Key Takeaways
A family trust can offer flexibility with income and some asset protection, but it adds setup costs, yearly accounting fees and extra loan paperwork.
Fewer lenders offer trust loans, and most ask the people behind the trust to sign personal guarantees.
Trusts miss out on the main residence capital gains tax exemption and first home buyer concessions, and rental losses stay inside the trust.
Land tax is often higher for trusts in both NSW and Victoria, and a proposed 30% minimum tax on discretionary trusts from 1 July 2028 could reduce the income-splitting benefit.
Your accountant has suggested a family trust for your next investment property, and you are wondering what that means for the loan. Buying property in a family trust can work well, but it changes how lenders assess you, how the property is taxed and what it costs to run each year. The trust and the finance both need to be in place before you sign, so the order you do things in matters.
Your accountant usually looks after the structure itself. On the finance side, a trust loan broker can work out which lenders accept trust borrowers and how each one will assess yours.
How a Family Trust Works
A family trust, also called a discretionary trust, is a legal relationship, not a company. A trustee holds the property on behalf of a group of beneficiaries, usually family members, and decides each year how income is distributed. Four parts shape how it runs:
The trustee legally owns the property and signs the loan.
The appointor is the person who can replace the trustee and so effectively controls the trust.
The beneficiaries are family members who may receive income or capital.
The trust deed sets out what the trustee can and cannot do.
Many families choose a company as trustee, known as a corporate trustee, so the trust's assets sit apart from their personal names.
Why Investors Buy Through a Trust
Three benefits usually draw investors to a trust, and how much each one helps depends on your family and income mix:
Income flexibility, with net rental income and capital gains spread between beneficiaries each year within the tax rules.
Asset protection, as the property is generally kept separate from a beneficiary's personal debts.
Estate planning, as the trust can keep running after a family member passes away.
That protection has limits, though. Family law courts can look through a trust in a separation, and directors of a corporate trustee usually guarantee the loan personally.
The income flexibility may also shrink. The 2026–27 Federal Budget announced a 30% minimum tax on the taxable income of discretionary trusts from 1 July 2028. The Australian Taxation Office (ATO) notes the measure is not yet law, but if it passes, distributing income to lower-earning family members would save less tax.
Downsides of Buying in a Trust
Those benefits come at a cost, and it shows up in three places:
Tax Limits
Negative gearing losses stay inside the trust and cannot be passed to beneficiaries to offset their wages.
Capital gains tax (CGT) relief under the main residence exemption is generally not available if the trust owns your home.
First home buyer grants and stamp duty concessions are usually not available to trusts.
Buying in your own name has lost some of its edge too. According to the ATO, from 1 July 2027 rental losses on established homes bought after 7:30 pm (AEST) on 12 May 2026 can only offset residential property income, not wages. New builds keep full negative gearing. If you expect the property to run at a loss for a few years, it helps to understand how negative gearing works with an investment loan before you choose a structure.
Land Tax
In New South Wales (NSW), a discretionary trust is generally treated as a special trust and does not receive the land tax threshold, so land tax may apply from the first dollar of taxable land value. Revenue NSW's land tax rules for trusts also require a discretionary trust deed to exclude foreign beneficiaries, or the trust may pay surcharge land tax.
Victoria works differently. Land bought by a discretionary trust is generally taxed at trust surcharge rates once the trust's total taxable land value reaches $25,000, compared with a $50,000 threshold for individuals. Thresholds and rates are set each year, so treat these figures as a general guide.
Running Costs
Setup usually covers the trust deed, company registration for a corporate trustee and professional advice. After that, expect an annual trust tax return, accounting fees and yearly company fees for as long as the trust holds the property. Ask your accountant or solicitor for a quote covering both before you decide.
How Lenders Assess Trust Loans
Lenders see trusts as more complex borrowers, so the application takes more preparation and fewer lenders will consider it. Among those that do, most ask for:
Full trust deed and any variations.
Company documents for a corporate trustee.
Personal guarantees from the directors, and sometimes from adult beneficiaries.
Income evidence from each guarantor, as a new trust has no trading history.
Requirements vary, so treat this list as a general guide. Some lenders also set a lower maximum loan-to-value ratio (LVR) for trusts, and rates or fees can differ from a personal investment loan. Before any of this, the deed itself needs to give the trustee power to borrow and grant a mortgage.
Steps to Buy Property in a Trust
The trust and any corporate trustee need to exist before you sign the contract, so the trustee can be named as purchaser. The usual order is:
Speak with your accountant or solicitor about whether a trust suits your goals.
Establish the trust and any corporate trustee.
Arrange pre-approval in the trustee's name.
Sign the contract with the trustee as purchaser.
Getting this order wrong can be costly, as changing the buyer's name after signing may trigger extra stamp duty.
Underneath, a trust purchase is still an investment loan. Lenders apply the same deposit and serviceability checks as they would for any rental purchase, which is why many buyers ask an investment loan broker to run the numbers before the trust is even set up.
Trust Purchase Example in Albury-Wodonga
This scenario is a general guide only.
Mark and Leah live in Albury and already own their home. They want to buy a $550,000 rental in Wodonga, and their accountant suggests a family trust with a company as trustee because their income mix and future plans suit it.
The trust has no income of its own, so the lender assesses Mark and Leah as guarantors using their wages and the expected rent. They use equity from their home for the deposit and costs, keeping the trust loan at 80% LVR. Their accountant also checks the expected land tax at Victorian trust surcharge rates before they proceed.
Frequently Asked Questions (FAQs)
Is it better to buy in a trust or in my own name?
It depends on your income, your family situation and what you expect the property to do. Buying in your own name keeps things simpler and may let rental losses reduce the tax on your wages, depending on the property type and when you bought it. A trust can suit people who want flexibility with income distributions or protection from future business risk. We can check which lenders suit either structure.
Can I live in a property owned by my family trust?
You can, but there are trade-offs. A home owned by a trust generally does not qualify for the main residence CGT exemption, which can mean tax when the property is sold. Owner-occupier concessions on stamp duty and land tax may also be limited. For most people buying their own home, personal ownership is the more common choice.
Do beneficiaries have to guarantee the trust loan?
Not always. Many lenders ask for guarantees from the trustee's directors, as they control the trust and usually provide the income used to assess the loan. Some lenders go further and ask for guarantees from adult beneficiaries who receive distributions. Others are more flexible.
Knowing each lender's position before you apply helps, as it affects who needs independent legal advice.
Can I move an existing property into my family trust?
You can, but the transfer is generally treated as a sale from you to the trustee. It may trigger stamp duty and CGT on any growth since you bought the property, and the trust would usually need its own loan to refinance the existing debt.
A transfer after 12 May 2026 may also affect how the new negative gearing rules apply to that property. Your accountant can check the costs first, and we can look at which lenders would refinance the property into the trust.
Bottom Line
Before you make an offer, have your accountant model the trust against buying in your own name, using the new negative gearing rules and the proposed trust minimum tax. That comparison shows whether the trust earns its yearly costs, and it gives a lender what it needs to check the deed and assess the loan.
If you are weighing up a trust purchase, Loan Street Finance can talk you through the lenders that suit your structure.
This article is general information only and does not take into account your objectives, financial situation or needs. You may wish to speak with a qualified tax, legal or finance professional before acting on it.