for business owners

If you run a business, you carry risk: a supplier dispute, a personal guarantee, a professional claim. Property held personally is exposed to that risk. Property held in a properly structured discretionary trust with a corporate trustee is generally protected, because you do not legally own it. This is the single most compelling reason business owners we work with choose a trust. It is not bulletproof (clawback rules apply if you transfer assets while insolvent), but for a solvent owner planning ahead, it is a strong shield.

Income streaming to lower-taxed family members

Once a property is positively geared (rent exceeds costs), the trust can distribute that profit to a spouse, an adult child or a bucket company, sending it to whoever pays the least tax. A property held in one high-income earner’s name has no such flexibility: every dollar of profit is taxed at their marginal rate. Streaming is a legitimate, powerful planning tool, but it must be documented with a valid trust distribution resolution before 30 June each year.

The disadvantages: trapped losses, land tax and cost

The main disadvantages of buying property in a trust are that negative gearing losses are trapped, land tax is charged at a higher surcharge rate, and there is more cost and administration. These are the reasons a trust is not automatically the right answer. If your property will run at a tax loss for years, holding it in a trust can cost you more than it saves.

Negative gearing losses are trapped in the trust

This is the deal-breaker for many investors. If a property held personally makes a tax loss, you offset that loss against your salary or business income and get a refund now. A trust cannot do that. A trust’s loss is trapped inside the trust and can only be carried forward to offset the trust’s future income, subject to the trust loss rules. So a highly negatively geared property in a trust delivers no immediate tax benefit. In practice, says Mina Baselyous (CPA, CTA, Registered Tax Agent), this is the mistake we see most: a growth property that runs at a loss is often better held personally, while a cash-flow-positive property is a natural fit for a trust.

Higher land tax and set-up cost

Trust-held land is taxed more heavily. In Victoria for the 2026 land tax year, land held in most trusts is assessed at surcharge rates from a $25,000 threshold, with a trust surcharge of up to 0.375% on top of the general rates, compared with the $50,000 threshold that applies to land held personally (State Revenue Office Victoria, current land tax rates). You also pay to set up and run the structure: the trust deed, a corporate trustee, annual accounts and a separate tax return. For a single modest property, that cost can outweigh the benefit.

What the 2026 Budget changes mean for property in a trust

The 2026-27 Federal Budget changed the tax rules for property investors, and it is important to separate what is now law from what is only proposed. According to the ATO’s new-legislation guidance, two changes are law and apply from 1 July 2027: the 50% capital gains tax discount is replaced by cost base indexation plus a 30% minimum tax on capital gains for individuals and trusts, and negative gearing is limited to new builds. A separate measure, a 30% minimum tax on discretionary trusts, was announced in the same Budget but is not yet law. All of this feeds into the trust-versus-personal decision.

The negative gearing and capital gains tax changes were legislated as the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, and the ATO confirms on its new-legislation guidance that these measures are now law and apply from 1 July 2027 (Australian Taxation Office, reforming negative gearing and capital gains tax). Crucially, negative gearing is being limited to new builds, not abolished: an investor who buys established property after Budget night (7:30pm AEST, 12 May 2026) can still deduct rental losses against their residential property income and carry unused losses forward, they simply cannot offset those losses against other income such as wages. Properties held before Budget night are grandfathered and unchanged, and investors in eligible new builds can still choose the current 50% CGT discount. The practical takeaways for anyone weighing up a trust in 2026 are:

• Negative gearing is now weaker on established property. Because negative gearing is limited to new builds, an established property bought after Budget night no longer produces a loss you can offset against your salary or business income (the loss can still offset property income and be carried forward). That weakens one of the historic reasons to hold established property in your own name, which narrows the gap with a trust.
• The CGT discount has changed for everyone. From 1 July 2027 the move to cost base indexation plus a 30% minimum tax on capital gains applies to individuals and trusts alike, so the old “trusts pass the 50% discount to beneficiaries” advantage is being reshaped. The structure still matters, but the sums are different.
• New builds are the more finely balanced case. Because investors in eligible new builds can still choose the 50% discount and can negatively gear, the choice of who holds a new build (you or a trust) becomes a considered planning decision, not a default.
• The 30% minimum tax on discretionary trusts is proposed, not law. Announced in the 2026-27 Budget to start 1 July 2028, it would tax the income of a discretionary trust at a minimum 30% at the trustee level, with a non-refundable credit for non-corporate beneficiaries, and the ATO states it is not yet law (Australian Taxation Office, minimum tax on discretionary trusts). It is a separate measure from the capital-gains 30% minimum tax above. If it proceeds it would change the income-streaming maths for trust-held property, so it is worth planning for, but not treating as settled law.

This is exactly the kind of moving target where modelling the numbers for your situation, before you buy, pays for itself many times over. It also raises a bigger question worth sitting with, whether a property gain is real wealth or just inflation. Our proactive tax planning service is built for these decisions.

Discretionary trust, unit trust or SMSF: which structure for property?

There is no single “trust” for property. The three structures we most often compare are a discretionary (family) trust, a unit trust and a self managed super fund. A discretionary trust gives the most flexibility to stream income and the strongest asset protection. A unit trust suits fixed-interest arrangements, for example two unrelated investors, and can help with land tax in some states. An SMSF suits long-term, super-funded investment with concessional tax, but with strict borrowing and use rules.

The right choice depends on who is investing, whether you are borrowing, whether the property is negatively or positively geared, and what you want to happen when you eventually sell or pass it on. A discretionary trust is the default for most family investors who want protection and streaming. A unit trust is common where partners want defined ownership. Holding property through an SMSF is a genuinely different strategy with its own rules; we cover it in detail in our guide to buying property through an SMSF. If a company might be involved, read our explainer on holding companies and asset protection first, because a company that holds property directly cannot access the 50% CGT discount at all.

Land tax on trust-held property in Victoria

Victorian land tax is where trusts feel the most pain. For the 2026 land tax year, most trusts are assessed at surcharge rates that begin at a $25,000 land value threshold, half the $50,000 threshold for individuals, plus a surcharge of up to 0.375% on top of the general rates, until the trust and general rates converge at $3 million (State Revenue Office Victoria, trusts and land tax). For a Melbourne investor, that surcharge can add hundreds or thousands of dollars a year.

There are ways to manage it. A unit trust or a nominated beneficiary election can, in some cases, have the land assessed at general rates rather than the trust surcharge rates. Whether that is available and worthwhile depends on your circumstances and must be weighed against the flexibility you would give up. This is a state-based, detail-heavy area, and it is one of the reasons we always model land tax across the whole family group before recommending a structure for a Melbourne or Casey-corridor client.

Should you buy your next investment property in a trust?

A trust is usually the right home for an investment property when you are a business owner who needs asset protection, the property is or will soon be positively geared, and you have family members or a bucket company to stream income to. It is usually the wrong choice when the property will be heavily negatively geared for years and you want that loss against your personal income now. The honest answer for most people is “it depends,” and the difference in tax over a decade is large enough to justify getting proper advice first.

The costliest version of this decision is discovering the wrong structure after settlement, because moving a property from your name into a trust later triggers full stamp duty again and a CGT event, as if you sold it. That is why we sit down with clients before they buy, model each option, and match the structure to both the property and the wider family group. If you are weighing up a purchase, explore our full guide to the types of trusts in Australia, understand how capital gains tax works on property, and see how a bucket company can cap the tax on distributed profit. When you are ready, speak to our team and we will map it out for you.

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