Buying Investment Property in a Family Trust

A practical, step-by-step guide for Australian investors purchasing property through a discretionary (family) trust.

When does a family trust make sense?

Income-splitting flexibility (distribute trust income each year to lower-marginal-rate family members), 50% CGT discount on long-term gains (the major advantage over a company structure), asset protection for the appointor / specified beneficiaries. Major trade-offs: land-tax surcharges in NSW/VIC unless the deed correctly excludes foreign beneficiaries, and a distribution resolution deadline (30 June) that, if missed, taxes all trust income at 47%. Get the deed reviewed by a solicitor familiar with your state's land-tax rules before signing.

Setup & Compliance

Establish the discretionary trust deed

A solicitor or trust-deed provider drafts the trust deed. The deed names: settlor, trustee, appointor, beneficiaries (specified + general beneficiary classes). Stamp duty on the deed varies by state — NSW $500, VIC $200, QLD/WA generally nil. (1–2 weeks, $500–$1,500 + GST (deed) + state stamp duty)

Set up corporate trustee (recommended)

A Pty Ltd company acting as trustee gives stronger asset protection (trustee liability is limited to company's assets, not directors personally) and continuity (easier to swap directors than trustees). You CAN use individual trustees — but most accountants strongly recommend corporate. (1–3 days, $590 ASIC fee + provider fee if applicable)

If using a corporate trustee, the company's sole purpose is to act as trustee. It typically does not trade or hold its own assets — it only holds property "as trustee for [Trust Name]".

Apply for ABN, TFN

Trust applies for its own ABN and TFN. The trust is a separate tax entity — it lodges its own tax return (form TRT). Register for GST only if turnover > $75,000 (rare for residential rent). (1–2 weeks, Nil (free via ABR))

Open trust bank account

Open transaction account in the name "[Trustee Company] ATF [Trust Name]" (ATF = "as trustee for"). Banks require: certified trust deed, ASIC certificate for corporate trustee, ID for all trustee directors. (1 week, Nil)

Pre-purchase planning

Beneficiary planning

Trustee has discretion (each year) to distribute trust income to any beneficiary in the deed's defined class. This flexibility is the main tax benefit — distribute to lower-marginal-rate family members. Plan now: who are the beneficiaries, what are their likely income brackets across the next decade? (Same day, Nil (planning))

Land-tax considerations

Trusts often face higher land-tax rates / lower thresholds than individuals. NSW: discretionary trusts pay surcharge land tax unless the deed excludes "foreign persons" as potential beneficiaries (the deed wording matters!). VIC: special trusts pay surcharge from $25,000+ taxable land. (Same day, Nil (calculation))

Check that the deed has the correct foreign-beneficiary exclusion clause for your state — without it, NSW + VIC apply substantial surcharges. Many older deeds are non-compliant; have a solicitor review BEFORE purchase.

Loan pre-approval

Trust loans are generally a hybrid of residential + commercial — borrower is "[Trustee] ATF [Trust]" with director/beneficiary guarantees. LVR usually 80% (residential lender) or 70% (commercial lender). Some lenders won't lend to trusts; shortlist a broker who specialises. (2–4 weeks, $0–$995 application fee)

Purchase & Settlement

Due diligence

Same as a personal purchase — building & pest inspection, strata report (if applicable), title search, contract review by solicitor. (1–2 weeks, $1,000–$2,500)

Sign contract in trustee name

Contract is between vendor and "[Trustee Company] Pty Ltd ACN xxx xxx xxx as trustee for [Trust Name]". Director of trustee company signs. (Same day, Included)

Pay stamp duty

Stamp duty payable to the State Revenue Office at standard non-concessional rates — no first-home or owner-occupier concessions. Some states apply a foreign-purchaser surcharge if any beneficiary is a "foreign person" (back to the deed clause). (At settlement, Varies — model upfront)

Settlement

Title transfers to "[Trustee Company] Pty Ltd ATF [Trust]". Trust loan funds disburse, deposit completes. Property is now a trust asset. (4–8 weeks from contract, $1,500–$3,000 (conveyancer))

Annual operations

Trust distribution resolution (every 30 June)

Before the end of each financial year, the trustee MUST sign a written resolution determining how the trust's net income will be distributed to beneficiaries. Without a valid resolution by 30 June, trust income is taxed at the top marginal rate (47%). (Annual (must be done by 30 June), Included in accountant's annual fee)

This is the single most-missed compliance deadline in family-trust property investment. Set a reminder for early June every year.

Trust tax return

The trust lodges its own tax return (form TRT). Trust itself usually pays no tax — net income flows to beneficiaries based on the resolution, and they include it in their personal returns. CGT discount: 50% applies on long-term gains because the trust ultimately distributes to individuals. (Annual, $1,500–$3,500 + GST p.a.)

Corporate trustee — ASIC review

If using a corporate trustee, the company has its own ASIC annual review fee. (Annual, $321 p.a. (proprietary company fee))

Track everything in InvestorJoint

Add the trust as an entity, link the property under it (with corporate trustee as a director if applicable), capture loan + interest schedule, and let depreciation, BAS and distribution-prep reports run. (Ongoing, Free up to 3 properties)

Family trust property FAQ

What happens if the trustee misses the 30 June distribution resolution deadline?

If a valid distribution resolution isn't signed before the end of the financial year, the trust's entire net income for that year is taxed at the top marginal rate (47%) instead of being distributed to beneficiaries at their own rates — this is the single most costly and most common compliance failure in family trust property investment.

Does a family trust get the 50% CGT discount?

Yes — when the trust distributes a capital gain to an individual beneficiary (or another trust that ultimately distributes to individuals), that beneficiary can access the 50% CGT discount on a gain held for more than 12 months, the same as if they'd owned the property personally. This is the main tax advantage a discretionary trust has over a company, which cannot access the discount at all.

Why does the trust deed's foreign-beneficiary clause matter?

NSW and Victoria apply a land-tax and stamp-duty surcharge to trusts that COULD distribute to a foreign person, even if they never actually do, unless the deed is amended to permanently exclude foreign beneficiaries from the class. Many older, generic trust deeds lack this exclusion, so a solicitor should review (and if needed amend) the deed before you buy in either state.

Can I use an existing family trust I already have, or do I need a new one?

You can generally use an existing discretionary trust if its deed's investment powers are broad enough to include real property and borrowing — but check the deed's vesting date (when the trust must wind up) isn't approaching, and confirm the foreign-beneficiary exclusion above if you're in NSW or VIC.

Do I need a corporate trustee, or can an individual be the trustee?

An individual can legally be a trustee, but a Pty Ltd corporate trustee is strongly recommended: it limits liability to the company's assets rather than exposing the trustee's personal assets, and makes it far simpler to change control later (swap a director) rather than needing to transfer trust assets to a new individual trustee.