Trust vs Company — which structure wins under the new Australian property laws?
The 1 July 2027 reform removes the 50% CGT discount for individuals and discretionary trusts — both move to inflation-indexed cost base instead. Trusts additionally face a 30% minimum CGT rate; individuals pay their marginal rate on the real (post-indexation) gain. From 1 July 2028, a 30% minimum tax applies to discretionary trust income. Companies face flat 25% or 30% on the full nominal gain. Run your scenario below.
Frequently asked questions
What are the new laws this calculator models?
From 1 July 2027, the proposed budget changes remove the 50% capital gains tax (CGT) discount for discretionary trusts and replace it with two safeguards: • Cost-base indexation by CPI inflation — so the gain you pay tax on is the REAL (post-inflation) gain, not the nominal one. • A 30% minimum CGT rate on the real gain, regardless of which beneficiary the trust distributes the gain to. From 1 July 2028, discretionary trust income (rental profits, distributions) is subject to a 30% minimum tax — closing the long-standing income-streaming arbitrage that let trustees distribute to family members on lower marginal tax rates. Companies are unaffected. They've never had a CGT discount and continue to pay 25% (base-rate-entity) or 30% on capital gains and income.
Why does the trust still often win even after losing the 50% discount?
Two reasons: 1. Indexation. Over a 10-year hold with 3% inflation, the indexed cost base is about 34% higher than the original purchase price. A property bought for $500,000 that grows to $895,000 has a NOMINAL gain of $395,000 — but a REAL gain (after indexation) of just $223,000. The trust pays 30% of $223k = $67k. A company pays 25% of $395k = $99k. 2. Time horizon. Companies pay full-rate CGT on the full nominal gain forever. Trusts get inflation protection that compounds. The longer the hold, the larger the gap. The trust can lose this advantage if (a) inflation is genuinely low (1-2%) or (b) capital growth massively outpaces inflation early on. Play with the sliders above to see your scenario.
When does the company structure actually win?
Three scenarios push the answer to company: 1. Very low inflation. With 1% inflation, indexation barely shrinks the trust's gain — the 30% minimum CGT rate then bites harder than the company's 25%. 2. Heavy positive cashflow. If the property runs at a strong rental yield (commercial property, regional yields >7%), the 25% company rate on annual income beats the 30% minimum trust rate every year. Over 10 years that compounds. 3. Base-rate-entity scrutiny. If the company can stay at 25% — its passive income shouldn't exceed 80% of total assessable income, and aggregated turnover stays under $50m — you keep the lower rate. Most pure property holding companies FAIL this test, so they pay 30%, not 25%. That single change flips the answer back to the trust in most cases. In practice: residential property held >7 years with positive growth + normal yields → trust wins. Commercial, high-yield, short-hold, or non-base-rate-entity company → company can win.
What about the discretionary trust's loss-quarantine problem?
Real and important. A trust CAN'T distribute a tax loss to a beneficiary — rental losses sit inside the trust, carried forward against future trust income only. The calculator models this: in negative-gearing scenarios the loss accumulates and only offsets when the trust eventually has positive income (rent that grows above interest, or the capital gain on sale). For a property that starts cashflow-negative, this means: • A personal-name owner gets the tax saving every year against salary. • A trust gets no tax saving until the property is positively geared or sold. • A company is the same — losses quarantined. If you're heavily negatively gearing in the early years, personal name often beats trust on a time-value basis, even though trust wins on the eventual capital gain. The Trust vs Personal calculator on this site models that side specifically.
What does the calculator NOT model?
A focused list — every one of these can change the answer: • Land tax. Trusts pay land tax from dollar one in NSW + VIC + QLD (no threshold). Companies usually get the full threshold. Add $5-15k/yr in some states. • Stamp duty. Some states (notably QLD + NSW) charge a foreign-trust surcharge or vesting duty on trusts. Companies get standard treatment. • Borrowing capacity. Banks lend less, at higher rates, and want personal guarantees on trust + company loans. Real cost is 30-100 basis points + a thinner serviceability calc. • Distribution flexibility. Trusts can stream to family members above their tax-free thresholds; companies can't (must pay franked dividends). Both got narrowed by the 2028 changes but the trust still keeps more flexibility. • Asset protection. Trusts ring-fence from personal creditors (subject to clawback rules + asset-protection trust structures); companies do too but with different mechanics. • Negative gearing of the holding cost. If you can offset the company's interest expense against other group income (multiple-property company), the loss-quarantine bite shrinks. Single-property companies can't. • Setup + ongoing cost. Discretionary trust + corporate trustee = $2-4k setup + $1.5-3.5k/yr ongoing. Bare Pty Ltd = $500 + $1.5k/yr. Personal name = $0. These are real money. Run the calculator for the order of magnitude, then talk to your accountant.
Is the 25% company tax rate guaranteed?
No. A company gets the 25% base-rate-entity (BRE) rate only if BOTH conditions are met every year: 1. Aggregated turnover under $50 million. 2. NO MORE THAN 80% of assessable income is passive (rent, interest, dividends, royalties, net capital gains). For a single-purpose property holding company, rental income IS passive, so the company almost certainly fails the 80% test and pays 30%. The 25% rate is most often achievable when the property sits inside a trading company that uses it for its own business operations (e.g. a medical practice owning its rooms). In the calculator, use 25% only if the company has substantial active income from another source. For pure property holds, use 30% — that's the realistic rate.
How does inflation affect the comparison?
Indexation is the trust's compensation for losing the 50% CGT discount. The higher the inflation rate, the more the cost base inflates, and the smaller the REAL gain the trust pays tax on. • At 1% inflation over 10 years: cost base grows ~10%. The trust still pays close to 30% of the nominal gain — almost no benefit. • At 3% inflation (the 2026 RBA target): cost base grows ~34%. Roughly 35-40% of the nominal gain is excluded from tax. • At 5% inflation: cost base grows ~63%. The trust's CGT bill is roughly half what the company pays. The new law assumes Australia stays in the 2-3% band most years. If we re-enter a high-inflation period, trusts become structurally cheap; if disinflation returns, companies start to look better.