Property investment is one of Australia’s favourite wealth-building strategies — but owning investment property without the right tax advice is like running a business without looking at the numbers. The difference between a property investor who understands their tax position and one who doesn’t isn’t a rounding error — it can be tens of thousands of dollars per year, and hundreds of thousands over a full investment cycle. In this post, I’ll walk you through the key tax considerations for Australian property investors and how to structure your portfolio for long-term wealth.

Why Property Investors Need a Specialist

Property investment sits at the intersection of income tax, CGT, land tax, GST (in some cases), and state-based regulations. Most general accountants can handle the basics — declaring rental income and claiming basic deductions — but very few have the depth to advise on optimal structure for holding multiple properties, CGT minimisation on eventual disposal, and depreciation optimisation through quantity surveyor reports.

Negative Gearing Explained

Negative gearing occurs when the expenses of holding an investment property exceed the rental income — creating a net loss. This loss is deductible against your other income (salary, business income, etc.), reducing your overall tax bill.

For example: you earn $200,000 from your business and have a rental property that generates $30,000 in rent but costs $45,000 to hold. The $15,000 net loss is deductible against your $200,000 income — saving you approximately $7,050 in tax at the 47% rate.

Interest Deductions: What Qualifies?

• Only interest on funds borrowed to acquire or improve the investment property is deductible
• Mixed-purpose loans must be apportioned between investment and personal use
• Loan fees and establishment costs are deductible over the term of the loan (not immediately)

Depreciation Schedules and Quantity Surveyors

Depreciation is one of the most underutilised tax deductions available to property investors. You can claim:

• Division 43 (building allowance): 2.5% of the original construction cost per year for residential properties built after 17 July 1985
• Division 40 (plant and equipment): Fixtures and fittings — carpets, blinds, appliances, hot water systems, air conditioning

A depreciation schedule from a registered quantity surveyor (typically $500–$700) pays for itself many times over in the first year’s deductions.

Land Tax Across States

Land tax is a state-based tax with different rates and thresholds in each state. Land tax planning is essential as a portfolio grows — the structure in which you hold property affects land tax significantly.

Using a Trust to Hold Investment Property

Holding investment property in a family trust offers income splitting, the 50% CGT discount, and asset protection. However, negatively geared properties in a trust cannot offset losses against personal income — trust losses are trapped. The trust structure works best for positively geared or high-growth properties.

CGT on Sale of Investment Property

• If held for more than 12 months, the 50% general CGT discount applies
• Timing the sale to a year when your other income is lower reduces the effective tax rate
• Capital losses from other assets offset capital gains first

SMSF and Property

An SMSF can hold residential or commercial property with rental income taxed at only 15% in accumulation phase, and 0% in pension phase. This makes it an extraordinarily tax-effective vehicle for property investment — but the property cannot be used by members or related parties for personal purposes.

How Pinnacle Approaches This With Property Investors

Property investor clients at Pinnacle get a comprehensive review of their entire portfolio and tax position. We look at each property — its income, expenses, depreciation, and projected capital gain — and advise on the most tax-effective structure. Learn more about our tax planning approach here.

To discuss your property investment tax position, contact Pinnacle today for an obligation-no-obligation consultation.

Frequently Asked Questions

Is negative gearing still available in Australia?

Yes. As of 2026, negative gearing is fully available for Australian property investors. Current ATO rules allow rental losses to be offset against other assessable income.

Can I use my SMSF to buy a property I live in?

No. The superannuation laws prohibit an SMSF from acquiring residential property from, or leasing it to, a related party including fund members.

What is the main residence exemption?

The main residence exemption excludes capital gains on the sale of your main home from CGT. If you used part of your home for income-producing purposes, or rented it out while treating it as your main residence, the exemption is apportioned.

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One of the most valuable concessions for an investor who once lived in the property is the CGT 6 year rule, which can keep a former home exempt for up to six years of rental. If you hold business premises in your fund, see our guide to upgrading business premises held in super.

Much of the capital gain on Australian property is inflation, not real wealth. If every home rises together, selling one to buy an equivalent leaves you no better off, yet you are taxed on the whole nominal gain. Property largely protects wealth against inflation; a business is the asset whose value you can actually control and create.

Sell your house, buy the identical house down the street, and you pay the same price. So where was the gain? That one question undoes a lot of what Australians assume about property and wealth. I am Mina Baselyous, a Chartered Tax Advisor (CTA), CPA and Registered Tax Agent, and this is a perspective piece, general information rather than personal advice, and not a recommendation to buy or sell anything. The aim is to give established business owners a sharper lens: work out how much of a “gain” is real, how Australia taxes it, and which asset you would rather be compounding.

The house next door: where did the gain actually go?

Here is the intuition pump. If your home doubled in value, but so did every comparable home in your suburb, you have not become wealthier in the only market that matters to you, which is housing. Sell for the higher price and the replacement costs the higher price too. The number on the contract changed; your position did not. A paper gain only becomes real wealth if you leave the asset class, trade down to something cheaper, or move to a market that rose less. Otherwise the “gain” is a change in the measuring stick, not an increase in what you can actually buy.

Take a simple, like-for-like example. You bought a home in 2004 for $400,000. Today an equivalent home costs $900,000, and you sell your original for $900,000. On paper you gained $500,000. But if you want to keep living in a similar home, the replacement also costs $900,000, so in housing terms you are exactly where you started. In our experience working with business owners, this is the single most misunderstood number on a balance sheet: people see the headline gain, feel wealthy, and never ask whether it is spendable or just the market re-pricing everything at once.

How much of a “gain” is just the dollar shrinking?

Layered on top of that is plain currency inflation. A 2024 dollar buys far less than a 2004 dollar, so part of any long-run gain is simply the dollar losing purchasing power. Economists call the headline figure the nominal gain and the purchasing-power increase the real gain. Since the Reserve Bank adopted its 2 to 3 per cent inflation target in 1993, CPI inflation has averaged about 2.5% a year (RBA: Australia’s inflation target; see also the ABS history of inflation, both as at September 2026).

Apply that to the example. Assume general prices rose about 70% over those two decades, roughly in line with an average of 2 to 3 per cent a year (an illustration only; check the actual cumulative change against the ABS CPI for your dates). Your $400,000 needed to grow to about $680,000 just to stand still in purchasing-power terms. That means the real gain, the genuine increase in wealth, was closer to $220,000, and the other $280,000, more than half the headline number, was the dollar losing value.

Property has, over long periods, risen faster than general inflation: CoreLogic data puts national dwelling value growth at roughly 6.8% a year over the 30 years to 2022, and the Reserve Bank has documented that housing prices have grown strongly and well above CPI over the long run (RBA Bulletin: Long-run Trends in Housing Price Growth, September 2015). That varies a lot by city and period, so treat any single average with care. The point is not that property never rises in real terms; it often does. The point is that a large slice of the headline number is inflation of one kind or another, and part of what is left is a market you did not steer.

You are taxed on that inflation, and Australia used to index for it

Australia does have capital gains tax, and it applies. That is not in dispute. The sharper, more honest point is what CGT is applied to: under today’s rules you are taxed on the nominal gain, inflation included, not on the real gain alone. It was not always this way. For assets acquired before 11.45am on 21 September 1999, the law let you index the cost base to inflation, so tax fell only on the gain above inflation.

That indexation was frozen. Following the Ralph Review of Business Taxation, the New Business Tax System changes stopped cost-base indexation at 30 September 1999 and replaced it, from 21 September 1999, with the 50% CGT discount for individuals and trusts. According to the ATO, if a CGT event happens on or after that date you can only index the cost base up to the September 1999 quarter (ATO: Indexing the cost base, as at September 2026). For an asset bought before that date and held at least 12 months, you can still choose the frozen-indexation method or the discount method, whichever gives the lower gain.

Two things about that old indexation are worth noting. First, it used the CPI, a measure of general consumer prices, so it only ever stripped out general inflation, never property-specific or share-specific inflation. Second, the same CPI method was applied across every asset class, from property to shares to, today, crypto, even though each inflates at a different speed. Indexing by CPI was always a blunt instrument. The 50% discount that replaced it is blunter still: it halves every gain by the same amount regardless of whether you held for one year or twenty, or whether inflation over that time was low or high. In our worked example, the discount taxes you on $250,000 (half of the $500,000 nominal gain), which is more than the entire real gain of $220,000. Even after the discount, you can be taxed on more than the wealth you genuinely created.

The plot twist: indexation returns from 1 July 2027 (and this is now law)

The government has effectively conceded the point. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 replaces the 50% CGT discount for individuals, trusts and partnerships with cost-base indexation plus a 30% minimum tax rate on capital gains, applying from 1 July 2027. The ATO’s own explanation is that the cost base will be indexed for inflation using the CPI “so that only real (inflation-adjusted) gains are subject to tax” (ATO: Reforming negative gearing and capital gains tax, as at September 2026). This is law: the Act received Royal Assent on 26 June 2026, with the CGT and negative gearing measures commencing 1 July 2027.

Read that again. The reason given for reintroducing indexation is precisely the argument in this article: taxing inflationary gains was never fair. In practice, says Mina Baselyous (CPA, CTA, Registered Tax Agent), the mistake we see most is owners assuming a “50% discount” and a “30% minimum tax on real gains” are the same deal. They are not, and for some higher-income investors the new regime can be less generous, not more, even though it taxes only the real gain. And notice it still uses CPI, so it will strip general inflation but not the property-specific inflation the earlier sections described.

Two accuracy points matter here. First, negative gearing is being limited to new builds and key housing priorities from the 2027-28 income year, not abolished; losses on existing residential property bought after 7:30pm on 12 May 2026 will still be deductible, but only against residential property income including capital gains, with property held before that time grandfathered. Second, a separate 30% minimum tax on discretionary trusts has been announced but is not yet law; it is proposed to start from 1 July 2028 and should be treated as a proposal, not a settled rule. These are different measures with different statuses, and they are easy to confuse.

Reframing property honestly: wealth protection, not wealth creation

If a large slice of property’s nominal gain is inflation, and the rest is a market you cannot steer, the honest reframe is this: residential property is largely an inflation hedge that preserves purchasing power, more than a wealth-creation engine that multiplies it. That is not a criticism. Property does some things very well. It is a real, tangible asset, banks will lend against it cheaply so leverage can amplify your equity returns, it enforces a savings discipline through the mortgage, it can sit outside your trading entity for asset protection, and rents tend to rise broadly with inflation.

What property does not give you is control over value creation. You cannot buy a $1 million house, renovate it, and make it worth $10 million; a renovation moves the needle at the margin, but the market carries the rest, and you do not steer that market. It is driven by interest rates, migration, credit policy and sentiment, none of which you influence. When conditions turn, your only levers are to hold or to sell. Two honest caveats keep this balanced: gearing genuinely amplifies property returns on the way up, and trading down or moving to a cheaper market does realise a real, spendable gain. Property earns a legitimate place in a plan. It just tends to protect wealth rather than create it.

The asset you control: your business

A business is the opposite kind of asset. Market forces still apply, but on top of them you control value creation. You can lift prices, improve margins, add a product line, hire a better team, systemise operations, enter a new market, or cut a service that loses money. You can genuinely take a business worth $1 million and, through customers, strategy, stage and hundreds of decisions, build it toward $10 million. That is real, controllable wealth creation, and it compounds: a business that grows its profit also grows the multiple that profit is worth on sale. Yes, a business carries more risk and effort than a passive property, but that is the point. Because you control it, you can influence the outcome.

The tax system also treats a well-structured business sale more kindly than most people expect. The four small business CGT concessions can dramatically reduce, and in some cases eliminate, the tax on a business sale for eligible owners, and those concessions are being retained under the 2026 reforms. That is a level of tax outcome a standard residential investment property simply cannot access. The catch is that these outcomes depend heavily on getting your business structure right years before you sell, which is exactly the sort of decision most owners make too late.

This is where an advisor earns their keep. A good Virtual CFO relationship is about steering the asset you control: reading the numbers, making the strategic call when the market shifts, and compounding the result. In our experience, the owners who build lasting wealth are the ones who treat their business as the primary engine and property as the ballast, not the other way around.

So where does this leave you? A framework, not a recommendation

None of this is advice to sell your property or pour everything into your business. Both assets have legitimate roles, and the right mix depends entirely on your circumstances, risk appetite, debt, stage of life and goals. The point is to see each asset clearly. Ask of any “gain”: how much of this is real and spendable, and how much is inflation I will be taxed on? Ask of any asset: can I actually influence its value, or am I just hoping the market is kind?

For most established business owners we work with, the answer reframes their whole plan. Property earns its place as a stable, protected, inflation-hedging store of value. The business earns its place as the controllable, compounding, concession-friendly wealth engine. Getting the balance, the ownership structure and the timing right, before the 1 July 2027 changes and before any sale, is where proactive advice pays for itself many times over.

Frequently Asked Questions

For the mechanics behind all of this, see our plain-English guides to how capital gains tax works and the 50% CGT discount rule. If property is part of your plan, our guides to negative gearing and buying an investment property in a trust are worth reading, and if the business is your real engine, start with exit and succession planning or a proactive tax planning review.

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You can pay yourself from your company through salary or wages, franked dividends, a complying Division 7A loan, or trust distributions where a trust owns the company. Most owners use a combination. Salary is tax deductible to the company and carries super and PAYG withholding, while dividends pass on franking credits for tax the company has already paid. The best mix depends on your marginal rate against the company rate. One option owners ask about constantly is borrowing from the company to fund a home loan offset account, which has its own Division 7A timing rules. Once the money is in your hands, where you park it changes the tax outcome.

Once your business runs through a company, the money in the company bank account is not yours to spend. It belongs to a separate legal entity, and how you move it into your own hands decides how much tax you pay and whether you stay on the right side of the Australian Taxation Office. Do it well and you can smooth your income, use franking credits and keep your overall rate down. Do it carelessly and you can trigger a Division 7A deemed dividend that taxes the same money twice. Mina Baselyous, a Chartered Tax Advisor (CTA), CPA and Registered Tax Agent, structures owner remuneration for established Melbourne businesses. This guide walks through every option, the trade offs, and how to combine them tax effectively.

Salary and wages: deductible to the company, taxed to you

Paying yourself a salary or director’s wage is the simplest option. The company claims a tax deduction for the wage, so it reduces company profit, but you pay tax at your personal marginal rate, the company must withhold PAYG tax and remit it, and superannuation guarantee applies on top. It is clean and predictable, and it builds your super, but it offers no rate advantage once your income is high.

The numbers drive the decision. The company tax rate is 25 percent for a base rate entity, a company with aggregated turnover under $50 million and no more than 80 percent passive income, or 30 percent otherwise for the 2025-26 year, per the ATO company tax rates. Your top personal marginal rate is 47 percent including the Medicare levy on income above $190,000. A salary is fully deductible, but every dollar taken as wage above the middle brackets is taxed far higher than it would be if left in the company. Superannuation guarantee is also compulsory on your ordinary earnings at 12 percent from 1 July 2025, per the ATO super guarantee rate, which is a genuine cost but also a concessionally taxed way to build wealth.

Dividends and franking credits: sharing the tax the company already paid

Dividends are paid to you as a shareholder out of the company’s after tax profits. Because the company has already paid tax on those profits, it can attach franking credits to the dividend, and you receive a credit for that tax under the imputation system. You are taxed on the grossed up dividend but offset the franking credit against your bill, so the profit is not taxed twice.

Under the ATO rules on dividend imputation, you include both the dividend and the attached franking credit in your assessable income, then claim a tax offset equal to the credit. If your marginal rate is below the company rate, the excess franking credit can be refunded; if it is above, you top up the difference. Unlike a salary, a dividend is not deductible to the company and carries no PAYG withholding or super, so it is a different lever entirely. How and to whom dividends can be paid also depends on your share structure and classes of shares, which is why the share register is worth getting right early.

Division 7A: the trap of just taking the money

The most expensive way to pay yourself is to simply transfer company money to your personal account and sort it out later. If a private company lends money to a shareholder or associate and it is not repaid or put on a complying loan agreement by the company’s lodgement day, Division 7A treats it as an unfranked deemed dividend, taxable to you in full with no franking credit. It is the single most common structuring mistake we see.

The fix is to formalise the loan. Under the ATO rules on Division 7A, a complying loan needs a written agreement, interest charged at least at the ATO benchmark interest rate, a maximum term of seven years unsecured (or 25 years if properly secured over real property), and minimum yearly repayments. As Mina Baselyous (CPA, CTA) puts it, Division 7A does not stop you accessing your company’s money, it just insists you do it as a real loan, a real wage or a real dividend rather than pretending the question does not exist. For a fuller treatment, see our guide to what Division 7A is and how it works.

Trust distributions when a trust owns your company

If a family trust owns your trading company, or the trust runs the business and distributes profit to a company, you gain another lever. A discretionary trust can distribute income to a bucket company, capping the tax on retained profit at the company rate of 25 or 30 percent rather than your top marginal rate, and the money can later be paid to you as a franked dividend. This is a structuring decision, not a year end afterthought.

The classic arrangement pairs a trust with a bucket company to hold profits you do not need to live on, taxed at the company rate, and released to you as franked dividends in later, lower income years. Where a company is held inside a trust, the interaction of franking credits, the holding period rules and who can use the credits gets technical, as we explain in our post on a company held in a family trust. Used well, this is one of the most powerful ways to control the timing and rate of the tax you personally pay.

Drawings and the shareholder loan account

Drawings are simply money you take from the company during the year before it is classified as wage, dividend or loan. They are not a separate tax free method of paying yourself: every drawing sits in your shareholder loan account and must eventually be squared off as salary, a franked dividend or a complying Division 7A loan. Left unreconciled, drawings are exactly what triggers a deemed dividend.

In our experience working with Melbourne business owners, the loan account is where good intentions unravel. Owners draw what they need through the year, then discover at tax time that the balance has to be dealt with. The discipline is to decide the mix deliberately and clear the loan account each year, not to let it drift. This is bread and butter work for a proactive accountant, and one of the reasons a tax planning engagement pays for itself.

How to combine them to manage your effective tax rate

The tax effective answer is almost never one method. It is a deliberate blend: a salary up to the point where your marginal rate is still reasonable, franked dividends to pass on company tax already paid, retained profit taxed at the company rate where you do not need the cash, and a bucket company or trust to hold surplus. The goal is to smooth income across years and keep your overall effective rate down.

The right blend is personal. It depends on how much you need to live on, your other income, your marginal rate this year versus next, your super position and whether a trust sits in the structure. In practice we model several combinations and choose the one with the lowest lifetime tax, not just the lowest tax this June. Getting this right, year after year, is what separates a compliance accountant from a proactive advisor, and it is the kind of forward planning a business owner should expect from their business structure.

Frequently Asked Questions

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Yes, GST usually applies to commercial property. Selling or leasing commercial premises is generally a taxable supply, so a GST registered seller adds 10 percent to the price and a registered buyer or tenant can claim it back. Two concessions, the going concern exemption and the margin scheme, can legally reduce or remove that GST.

For an established business owner, buying or selling the premises you trade from is one of the largest transactions you will ever make, and GST can swing the numbers by tens of thousands of dollars. Get the contract wording right and the sale can be GST free or taxed only on the margin. Get it wrong and you can hand the Australian Taxation Office an extra 10 percent that was avoidable. Mina Baselyous, a Chartered Tax Advisor (CTA), CPA and Registered Tax Agent, has structured commercial property deals for trading businesses across Melbourne. This guide explains when GST applies, how the going concern exemption and the margin scheme work, how to claim input tax credits, how GST works on commercial rent, and the traps that catch owners out.

When does GST apply to a commercial property sale or purchase?

GST applies when the seller is registered, or required to be registered, for GST and sells the property in the course of running an enterprise. The sale is then a taxable supply and 10 percent GST is built into the price. Selling privately owned premises with no enterprise, by contrast, is usually outside the GST system.

The GST rate has been 10 percent since the tax began on 1 July 2000, and on a straightforward taxable sale the GST is one eleventh of the price. Registration is compulsory once your GST turnover reaches the $75,000 threshold, and a one off property sale can itself push you over that line or count as an enterprise in its own right, so a seller who assumes they are not in the GST net can be caught out. The ATO guidance on selling commercial premises and on the $75,000 registration threshold is the place to confirm your position before you sign.

Who bears the GST comes down to the contract. If the price is expressed as GST inclusive, the seller wears it out of the sale proceeds. If the contract says the price is exclusive of GST, or is silent, the buyer can end up paying an extra 10 percent on top. In our experience working with buyers and sellers, the GST clause in the contract of sale matters as much as the price itself.

The going concern exemption: how to sell commercial property GST free

The sale of a going concern is GST free, meaning no GST is added to the price and none is remitted to the ATO. It commonly applies when a commercial property is sold with a tenant and lease already in place, because the leasing enterprise continues uninterrupted. All the legislated conditions must be met, and both parties must agree to it in writing before settlement.

Under the ATO rules on selling a going concern, the supply is GST free only if all of the following apply: the sale is for payment; the purchaser is registered or required to be registered for GST; the buyer and seller agree in writing that the sale is of a going concern; the seller supplies to the buyer everything necessary for the continued operation of the enterprise; and the seller carries on the enterprise until the day of the sale. Miss one condition and the concession fails, turning a supposedly GST free deal into a taxable one.

The most common use is a tenanted investment property: the enterprise is the leasing business, so the property must be sold subject to the existing lease with the tenant remaining. Selling vacant premises you occupied yourself is much harder to structure as a going concern. As Mina Baselyous (CPA, CTA) puts it, the going concern exemption is not a box you tick at settlement, it is a set of conditions you have to engineer into the deal from the first draft of the contract.

Buying through an SMSF or trust: the GST registration trap

This is where the going concern exemption most often comes unstuck. A self-managed super fund or a family trust buys a tenanted commercial property, the contract has the going-concern clause, but the buying entity is not registered for GST. Because the buyer condition is not met, the sale cannot be GST free and the seller must charge GST, despite the clause. The fix is simple but it has to happen before settlement: register the buying entity for GST.

An SMSF or trust that leases commercial property is carrying on a leasing enterprise, so it must register for GST once the rent reaches the $75,000 turnover threshold, and can register voluntarily below it. For a going-concern purchase it generally should, with an effective date on or before settlement. Register the purchase in the name and ABN of the fund or trust itself, not the corporate trustee, which holds an ACN only. If you are buying premises inside super, our guide on buying your business premises through your SMSF covers how the strategy fits together.

The margin scheme: paying GST on the margin, not the full price

The margin scheme lets an eligible seller calculate GST as one eleventh of the margin, that is the sale price less what they originally paid for the property, rather than one eleventh of the whole selling price. On a property that has grown in value, that can cut the GST bill substantially. The scheme can only be used on a taxable sale, and the buyer and seller must agree to it in writing on or before settlement.

Eligibility is the catch. Under the ATO rules on eligibility to use the margin scheme, you generally cannot use it if you originally bought the property through a sale that was fully taxable and did not itself use the margin scheme. In other words, the history of how you acquired the property determines whether you can pass the margin scheme on when you sell. The calculation of the GST payable then rests on your purchase price or, in some cases, an approved valuation.

The trade off for the buyer is important: when you buy under the margin scheme you cannot claim an input tax credit for the GST included in the purchase price. So the margin scheme suits a sale to a buyer who is not registered or who cannot use the credit anyway, and it is a poor fit where the buyer would otherwise claim the full credit back. Working out whether going concern or the margin scheme gives the better result is exactly the kind of forward planning that proactive tax planning is built around.

Claiming input tax credits when you buy commercial premises

If you buy commercial premises in a taxable sale and you are registered for GST, you can generally claim the GST in the price back as an input tax credit, provided you buy the property to use in your enterprise. On a full taxable purchase the credit is one eleventh of the price, which can be a very large one off refund that materially changes the cash you need at settlement.

Two conditions govern the claim. You must hold a valid tax invoice, and the purchase must relate to your taxable or GST free business activity rather than to making input taxed supplies such as residential rent. There is also a timing point: the credit is claimed in your business activity statement, so the GST is often paid at settlement and recovered weeks later, creating a genuine funding gap you should plan for. Remember too that if the property is bought under the margin scheme, no input tax credit is available at all. The ATO overview of GST and commercial property sets out how these credits work.

GST on commercial rent for landlords and tenants

Leasing commercial premises is a taxable supply, so a GST registered landlord charges 10 percent GST on the rent and outgoings, and a GST registered tenant claims that GST back as an input tax credit. This is the opposite of residential rent, which is input taxed: no GST is charged and the landlord cannot claim credits on the associated costs.

For most business to business leases the GST washes through, the landlord remits it and the tenant reclaims it, so the real cost is neutral. It matters most where one side is not registered. A landlord below the $75,000 threshold who is not registered does not charge GST but also cannot claim credits on the building’s running costs, while a tenant who is not registered wears the GST on the rent as a true cost. The distinction between commercial and residential is also why owners holding property in different structures, for instance through a family trust earning residential rent, face very different GST outcomes, and why the ownership structure should be decided with GST in mind.

The GST traps that catch business owners buying or selling premises

Most GST damage on commercial property is done in the contract, not the tax return. The recurring traps are assuming a going concern applies when a condition is not met, agreeing to the margin scheme too late, buying through a structure that cannot claim the credit, and forgetting that a single price can be quoted GST inclusive or exclusive. Each of these is fixable before signing and expensive afterwards.

• Going concern that quietly fails. The buyer is not registered by settlement, the tenant vacates before completion, or the written agreement is missing. Any one of these turns a GST free sale into a taxable one, often with no price adjustment to cover it.
• Margin scheme agreed too late. The written agreement to apply the margin scheme must be in place on or before settlement. Leaving it to the accountant after the deal has settled is too late, and the concession is lost.
• Buying where you cannot claim the credit. Purchasing in a structure that makes input taxed supplies, or under the margin scheme, means the GST in the price is a permanent cost, not a recoverable credit.
• GST inclusive versus exclusive confusion. A price that looks competitive can carry an extra 10 percent if the contract says GST is payable in addition, so read the GST clause before you fall in love with the number.
• Wrong entity on the contract. The buyer named in the contract should match the entity that will be registered and claim the credit, which ties directly to your overall business structure.

These decisions rarely sit in isolation. If you are weighing whether to hold the premises personally, in a company, in a trust or inside super through the business real property strategy in an SMSF, the GST treatment, stamp duty, income tax and asset protection all interact. That is a conversation to have before you sign a contract of sale, not after. If you hold business premises in your fund, see our guide to improving a commercial property held in an SMSF.

Frequently Asked Questions

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Yes, a self-managed super fund can buy a residential investment property, but the rules are strict. The property must satisfy the sole purpose test, cannot be bought from or lived in by you or any related party, and must be leased at arm’s length. Since 10 August 2026, new residential purchases can no longer be funded by borrowing, so the fund must use its own cash.

SMSF property investment is one of the most misunderstood strategies in Australian superannuation. Done properly, holding a residential investment property inside your fund can build wealth in a concessionally taxed environment. Done carelessly, it can make your fund non-complying and cost you close to half its value in tax. As a Chartered Tax Advisor (CTA), CPA and Registered Tax Agent, I wrote this guide so established business owners can see exactly what is allowed, what changed in 2026, and whether the strategy actually suits them before committing hundreds of thousands of dollars of their retirement savings.

Self-managed super is a large and growing part of the system. As at 30 June 2025 there were more than 653,000 SMSFs holding around $1.05 trillion in assets, according to the ATO SMSF quarterly statistical report (June 2025), and residential real property makes up roughly five per cent of those assets. It is popular, but it is also the area where we see the most expensive mistakes.

Can your SMSF actually buy a residential investment property?

Your SMSF can buy a residential investment property outright, provided the purchase is a genuine investment for members’ retirement and meets the superannuation rules. The property must be bought from an unrelated party at market value, held solely to provide retirement benefits, and never used or occupied by you, your family, or any related party. It is an investment asset, not a lifestyle or family asset.

This is the point most people miss. A residential property in your SMSF is treated completely differently from one you own personally. You cannot spend a weekend in it, you cannot let your adult child rent it, and you cannot buy the unit you already own and shift it into the fund. The residential rules are far tighter than the rules for commercial premises, which is why we treat the two strategies as entirely separate conversations. If your interest is in owning the premises your business trades from, that is a commercial strategy, and you should read our guide on buying your business premises through your SMSF instead.

The big 2026 change: you can no longer borrow to buy residential property

This is the most important development in years. From 10 August 2026, an SMSF can only use a Limited Recourse Borrowing Arrangement (LRBA) to buy real property if that property is business real property. In plain terms, new borrowing to acquire a residential investment property inside super is no longer available. Your fund can still buy residential property, but it must now use its own cash.

The change came in through the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received Royal Assent on 26 June 2026, and it is now law. The ATO confirms the new rules apply to LRBAs entered into on or after 10 August 2026, and that LRBAs are not banned entirely: funds can still borrow to acquire business real property (such as commercial premises), and existing arrangements continue. See the ATO’s guidance on the changes to LRBAs for property from 10 August 2026.

According to the ATO, three situations are unaffected by the change: existing LRBAs entered into before 10 August 2026, the refinancing of those existing LRBAs, and binding contracts to acquire real property that were exchanged before 10 August 2026, even if the contract settles or the loan is entered into after that date. If you were already part-way through a residential purchase under an old contract, you are grandfathered. If you are starting fresh, borrowing for residential is off the table.

In practice, says Mina Baselyous (CPA, CTA, Registered Tax Agent), the mistake we see most is owners still assuming they can gear a residential property inside super the way they could in 2024. That door is closed for new purchases. The mechanics of the old borrowing structure, the bare trust and the LRBA, still matter for existing arrangements and for commercial property, and we explain them in our guide to the SMSF bare trust and how LRBAs work.

The rules you cannot break

Every SMSF investment must exist for one reason only: to provide retirement benefits to members. For residential property this creates several hard rules that override any commercial logic or family convenience. Break one of them and the ATO can make your fund non-complying, which means it loses its concessional tax status and can be taxed at the top marginal rate on its assets. These are the non-negotiables.

It must pass the sole purpose test

The sole purpose test requires that the property is held solely to provide retirement benefits, with no present-day benefit to any member or related party. The ATO is explicit that no one associated with your SMSF should get a present-day benefit from its investments. A single night’s stay by a member or relative is enough to breach it, and there is no brief use exception. See the ATO’s guidance on SMSF investment restrictions.

You cannot buy it from a related party

An SMSF generally cannot acquire an asset from a related party. Business real property and listed securities are exceptions; residential property is not. This means you cannot sell your own investment unit to your fund, buy your sister’s apartment, or transfer a property held in your family trust into the SMSF. Residential property must be bought from an unrelated third party at arm’s length, or the fund breaches the related-party acquisition rules.

No one related can live in it or rent it

A residential property owned by your SMSF cannot be lived in or leased by you or any related party, at any price. Unlike commercial premises, which can be leased back to your own business at market rent, residential property must be tenanted only by genuinely unrelated tenants on an arm’s length lease. Renting to your children, parents or business partners is a straight breach, even if they pay full market rent.

Arm’s length and the in-house asset rule

Every dealing must be on arm’s length, market-value terms. If a transaction is not at arm’s length, the income can be taxed as non-arm’s length income at the top marginal rate. The fund must also keep in-house assets to no more than 5 per cent of total assets. A directly held residential property tenanted by strangers is not an in-house asset, but the moment a related party is involved, the in-house asset and related-party rules come into play. These interlocking rules are why residential SMSF property needs proper structuring, the same discipline we apply across trusts and asset-protection structures.

How your SMSF pays for it now: cash, liquidity and diversification

With new residential borrowing gone, your fund now needs enough cash to buy the property outright, plus a buffer. That is a high bar. A fund buying a $700,000 property needs the full purchase price and costs available, and it still has to hold enough liquidity to pay members’ pensions, insurance premiums, and the annual accounting and audit fees. This is where many SMSF property plans fall over.

Liquidity and diversification are the two risks we watch most closely. A single property can swallow the majority of a fund’s balance, leaving it concentrated in one illiquid asset that cannot be sold in part. If a member moves into pension phase and needs to draw a minimum pension, or an unexpected cost arrives, a fund with almost everything tied up in bricks and mortar can be forced to sell at the wrong time. Your fund’s investment strategy, which the ATO requires you to document and review, must genuinely address this.

The tax on SMSF residential property

The tax treatment is the reason the strategy is attractive. Rental income inside a complying SMSF in accumulation phase is taxed at 15 per cent, well below the marginal rates of up to 47 per cent that apply to property held personally. If the fund holds the property for more than 12 months, the capital gain on sale receives a one-third discount, bringing the effective tax rate to 10 per cent. In retirement (pension) phase, income and capital gains supporting a pension can be entirely tax-free.

That 0 per cent outcome in pension phase is the headline. A property that has grown in value for years can, with the right timing and advice, be sold with no capital gains tax at all once the fund is wholly supporting retirement-phase pensions. See the ATO’s guidance on how SMSFs are taxed for the current rates. Getting the timing of a sale right relative to pension phase is exactly the sort of forward planning that belongs in a proper tax planning conversation, not an afterthought at sale.

Pros, cons and who it actually suits

Residential property in an SMSF suits a specific type of owner: someone with a strong super balance, stable contributions, a long time horizon, and a genuine tolerance for holding a single illiquid asset. It is rarely the right move for a fund with a modest balance that would become dangerously concentrated. The honest answer for many owners is that a commercial premises strategy, or keeping property outside super, serves them better.

The advantages are real: concessional tax on rent, a discounted or nil rate on capital gains, and an asset held for retirement inside a protected structure. The trade-offs are just as real: no more borrowing for new residential purchases, high cash requirements, concentration and liquidity risk, the strict no-personal-use rules, and higher ongoing compliance costs. In our experience working with clients, the strategy works best as one considered part of a broader wealth and structuring plan, not a standalone punt on the property market.

How Pinnacle helps, and who else you need

SMSF property is a team effort, and it matters that each professional stays in their lane. As your registered tax agent and SMSF accountant, Pinnacle handles the fund’s establishment and structure advice, annual accounting, tax return and audit coordination, compliance review against the sole purpose test and in-house asset rules, and how the property fits your wider business and personal tax strategy. We are the advisor in the room before the decision is made, not just the firm that files the paperwork afterwards.

Two things sit outside our licence. A licensed financial adviser must advise on whether the property is a suitable investment for your fund and on contribution and pension strategy. A solicitor handles the conveyancing and any deed work. We coordinate closely with both so the structure is compliant and tax-efficient from day one. If you want to know whether residential property genuinely belongs in your fund, that is the conversation to have with us first. If you hold business premises in your fund, see our guide to renovating or upgrading a warehouse in your SMSF.

Frequently Asked Questions

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When a company is held inside a family trust, the trust owns the shares and receives the franked dividends the company pays. A discretionary trust generally cannot pass those franking credits through to its beneficiaries unless it has made a family trust election, because without one the beneficiaries fail the 45-day holding period rule. Interposed bucket or holding companies in the group usually need an interposed entity election too.

Plenty of Melbourne business families run a perfectly good structure: a family discretionary trust that owns the shares in a trading or investment company, with a bucket company sitting in the background to hold retained profits. The structure looks right. The problem only shows up at tax time, when the franking credits attached to the company’s dividends quietly fail to reach the people they were meant to benefit. This article, written by Mina Baselyous (CPA, CTA and Registered Tax Agent), explains why that happens and how a family trust election fixes it.

This guide sits alongside our broader explainer on the family trust election and interposed entity election, and our complete guide to trusts in Australia. Here we focus specifically on the franking-credit angle when a company is held within a trust.

What “a company held in a family trust” actually means

Holding a company inside a family trust means the trust is the shareholder. The trust owns the shares in the company, and when the company pays a franked dividend, that dividend and its attached franking credits flow up to the trust first, not directly to you. The trustee then decides which beneficiaries receive that income. This is a common and legitimate way to combine the flexibility of a discretionary trust with the lower tax rate and asset protection of a company.

The appeal is obvious. The company can retain profits and reinvest at the corporate tax rate, the trust gives you discretion over who receives distributions each year, and the whole arrangement can be built for asset protection. In our experience working with established business owners, this is one of the most common structures we review. The catch is that the franking credits, which are often the whole point of paying a franked dividend, do not automatically reach the beneficiaries just because the structure exists.

The problem: franking credits do not flow freely through a discretionary trust

Franking credits do not pass automatically from a discretionary trust to its beneficiaries. To claim a franking tax offset on a franked dividend received through a trust, both the trustee and the beneficiary must be a “qualified person”. Being a qualified person generally means satisfying the holding period rule: holding the shares “at risk” for at least 45 days (90 days for preference shares), not counting the day of purchase or sale, per the ATO’s guidance current as at November 2025.

Here is where a discretionary trust runs into trouble. The ATO’s position is that where a discretionary trust has not made a family trust election, its beneficiaries are treated as holding a “short position” equal to their interest in the shares. In plain terms, they are deemed not to hold the shares at risk, so they cannot satisfy the holding period rule and cannot be qualified persons. As the ATO puts it, a beneficiary of a discretionary trust generally cannot hold an interest in the shares at risk for the required 45 days “unless the discretionary trust has made a family trust election” (ATO, Non-widely held trusts and the franking tax offset, updated 18 November 2025).

The practical result: your company pays a fully franked dividend, the credits flow to the trust, and then, without an election in place, those credits can be trapped rather than usable by the family members you distributed to. For a growing business paying meaningful franked dividends, that is a real and recurring cost.

How a family trust election fixes the franking problem

A family trust election (FTE) removes the deeming that blocks the credits. Once a trustee makes an FTE, the beneficiaries are no longer deemed to hold a short position against their interest in the shares. Provided a beneficiary’s risk is not otherwise materially diminished, they are then treated as holding the interest at risk and can be a qualified person, so the franking credits can flow through to them. The FTE is made under Schedule 2F of the Income Tax Assessment Act 1936 and nominates a single “test individual” whose family group the trust must distribute within.

This is the core reason so many trusts that hold shares end up making an FTE. It is not because the law forces every family trust to elect. It is because, for a discretionary trust that owns shares in a company, the FTE is usually the cleanest and most defensible way to let the franking credits reach beneficiaries. The trade-off is that distributions must then stay inside the test individual’s family group, or a punitive tax applies (covered below). Our full walk-through of how the elections work, including whether they can be backdated, is in our family trust election and interposed entity election guide.

The test individual: one choice that constrains the whole group

The test individual is the single person whose “family group” the trust is locked to. Choosing them is the most consequential decision in the whole exercise, because their family group defines who can receive distributions without penalty, and the same test individual must be specified across the family trust election and every related interposed entity election in the group. Choose once, and it binds the entire structure.

The test individual is usually the parent or head of the family that the wealth flows through. Their family group broadly includes their spouse, children and other lineal descendants, parents, grandparents, siblings, and the spouses of those people, along with companies and trusts that have been brought inside the group by election. Because every entity in the structure has to line up behind the same test individual, a family with two separate branches, or a business partner who is not a relative, cannot simply be swept into one family group. That constraint is exactly why the choice needs to be made deliberately and early, not discovered later.

Interposed entities: bucket and holding companies need their own election

Any company, second trust or partnership that sits between the family trust and the individuals, and that receives distributions from the trust, generally needs an interposed entity election (IEE) to be treated as part of the family group. Without one, a distribution from an elected family trust to that entity is a distribution outside the family group, which triggers family trust distribution tax. The IEE must nominate the same test individual as the FTE.

This is where multi-entity structures get caught out. A bucket company used to hold retained profits is a beneficiary of the trust, so it usually needs an IEE. So does a holding company that sits above the group, and any second discretionary trust that receives distributions. Each interposed entity has to be brought inside the family group by its own election, all pointing at the one test individual. Getting the trust and bucket company working together is precisely where the elections matter most. If the structure is new to you, start with our complete guide to bucket companies in Australia.

The traps when other family trusts and companies are in the group

Once you have more than one entity, three traps come up repeatedly. Distributing outside the family group triggers family trust distribution tax (FTDT) at the top marginal rate plus Medicare levy, currently 47% as at the 2025-26 year. One test individual constrains every entity in the group. And a company added as a beneficiary after a dividend has already been paid can miss the holding period entirely, losing the franking offset for that year even when every election looks correct.

Trap 1: distributing outside the family group (FTDT at 47%)

Once an FTE is in place, any distribution of income or capital outside the test individual’s family group is hit with family trust distribution tax at 47% (the top marginal rate plus the 2% Medicare levy), per the ATO’s family trusts guidance. This is not ordinary income tax on top of a distribution; it is a separate, flat, punitive charge on the amount distributed outside the group. It is why a mistaken distribution to a non-family entity, or to a bucket company that was never brought inside the group by an IEE, can be so expensive.

Trap 2: one test individual has to work for the whole family

Because the FTE and all the IEEs must nominate the same test individual, the family group is defined once and applies to every entity. In practice, this means a structure built around one branch of a family cannot easily distribute to a more distant relative, an unrelated business partner, or a separate family’s trust without triggering FTDT. If your plans involve bringing in a partner or splitting the structure between two families down the track, the test individual choice needs to anticipate that now.

Trap 3: adding a corporate beneficiary after the dividend is paid

This is the subtle one. Even with a valid FTE, a beneficiary only holds an interest in the shares from the day they become a beneficiary. The ATO’s guidance is clear that a company incorporated and added to the beneficiary class after the shares have gone ex-dividend has not held the interest at risk for the required 45 days, so it is not a qualified person for that dividend. In practice, says Mina Baselyous (CPA, CTA, Registered Tax Agent), the trap we see most is a bucket company added as a beneficiary after the franked dividend has already been paid; the credits are lost for that year even though every election on file looks correct.

Why the $5,000 small shareholder rule rarely saves a company

The small shareholder exemption lets an individual claim franking credits without meeting the 45-day holding period rule, but only where their total franking credit entitlement for the year is below $5,000, and only for individuals. It does not apply to companies, trustees or partnerships. So an individual family member can sometimes still get the offset even from a non-electing trust, but a bucket company never can.

A $5,000 franking credit entitlement is broadly a fully franked dividend of around $15,000 where the paying company is on the 25% base rate, so the exemption only helps at modest dividend levels. Crucially, the ATO confirms the exemption “only applies to individuals, and does not apply to trustees, partnerships or companies” (ATO, updated November 2025). If your plan is to stream franked dividends into a bucket or holding company, the small shareholder rule offers no help, and the elections and beneficiary timing have to be right.

A worked example

If the trust has made an FTE nominating one parent as the test individual, and the parents have been in the beneficiary class throughout the holding period, the parents are qualified persons. Their share of the $30,000 in franking credits flows through and can be used against their own tax. The election has done its job.

BucketCo, however, misses out for that year. It only became a beneficiary in February 2026, after the shares went ex-dividend. Even though the trust has a valid FTE, BucketCo did not hold an interest in the shares at risk for 45 days during the qualification period, so it is not a qualified person and cannot claim the franking offset on its slice for the 2025-26 year. The $5,000 small shareholder exemption cannot rescue it, because that exemption is for individuals only.

If the trust had made no FTE at all, even the parents would generally fail the holding period rule because of the short-position deeming, and the credits would be trapped rather than usable by the family. The lesson is consistent: make the election early, and get every intended beneficiary, including any bucket or holding company, into the beneficiary class and covered by an interposed entity election before the dividend is paid. Your share structure and who sits in the beneficiary class both matter here.

Getting the structure right up front

None of this means a trust that owns a company is a bad idea. It is often an excellent one. It means the elections, the test individual and the beneficiary timing all have to be handled deliberately, before dividends are declared and before a new entity is bolted on. The elections are relatively straightforward when planned in advance and can be genuinely difficult, or costly, to fix after a distribution or a dividend has already happened.

This is exactly the kind of thing a proactive advisor should be raising before you make a move, not explaining after the credits are lost. If your structure includes a trust, a trading or investment company and a bucket company, and you have never confirmed that the franking credits actually reach your beneficiaries, it is worth a review. Effective tax planning starts with getting the structure and its elections right.

Frequently Asked Questions

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Medicine is one of the most financially complex professions in Australia. High incomes, complex entity structures, professional service business rules, significant superannuation obligations, and a practice environment that blends employment, contracting, and private enterprise — it’s a combination that most general accountants simply aren’t equipped to handle at the level you deserve. I work with a number of medical professionals across Melbourne, and in this post I’ll explain what makes the tax and structuring position of doctors and specialists genuinely unique, and what good advice in this space actually looks like.

The Unique Tax Position of Doctors and Specialists

Medical professionals in Australia typically operate across multiple income streams simultaneously:

• Employment income from a hospital or health service
• Contracting income from providing services to medical centres or GP clinics
• Private practice income from patients billed directly or through Medicare
• Procedural income for specialists — often lumpy, high-value, and unpredictable

The interplay of these income streams creates complexity that a standard small business accountant isn’t trained to navigate. For example, the ATO’s personal services income (PSI) rules can prevent doctors from splitting income through a company or trust — a critical constraint that determines the structure options available.

Practice Structure Options for Medical Professionals

• Sole trader: Simple but fully exposed — all income at personal marginal rates, no asset protection, limited flexibility.
• Partnership: Used in group practices. Partners share income and expenses.
• Service trust: A trust that provides services (administrative, nursing, facilities) to the medical practice and charges a service fee. This is one of the most powerful structures available to medical professionals — but it requires careful structuring to survive ATO scrutiny.
• Incorporated practice: Subject to the PSI rules and relevant state medical board requirements.

Superannuation Strategies for High Earners

• Concessional contributions: Maximise the $30,000 annual concessional cap. At a 47% marginal rate, the tax saving on a full $30,000 concessional contribution is approximately $9,600 per year.
• Catch-up contributions: If your super balance is under $500,000, you may be able to carry forward unused concessional cap amounts from the previous five years.
• Division 293 tax: High earners (income above $250,000) pay an additional 15% tax on their concessional contributions.
• SMSF: For medical professionals wanting more control over their superannuation investments, particularly those who want to invest in property or specific assets.

Trust Distributions to Family Members

Where income can be structured through a service trust, distributions to family members in lower tax brackets can significantly reduce the overall family tax bill. However, the personal services income rules must be analysed carefully — if more than 50% of the income comes from one payer, PSI may apply, preventing income splitting.

Loan Arrangements and Division 7A

If you operate through a company, be very careful about Division 7A. Any loans, payments, or forgiven debts between your company and you personally can trigger Division 7A — causing the amount to be treated as an unfranked dividend. Read our full Division 7A guide here.

Investment Property for Medical Professionals

• Negative gearing benefits are greatest when your marginal rate is highest
• Structure for property investment — holding property in a trust vs personally vs a company has different CGT, land tax, and income tax implications
• Depreciation schedules — commissioning a quantity surveyor’s report to maximise depreciation deductions is almost always worth it

How Pinnacle Approaches This With Medical Clients

When medical professional clients come to Pinnacle, the first thing we do is map their entire income picture — employment, contracting, private practice, investments — and determine the PSI status of each income stream. This analysis drives every structural recommendation we make.

From there, we advise on the optimal structure for the private practice component, the service trust arrangement (if appropriate), superannuation strategy, and investment structure. Learn more about our advisory approach here.

If you’re a doctor, specialist, or allied health professional who isn’t confident your current accountant truly understands your tax position, contact Pinnacle today for a confidential review.

Frequently Asked Questions

Can a doctor operate through a company or trust in Australia?

Yes, in most states — subject to the applicable Medical Practice Act and the ATO’s personal services income rules. Some states require an incorporated medical practice (IMP) registration. Speak to Mina for a PSI analysis specific to your practice.

What is a service trust for a medical practice?

A service trust is a separate trust entity that provides management and support services to a medical practice and charges the practice a service fee. The fee is deductible to the practice and becomes income of the trust, which can be distributed to family members in lower tax brackets.

What is Division 293 tax?

Division 293 tax is an additional 15% tax on concessional superannuation contributions for individuals with income above $250,000, bringing the effective tax rate on those contributions to 30% — still far below the 47% personal marginal rate.

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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.

Frequently Asked Questions

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A business is usually valued by multiplying its sustainable earnings, the normalised profit after adjusting for owner add backs, by a market multiple that reflects its industry, size and risk. Other methods include discounted cash flow for growing businesses and asset based valuation for asset heavy ones. In practice the answer is a defensible range, not a single number, and what drives it is risk and how much the business depends on you.

Most owners have a number in their head for what their business is worth, and most are wrong, in both directions. Value is not what you have put in, or what you would like to retire on. It is what a rational buyer will pay for the future profit and the risk that comes with it. In our experience working with owners approaching a sale or a restructure, understanding what drives the number early is worth far more than a valuation done the month before you exit. Mina Baselyous, a Chartered Tax Advisor (CTA), CPA and Registered Tax Agent, advises owners on valuation, structuring and exit. This guide explains the methods, what really moves the figure, and how to lift it before you sell.

What is a business valuation and why it matters

A business valuation is an estimate of what your business is worth to a buyer at a point in time. It matters well before a sale: it underpins succession and exit planning, buying in or out a partner, raising finance, settling disputes, and meeting tax obligations. Knowing your number, and what moves it, turns vague ambition into a plan you can actually manage toward.

Valuation is also a management tool, not just an exit event. The same factors that lift a sale price, strong recurring revenue, low owner dependence, clean records and predictable growth, are the factors that make a business better to own today. That is why we treat valuation as connected to everyday performance and Virtual CFO work, not a one off number pulled together at the end. If you are buying rather than selling, the same logic drives price on the other side of the table, as covered in our guide to buying a business in Australia.

The main valuation methods

There are three common approaches. The earnings multiple method, most common for established small and medium businesses, applies a multiple to normalised profit. Discounted cash flow values a business on the present value of its expected future cash flows, and suits businesses with strong, forecastable growth. Asset based valuation totals the net assets, and suits asset heavy or winding down businesses rather than profitable trading ones.

For most owner operated businesses, the earnings multiple approach dominates because it is how buyers actually think: what is the sustainable profit, and how many years of it am I willing to pay for. Discounted cash flow is more rigorous but only as good as the forecasts behind it, so it is used for higher growth or capital intensive businesses. Asset based valuation usually sets a floor rather than the answer, because a profitable business is worth more than the sum of its equipment. A proper valuation often cross checks two methods to land on a range.

What actually drives the number

Two businesses with identical profit can be worth very different amounts. The driver is risk: the more certain and transferable the future earnings, the higher the multiple a buyer will pay. The biggest levers are owner dependence, revenue quality, customer concentration, growth trend, and the reliability of the financial records behind the numbers.

Start with normalised earnings. Buyers strip out owner add backs (personal expenses, above or below market owner wages, one off items) to find the true, ongoing profit, so clean, defensible accounts matter. Then they price the risk: a business that runs without the owner, earns recurring or contracted revenue, has no single customer above roughly ten to fifteen percent of sales, and shows a steady growth trend commands a materially higher multiple than one that is really a job with the owner at the centre. As Mina Baselyous (CPA, CTA) says, the fastest way to raise your valuation is not to grow profit by ten percent, it is to make the same profit far less dependent on you.

What is a multiple, and what is a good one?

A multiple is simply how many years of normalised earnings a buyer will pay. If a business earns $400,000 in normalised profit and sells on a multiple of three, it is worth around $1.2 million. Small owner operated businesses commonly trade on lower multiples, while larger, more systemised businesses with lower risk attract higher ones.

There is no single correct multiple; it reflects risk and size. As a broad pattern, small businesses that depend heavily on the owner often sell in the region of two to three times earnings, while larger, well systemised businesses with recurring revenue and a real management team can command four times or more. Industry norms matter too. The point is not to memorise a number but to understand that you influence your multiple: every risk you remove from the business moves it up. This is where planning to build a business that runs without you pays off directly at sale.

How to increase your valuation before you sell

The best time to lift your valuation is two to three years before you sell, not the week you list. The highest impact moves are reducing owner dependence, building recurring or contracted revenue, diversifying your customer base, cleaning up your financial records, and showing a consistent growth trend. Each one lowers buyer risk and lifts the multiple.

Practically, that means documenting systems so the business does not live in your head, promoting or hiring a second in charge, converting one off sales into retainers or contracts where possible, and getting your bookkeeping and reporting to a standard a buyer can trust in due diligence. Accurate records are the foundation: no buyer pays a premium for numbers they cannot verify. This is exactly the forward work a Virtual CFO engagement drives, and it dovetails with getting your structure right so the eventual sale is tax efficient through the small business CGT concessions.

When you need a formal valuation

A formal, independent valuation is worth the cost when the number carries real consequences: selling the business, admitting or exiting a partner, a divorce or dispute, raising finance, or meeting a tax obligation. Several tax outcomes, including the small business CGT concessions, depend on defensible market values, so a rough estimate is not enough.

The small business CGT concessions, for example, apply where the business has aggregated turnover under $2 million or maximum net asset value under $6 million as at the 2025-26 year (see the ATO small business CGT concessions), and the ATO expects values to be supportable, so market valuations for tax must follow the ATO valuation guidelines. For a sale, a defensible valuation also anchors your negotiation. Whether you are years from exit or preparing to sell now, understanding the number early lets you plan around it. It connects directly to selling your business and to proactive tax planning.

Frequently Asked Questions

Decisions like valuing or selling are where business advisory in Melbourne before the decision pays off.

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The Research and Development (R&D) Tax Incentive is the Australian Government’s main program for rewarding businesses that experiment and innovate. Companies with an aggregated turnover under $20 million receive a refundable tax offset equal to their company tax rate plus an 18.5 percent premium, which for a base rate entity is an effective 43.5 percent. To claim, you must spend at least $20,000 on eligible R&D and register the activities with AusIndustry.

If your business builds, tests or improves products, processes or software and takes on genuine technical risk to do it, you may be leaving real money on the table. The R&D Tax Incentive is one of the most generous and most underused concessions available to Australian companies. In our experience working with business owners, the two failures we see are eligible companies never claiming, and ineligible claims that fall over under review. Mina Baselyous, a Chartered Tax Advisor (CTA), CPA and Registered Tax Agent, helps businesses claim it correctly. This guide explains what it is worth, who qualifies, what counts as R&D, and how to claim it without stepping into trouble.

What is the R&D Tax Incentive?

The R&D Tax Incentive is a targeted tax offset that reduces the cost of eligible research and development. It is jointly administered by AusIndustry, which assesses whether your activities qualify as R&D, and the ATO, which handles the tax offset in your company return. The aim is to encourage companies to conduct experimental work they might otherwise consider too risky.

Unlike a grant, you do not compete for a limited pool of funding. If your activities and expenditure meet the rules, the offset is an entitlement. It applies across industries: manufacturing, software, engineering, food and agriculture, medical and biotech, and more. The common thread is not lab coats, it is technical uncertainty resolved through a systematic, experimental process. You can read the government overview on business.gov.au.

How much is the R&D Tax Incentive worth?

The value depends on your company’s turnover. Companies with aggregated turnover under $20 million receive a refundable offset of their company tax rate plus 18.5 percent, so a company on the 25 percent rate receives an effective 43.5 percent, and can get cash back even in a loss year. Companies with turnover of $20 million or more receive a non-refundable offset at a tiered premium above their tax rate.

For larger companies the premium is 8.5 percent above the company tax rate for R&D expenditure up to 2 percent of total expenditure, and 16.5 percent above for spend beyond that intensity threshold. A cap applies: the offset falls back to the company tax rate on notional R&D deductions above $150 million in an income year. These rates apply for the 2025-26 income year per the ATO R&D rates and entitlements guidance. From 1 July 2028 the refundable turnover threshold is legislated to rise from $20 million to $50 million and the expenditure cap from $150 million to $200 million. As Mina Baselyous (CPA, CTA) puts it, for a profitable company on 25 percent, a genuine R&D claim turns an ordinary deduction into an offset worth almost 44 cents in the dollar, which is why it is worth getting right.

Who is eligible to claim?

To claim, you must be a company (not a sole trader, partnership or trust) that is liable to Australian tax, you must conduct at least one eligible core R&D activity, and you must incur at least $20,000 of eligible notional R&D deductions in the year, or use a registered Research Service Provider. This company requirement is one reason business structure matters so much for innovative businesses.

Because only companies can claim, sole traders and trusts running genuine R&D often restructure so the R&D sits in a company. If innovation is central to your plans, factor this into your business structure from the start rather than trying to fix it retrospectively. The $20,000 minimum spend is a low bar for most serious projects, and expenditure below that can still qualify if the work is done by a registered Research Service Provider.

What activities and costs qualify?

Eligible R&D falls into two categories. Core R&D activities are experimental activities whose outcome cannot be known in advance and can only be determined by a systematic progression of work based on established science, conducted to generate new knowledge. Supporting R&D activities are those directly related to and undertaken for the purpose of the core activities.

The test that trips people up is technical uncertainty. Improving a product using known methods is not R&D; resolving a genuine unknown through hypothesis, experiment and evaluation is. Eligible expenditure can include the salaries of staff doing the work, contractor costs, a portion of overheads, and the decline in value of assets used in R&D. Routine data collection, market research, quality control and reproducing an existing product are specifically excluded. Careful, contemporaneous record keeping, notes of the hypothesis, the experiments and the results, is what separates a defensible claim from one that collapses under review.

How to claim: registration and the process

Claiming is a two step process. First, register your R&D activities with AusIndustry within 10 months of the end of your income year, which is 30 April for a company with a 30 June year end. Second, claim the offset in your company tax return by completing the R&D tax incentive schedule. You cannot claim the offset without registering first.

The registration describes your core and supporting activities and why they meet the definition, so the technical write up matters. Once registered, your accountant calculates the notional deductions and the offset in the tax return. Because the program is jointly reviewed by AusIndustry and the ATO, both the technical eligibility and the expenditure must stand up. This is exactly the kind of forward planning that sits alongside broader tax planning and, for scaling companies, a Virtual CFO engagement that keeps the numbers and the records in order year round.

Getting it right and avoiding the traps

The R&D Tax Incentive is generous, and that generosity attracts scrutiny. Overstated or poorly documented claims are a common target for review, and the cost of getting it wrong includes repaying the offset with interest and penalties. The safest approach is to claim only genuine R&D, keep contemporaneous records, and get the eligibility assessment right before you lodge.

Treat the incentive as one lever in a broader strategy rather than a standalone windfall. It works best when it is planned alongside your other concessions, such as the instant asset write-off and your wider approach to paying less tax legally. Done properly, it can materially change the economics of innovation for your business, funding the next project from the tax saved on the last one.

Frequently Asked Questions

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