A Guide for an Investor Buying Property in a Trust & How to Use a Family Trust Structure

Introduction

Using a trust structure is a common strategy for a property investor seeking asset protection, tax planning advantages, and long-term wealth creation. While a family trust can be a powerful vehicle for purchasing investment properties, the structure must be established correctly from the outset to avoid significant tax consequences and legal risks.

This article explains the key considerations for buying property in a trust. It covers the benefits of the structure, specific Queensland stamp duty and land tax rules, the impact of the Trusts Act 2025 (Qld) (‘Trusts Act‘) reforms that commenced in April 2026, and proposed changes to tax laws announced in the May 2026 Federal Budget.

Interactive Tool: Check Your Legal & Tax Risks Before Buying Property in a Trust

Why Real Estate Investors & Property Developers Use a Trust Structure

Asset Protection & Risk Isolation

Using a trust to hold property creates a financial separation between personal and investment assets. Because the trust legally owns the property, it helps shield your family home and other personal wealth from business risks or legal claims related to the investment. The trustee holds the legal title to the property, which isolates it from liabilities that beneficiaries might face personally.

This structure is a key reason why an investor will use a trust for buying property. However, this protection is not absolute. Personal guarantees on loans or incorrect structuring of the trust can still expose individuals to liability.

Tax Flexibility & Income Distribution

A significant advantage of buying property in a trust, particularly a discretionary or family trust, is the flexibility it offers for tax planning. Trustees can decide how to distribute income, such as rent from investment properties or profits from a development, to beneficiaries each financial year.

This allows income to be allocated to family members who are on lower personal tax brackets. By distributing profits strategically, the overall tax liability for the family can be reduced. This flexibility also extends to the distribution of capital gains when the property is sold, which can help manage tax outcomes effectively.

Long-Term Wealth & Estate Planning

Trusts are effective vehicles for managing and transferring wealth across generations. When a property is held within a trust structure, it does not form part of an individual’s personal estate. This means the control of the asset can be passed on according to the terms of the trust deed without triggering certain tax events.

This feature makes a trust an ideal structure for long-term family wealth creation and succession planning. It ensures that assets are preserved and managed for future generations or for partners in a joint venture, providing stability and continuity over time.

Key Legal & Tax Considerations for Queensland Developments

Stamp Duty & The Additional Foreign Acquirer Duty Trap

Incorrectly executing a contract when buying property in a trust can lead to significant stamp duty costs. If an individual signs a contract with the plan to later nominate a trust as the purchaser, this action can be considered a dutiable transfer under Section 22(1) of the Duties Act 2001 (Qld) (‘Duties Act‘). This mistake may result in double stamp duty being charged—once on the transfer to the individual and again on the transfer to the trust.

A further risk for trusts purchasing residential land in Queensland is the Additional Foreign Acquirer Duty (AFAD). This duty adds an extra 7% to the dutiable value of the property and can be triggered if the trust is considered a foreign entity. A trust may be classified as foreign if:

• The trustee is a foreign person.
• The trust deed includes any potential foreign beneficiaries, even if the named beneficiaries are Australian citizens.

To avoid this costly trap, the trust deed should be amended to irrevocably exclude foreign persons from being beneficiaries. This amendment must be completed before the contract of sale is signed.

Land Tax Thresholds & Aggregation Rules

Trusts in Queensland are subject to different land tax rules compared to individuals, which can result in a higher annual liability. Under the Land Tax Act 2010 (Qld) (‘Land Tax Act‘), the tax-free threshold for a trust is $350,000, which is considerably lower than the $600,000 threshold for individuals. Trusts also face higher marginal tax rates on the value of their land holdings above this amount.

Queensland also applies trust aggregation rules for land tax purposes. If a trustee is responsible for multiple trusts and the beneficiaries and their interests in each trust are identical, the total taxable value of the land held across all those trusts is combined. This aggregation can push the total value into a higher tax bracket, increasing the overall land tax payable. A trustee will receive separate assessments for land held in their own capacity versus land held for a trust.

Contract Execution & Trust Deed Deficiencies

The purchasing entity must be correctly identified on the contract of sale from the very beginning to avoid compliance issues. The contract should name the trustee in its official capacity, for instance, “XYZ Pty Ltd as trustee for the Smith Family Trust.” Failing to do this can create unintended dutiable transactions and complicate the settlement process.

The trust deed itself is a critical document that must be reviewed before any property acquisition. It is essential that the deed expressly grants the trustee the power to acquire, hold, and develop real property, which is a critical detail to confirm with property development lawyers before any transaction. A deficient or outdated trust deed may:

• Lack the necessary authority for property transactions.
• Inadvertently include foreign beneficiaries, triggering AFAD.
• Fail to meet the requirements of lenders, delaying or preventing finance approval.

Understanding the Queensland Trusts Act 2025 Reforms

Expanded Trustee Powers & Codified Duties

The Trusts Act, which commenced on 28 April 2026, introduced significant changes to trust administration in Queensland. It grants trustees substantially broader powers while also formally setting out their duties in legislation for the first time. This creates a clearer framework for managing a property development or investment trust.

Under Section 82 of the Trusts Act, trustees now have the same powers as an absolute owner of the trust property, unless the trust deed specifies otherwise. This allows them to develop, subdivide, or sell land without needing to find a specific power in the legislation. Section 85 of the Trusts Act further clarifies that trustees have broad authority to maintain, renovate, and improve trust property.

These expanded powers are balanced by strict duties that are now codified. Key obligations for a trustee include:

• Care, diligence, and skill: Section 62 of the Trusts Act establishes a minimum standard of care, requiring a trustee to manage affairs as a sensible businessperson would. This duty cannot be excluded by the trust deed.
• Higher standards for professionals: A stricter test applies to professional trustees under Section 60 of the Trusts Act, measuring them against the standard of a competent member of their profession.
• Honesty and good faith: Trustees must act honestly and in good faith in the best interests of the beneficiaries, as required by Section 63 of the Trusts Act.
• Record-keeping: Section 64 of the Trusts Act mandates that accurate accounts and records must be kept for each trust and retained for at least three years after the trust ends.

New Trustee Eligibility Rules & Beneficiary Rights

The Trusts Act introduced new rules that restrict who can be appointed as a trustee. These changes are designed to protect the assets held within a trust structure. Under Section 13 of the Trusts Act, certain individuals and entities are disqualified from being a trustee.

The four main categories of disqualified persons are:

• Children or minors.
• Individuals who are insolvent under administration, such as bankrupts.
• Corporations that are being wound up or are under external administration (a Chapter 5 body corporate).
• Anyone who has been disqualified by a court order.

Alongside these new restrictions, the Trusts Act enhances the rights of beneficiaries, providing them with greater protection and transparency. Beneficiaries now have a clear statutory right under Section 65 of the Trusts Act to inspect the trust’s accounts.

Additionally, the amount of capital that can be advanced to a beneficiary has been increased. Sections 128 and 130 of the Trusts Act permit a trustee to advance up to $100,000 for a beneficiary’s maintenance, education, or general advancement in life. This is a substantial increase from the previous limit.

Managing Financing & Lender Requirements for Trust Loans

Personal Guarantees & Borrowing Capacity

Securing a loan to purchase property through a trust structure involves different requirements compared to an individual application. Lenders often view trust loans as having a higher risk profile due to their complex legal nature. This perception typically results in stricter lending criteria.

An investor may find their borrowing capacity is limited in several ways:

• Lenders may only be willing to finance up to 70-80% of the property’s value.
• It is a standard requirement for lenders to ask for personal guarantees from the trustees or beneficiaries.

This means that even though the trust legally owns the property, the individuals providing the guarantee are personally liable for the debt if the trust defaults.

Aligning Trust Deeds with Funding Requirements

A critical step in the financing process is ensuring the trust deed aligns with the lender’s requirements. Lenders conduct a thorough review of the trust deed before approving finance for a property purchase. One of the most common mistakes an investor can make is using a trust deed that does not permit the intended property activities.

The trust deed must explicitly grant the trustee certain powers, including:

• The power to borrow funds.
• The power to acquire or develop real estate.

If these powers are not clearly stated, it can lead to significant delays or even the rejection of the loan application. Reviewing and, if necessary, amending the trust deed is an essential part of preparing the structure for financing.

The Impact of the May 2026 Federal Budget on Property Trusts

Upcoming Changes to Capital Gains Tax

The Federal Budget announced on 12 May 2026 proposed significant reforms to Capital Gains Tax (CGT) that will affect any investor with a property trust structure. Commencing 1 July 2027, the existing 50% CGT discount for assets held over 12 months is set to be replaced. The new system will instead use cost base indexation, adjusting an asset’s original purchase price for inflation.

Under the proposed changes, a minimum tax rate of 30% will apply to the real capital gains that accrue after 1 July 2027. For an investor who bought a property before this date and sells it afterwards, a hybrid calculation will apply:

• the portion of the gain accrued before 1 July 2027 will remain eligible for the 50% discount; and
• the gain from that date forward will be subject to the new indexation method.

A key consideration for a property investor is the special treatment for new housing. An investor buying a newly constructed residential property will have the option to choose between applying the old 50% CGT discount or the new indexation and minimum 30% tax method upon selling.

Negative Gearing & Discretionary Trust Tax Adjustments

From 1 July 2027, the rules for negative gearing on established residential properties will also change. Losses from these investment properties will only be able to be offset against other income generated from residential properties, not against the taxpayer’s other income sources. Any excess losses can be carried forward to offset future income from residential property.

Transitional arrangements will apply to properties based on their acquisition date:

• Properties owned or under a contract exchanged before 7:30 pm AEST on 12 May 2026: exempt from the changes and can continue to be negatively geared against all income until sold.
• Properties acquired under contracts exchanged after this time but before 30 June 2027: can be negatively geared against all income only until 30 June 2027.
• Properties acquired from 1 July 2027 onwards: the new negative gearing rules will apply immediately.

Certain exemptions from these changes will be available. Eligible new builds, widely held trusts, and superannuation trust funds will not be affected by the new negative gearing limitations.

A separate measure announced in the budget will impact any family trust structure. From 1 July 2028, income earned through discretionary trusts will be subject to a minimum tax rate of 30%. This change is designed to adjust the tax planning benefits available through this type of trust.

Conclusion

Using a trust to buy property offers an investor significant advantages for asset protection and tax planning, but it requires careful structuring to comply with Queensland’s specific duty and land tax rules. An investor must also consider the impact of recent legislative reforms and proposed federal tax changes to ensure the structure remains effective long-term.

If you are considering buying property in a trust, obtaining specialist legal advice is essential to manage the complexities of tax law, financing, and asset protection. The property development team at GRM Law can provide guidance on structuring your acquisition to meet your investment goals, so contact us today.

Frequently Asked Questions

Disclaimer: This is general information only and is not legal advice. For advice on your circumstances, contact GRM LAW.