Buying an investment property through a family trust can give you flexibility on who pays tax on rent and capital gains. It can also cost more in land tax, trap your rental losses and rule out the main residence exemption.
This guide covers the rules for the 2025-26 and 2026-27 income years, plus the legislated changes to negative gearing and the CGT discount that start on 1 July 2027. Figures were checked against the ATO new legislation page, ATO trust guidance and the NSW and Queensland revenue offices.
It is written for property investors and families comparing a trust with buying in their own names. For the basics of how a trust works, read our family trust guide, and if you also run a business, our sole trader to company guide explains the company side.
Key takeaways
- Australian trusts can use the 50% CGT discount on assets held for at least 12 months; companies cannot.
- From 1 July 2027, the 50% discount is replaced by cost base indexation and a 30% minimum tax for gains accruing after that date.
- Rental losses stay in the trust and are carried forward; they cannot be passed to beneficiaries.
- NSW taxes discretionary trusts at 1.6% with no land tax threshold; Queensland trustees pay from $350,000.
- Income resolutions must be made by 30 June each year.
- The main residence exemption is generally not available to a trust.
Family trust property rules at a glance
| Issue | Family trust | Individual owner |
|---|---|---|
| CGT discount (asset held 12+ months) | 50%, can flow to beneficiaries | 50% for Australian residents |
| Rental losses | Stay in the trust, carried forward | Can offset other income |
| Main residence exemption | Generally not available | Available |
| NSW land tax | 1.6% from the first dollar (special trust) | Tax-free threshold applies |
| QLD land tax threshold | $350,000 (company and trustee rates) | $600,000 (individual rates) |
| Gains accruing from 1 July 2027 | Cost base indexation and 30% minimum tax | Same new rules |
Source: ATO CGT discount, ATO trust income, ATO new legislation, Revenue NSW, Queensland Revenue Office, checked 9 October 2026.
How does a family trust hold an investment property?
The trustee, either individuals or a company, buys the property and holds it for the beneficiaries. Rent goes into the trust account, expenses are paid from it, and each year the trustee decides which beneficiaries receive the net income. Our discretionary trust service page explains how we set these up.
Because the trust deed controls everything, the deed needs the right clauses before you sign a contract: power to stream capital gains, clear income definitions and, in states like NSW, wording that irrevocably excludes foreign beneficiaries.
How is rental income from a trust taxed?
Under the ATO trust income rules, the trust’s net income is taxed to the beneficiaries in proportion to their entitlement, whether or not they receive the cash. A beneficiary is presently entitled if they have a right to demand payment by the end of the income year.
That makes the 30 June resolution essential. The ATO resolutions checklist says resolutions must be made by 30 June, while capital gains can be streamed until 31 August. If no beneficiary is presently entitled, the trustee is assessed, possibly at the top rate.
Residential rent is input taxed for GST, so no GST is added to the rent and no GST credits are claimed on rental costs, according to the ATO residential premises page.
What happens to negative gearing losses in a trust?
If interest and other costs exceed the rent, the trust makes a loss. The ATO says trust losses cannot be distributed to beneficiaries. They are carried forward and used against future trust income or capital gains. That is the key difference from personal ownership, where a rental loss can reduce tax on salary. The ATO’s negative gearing guidance explains how a rental loss works for an individual, and our negative gearing guide covers the detail.
Some trusts also need a family trust election to use carried-forward losses under the concessional trust loss rules, as set out on the ATO family trusts page.
What changes on 1 July 2027?
The ATO confirms the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 is now law, available on the Federal Register of Legislation. In summary:
- Negative gearing: from 1 July 2027 losses on residential property investments are limited to new builds. Properties held at 7:30pm AEST on 12 May 2026 are exempt from the change.
- CGT: for gains accruing after 1 July 2027, the 50% discount is replaced with cost base indexation and a 30% minimum tax rate on capital gains.
- Who it covers: the ATO says the CGT change applies to individuals, trusts and partnerships.
For a trust, the minimum tax reduces the benefit of streaming future gains to low-income beneficiaries. Detailed valuation and transition rules matter, so model any sale or purchase with your adviser. Our capital gains tax service can run the numbers.
How much land tax does a trust pay?
Land tax is a state tax, separate from the ATO, and the ATO itself notes that state and territory requirements apply on top of federal tax. Trusts are often treated less favourably than individuals.
| State | How trusts are treated | Source |
|---|---|---|
| NSW | Discretionary trusts are special trusts: no threshold, flat 1.6% up to the premium threshold, then 2%. Foreign surcharge applies unless the deed irrevocably excludes foreign beneficiaries | Revenue NSW |
| QLD | Trustees pay company and trustee rates from $350,000: $1,450 plus 1.7c for each $1 above $350,000 up to $2,249,999 | Queensland Revenue Office |
| VIC, WA, SA, TAS, ACT, NT | Each has its own trust rules and surcharges | Check your state revenue office |
See our land tax guide for how land tax differs from council rates.
Worked example: NSW land tax and a later sale
A discretionary trust owns NSW land with a taxable value of $600,000. Revenue NSW gives this exact case: $600,000 x 1.6% = $9,600 land tax a year, because a special trust gets no threshold.
Years later the trust sells and makes a $200,000 capital gain on a property held more than 12 months, all of which accrued before 1 July 2027. After the 50% discount, $100,000 is assessable.
Option A: stream it all to one adult beneficiary with no other income. Tax at 2026-27 rates: $4,020 + 30% x ($100,000 – $45,000) = $4,020 + $16,500 = $20,520.
Option B: $50,000 each to two adult beneficiaries with no other income. Each pays $4,020 + 30% x ($50,000 – $45,000) = $4,020 + $1,500 = $5,520, so $11,040 in total.
Both figures exclude the Medicare levy. Rates are from the ATO resident tax rates page. For gains accruing after 1 July 2027, the new indexation and 30% minimum tax rules would change this result.
When is a family trust a poor fit for property?
- You plan to live in the property, since the main residence exemption is for individuals, not trusts, under the ATO CGT guide.
- The property will run at a loss for years and you want to offset salary income.
- You are buying in a state where trust land tax would outweigh the benefits.
- Your family includes foreign beneficiaries and the property is residential land in a state with foreign surcharges.
If a company beneficiary will receive distributions, read our Division 7A and UPE guide first.
Rule of thumb: Work out the yearly land tax and the trapped-loss cost before you sign. If the property only works with personal negative gearing, a trust is probably the wrong owner.
Common mistakes with property in a family trust
- Signing the contract in your own name: moving it to the trust later can mean paying duty twice.
- No foreign beneficiary exclusion: in NSW the trust can pay surcharge land tax even if it never pays a foreign person.
- Late resolutions: missing 30 June can leave the trustee taxed on the income.
- Expecting to use losses personally: trust losses stay in the trust.
- Ignoring 1 July 2027: the new CGT rules change the value of streaming future gains.
FAQ about family trusts for property investment
Can a family trust use the 50% CGT discount on property?
Yes. The ATO says Australian trusts can discount a capital gain by 50% if the asset was owned for at least 12 months, and a discounted gain can be passed to individual beneficiaries. From 1 July 2027 the discount is replaced by cost base indexation and a 30% minimum tax for gains accruing after that date. Gains accrued before 1 July 2027 keep the old treatment.
Can a trust negatively gear a rental property?
A trust can claim rental expenses, but if the expenses exceed the rent the loss stays in the trust. The ATO says trust losses cannot be distributed to beneficiaries; they are carried forward against future trust income. From 1 July 2027, losses on established residential property bought after 7:30pm AEST on 12 May 2026 are also limited by the new rules.
Do discretionary trusts pay more land tax?
Often, yes. In NSW a discretionary trust is a special trust with no tax-free threshold, taxed at 1.6% up to the premium threshold. In Queensland a trustee pays land tax from $350,000 of taxable land value, compared with $600,000 for individuals. Other states have their own rules, so check the state revenue office before buying.
Can I live in a property owned by my family trust tax free?
Generally not. The main residence exemption is for individuals, and the ATO guide says the rule applies if you are an individual, not a company or trust. Special disability trusts are an exception. Living in a trust property can also raise land tax and other issues, so get advice before moving in.
Is GST charged on rent from a trust property?
Not on residential rent. The ATO says residential rent is input taxed, so no GST is added and no GST credits can be claimed on costs related to the rental. Commercial property and the sale of new residential premises are different, as a sale of new residential premises is generally a taxable sale.
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Nanak Accountants can model your land tax, CGT and cash flow before you buy, and prepare the yearly resolutions and trust tax return. Call 1300 626 258, book a discovery meeting or visit Nanak Accountants.
This article is general information only and is not personal tax or legal advice. Figures and rules were checked against the ATO trust, CGT, GST and new legislation pages, the Federal Register of Legislation, Revenue NSW and the Queensland Revenue Office on 9 October 2026. Rates and thresholds change, so confirm the current position before acting.
