Trusts have long been used by Australian property investors to protect assets and distribute income. But the landscape changed significantly in May 2026. The Federal Budget introduced proposed tax reforms that affect how trusts are taxed, how investment losses work, and what the long-term CGT position looks like. If you're considering buying property through a trust, or already hold property in one, here's what's current.
Need financing for a trust property purchase?
If your accountant has advised a trust structure, we can help you navigate the lending side. Not all lenders accept trusts, we know which ones do and what documentation they need.
We'll respond within 2 hours. No obligation.
What Does It Mean to Buy Property in a Trust?
When you buy property in a trust, the trust itself owns the property, not you personally. You are either the trustee (the person who manages it) or a beneficiary (someone who benefits from the income or capital).
The two most common structures used for investment property in Australia are:
Discretionary (family) trust
The trustee has discretion over how income and capital are distributed among beneficiaries. Traditionally used for tax planning, distributing income to lower-income family members to minimise overall tax. The proposed 2026 Budget reforms target this structure specifically.
Unit trust
Beneficiaries hold fixed units, similar to shares. Income and capital are distributed proportionally. Generally not subject to the proposed discretionary trust minimum tax. Often used in commercial property or joint investment structures.
The tax strategy differences between these two structures matter a great deal in 2026. Speak to your accountant before choosing one, the rules are changing.
Can a Trust Borrow Money to Buy Property?
Yes, but the borrowing process is different from a standard personal home loan, and fewer lenders offer it.
When a trust borrows to purchase property, the trustee (an individual or a company) takes out the loan on behalf of the trust. Most lenders require the trustee to personally guarantee the debt. This means your personal credit position and income are still assessed, the trust structure doesn't insulate you from that.
What lenders typically look for
- A copy of the trust deed, lenders need to verify the trust structure and trustee powers
- Personal guarantee from the trustee (individual or directors of a corporate trustee)
- Standard income and serviceability assessment, same as a personal loan
- LVR typically capped at 80% (no LMI available for trust structures at most lenders)
- Signed trustee declaration confirming authority to borrow
Not every lender accepts trust structures. Rates may also be slightly higher than standard investment loans, subject to the lender and your overall position. A broker who works with trust borrowers regularly can identify which lenders are currently competitive for this structure.
80% LVR is a common cap, meaning a 20% deposit is generally required. Exact eligibility depends on the lender, loan size, and trust type.
The 2026 Budget Changes, What You Need to Know
The May 2026 Federal Budget introduced three proposed measures that directly affect property held through a discretionary trust. These are not yet law, but they are significant enough that any investor considering a trust structure should understand them before proceeding.
The following measures were announced in the May 2026 Budget. As of June 2026, legislation has not yet passed. Seek advice from your accountant or tax adviser before making structural decisions based on these proposals.
1. Proposed 30% minimum tax on discretionary trusts (from 1 July 2028)
Under the proposal, a 30% minimum tax would apply at the trustee level on all trust income, including rental income from investment properties. The main impact: the tax flexibility of distributing income to low-income beneficiaries to reduce overall tax would be significantly curtailed. Beneficiaries taxed above 30% would pay top-up tax; those taxed below 30% would lose the excess credit.
Unit trusts and fixed trusts are excluded from this measure, as are complying superannuation funds, charitable trusts, and deceased estates.
2. Negative gearing quarantined for new purchases (from 12 May 2026)
Any residential investment property purchased after Budget night, including properties purchased through a trust, can no longer offset rental losses against other income. Losses are quarantined and can only be offset against future property income or capital gains. Properties purchased before 12 May 2026 are fully grandfathered. New builds are still eligible for standard negative gearing treatment under the proposal.
3. CGT discount replaced with indexation (from 1 July 2027)
From 1 July 2027, the 50% CGT discount would be replaced by an indexed cost base calculation, with a 30% minimum effective tax rate on all capital gains regardless of hold period. For discretionary trusts holding property, this changes the long-term exit calculation materially.
Taken together, these three measures reduce the tax advantage of holding new residential investment property through a discretionary trust considerably. The structuring decision that made sense in 2024 may look very different under the proposed rules.
Pros and Cons of Buying Property in a Trust
Weighing up the full picture, including the proposed 2026 changes, here's how the trust structure stacks up for property in Australia today.
- Asset protection, property held in trust is generally separate from personal assets
- Estate planning flexibility, assets don't pass through a will
- Income distribution flexibility (discretionary trusts, subject to proposed minimum tax)
- Properties purchased before 12 May 2026 are grandfathered under existing rules
- Proposed 30% minimum tax significantly reduces income distribution advantage (discretionary trusts)
- Negative gearing losses quarantined for new property purchases (post 12 May 2026)
- Fewer lenders, not all banks accept trust borrowers
- No access to First Home Owner Grant or first home buyer stamp duty concessions
- Setup and ongoing compliance costs, trust deed, annual accounting, tax returns
- LVR typically capped at 80%, larger deposit required
Who Does a Trust Structure Still Make Sense For?
Given the proposed changes, the case for using a discretionary trust to buy new residential investment property has weakened for most investors. That said, there are still situations where a trust can make sense:
- Investors already holding property in a trust purchased before 12 May 2026, grandfathered under current rules
- Commercial property investors, negative gearing quarantine applies to residential property only
- Investors prioritising asset protection over tax efficiency, particularly those in high-litigation professions
- Estate planning scenarios where asset control across generations is the primary goal
- Investors considering new builds, still eligible for negative gearing treatment under the proposal
The right answer depends heavily on your income, other assets, and long-term plans. This is a decision your accountant and financial adviser need to be involved in, the tax position is now complex enough that generic guidance won't cut it.
If you're a doctor, specialist, or professional with asset protection concerns, this conversation is worth having. The lending side can be structured around the right trust setup, we just need to know what that is first.
How a Mortgage Broker Can Help With Trust Lending
Getting finance approved for a trust property purchase comes down to lender selection. Not all lenders accept trust structures, and those that do have different policies on LVR, trust deed requirements, and trustee assessment.
A broker who regularly works with trust borrowers can identify which lenders are currently competitive, what documentation you'll need, and how to structure the application to maximise your chances of approval. The process isn't more difficult, it just requires going to the right lender from the start.
If your accountant has advised you to proceed with a trust structure despite the proposed changes, or you're refinancing an existing trust loan, book a call and we can map out your options.
Complex Income? We Know How to Structure It
Trust borrowers often have self-employed or professional income structures that standard lenders don't handle well. See how we approach complex income scenarios for investors and professionals in Melbourne.
Self-employed and investor home loans →Thinking About Buying Property in a Trust?
Book a free call. We'll explain your borrowing options, which lenders accept trust structures, and what documentation you'll need, before you commit to a structure.
Book Free CallNo obligation. Broker fee: $0.