Using a trust to buy property is a strategy many investors consider when building wealth. While it adds some complexity, this structure can offer real advantages—especially around tax flexibility, asset protection, and long-term planning.
Why use a trust to buy property?
A trust is a legal structure where a trustee holds assets on behalf of beneficiaries. When you buy a property in a trust:
- The trust—not you personally—owns the property
- The trustee manages the property in line with the trust deed
- Profits or losses can be distributed to beneficiaries (depending on the trust type)
Key benefits of buying property in a trust
- Asset Protection
Keeps your personal assets separate from your investments. This can help protect you in the event of legal issues or financial setbacks. - Tax Planning
Discretionary trusts allow flexibility in distributing income to beneficiaries, potentially reducing overall tax liability. - Estate Planning
Makes passing assets to family members smoother. Trusts can avoid probate and offer more control over future ownership. - Land Tax Strategy
In some states, land tax is calculated per trust. This can reduce land tax for investors with multiple properties (though it depends on your location). - Improved Serviceability for Lending
One of the biggest advantages of using a trust is how it can affect your borrowing power. Some lenders don’t include trust-held property income or expenses when assessing your personal borrowing capacity. That means:- Your trust can hold existing investment properties
- You can still qualify for new loans in your personal name
- You can scale your property portfolio faster
Can a Trust Own Property?
Yes. A trust can legally own real estate in Australia. The trustee appears on the property title, but they hold it for the benefit of the trust’s beneficiaries.
Can a Trust Borrow Money to Buy Property?
Yes. Trusts can take out loans, although:
- Not all lenders offer trust loans
- More documentation is required (e.g. trust deed, financials)
- Guarantors are usually required
- Lending policies are stricter
While borrowing through a trust may reduce your lender options, it's still possible and common for investors.
Types of Trusts Used to Buy Property
- Discretionary Trust (Family Trust)
Gives the trustee flexibility to distribute income and capital to any beneficiary. Common for family investing. - Unit Trust
Beneficiaries own fixed shares of the trust. Often used when unrelated parties invest together. - Hybrid Trust
A mix of discretionary and unit trust features. More complex and less commonly used.
Trustee Options
You can choose between:
- Individual Trustee
Simpler and cheaper to set up, but personal assets may be exposed to legal risk. - Corporate Trustee
More expensive to set up and maintain, but offers better asset protection and makes future changes easier.
Risks to Be Aware Of
While there are many upsides, it's important to consider:
- Setup and Running Costs: Setting up a trust can cost $1,000–$2,500. Ongoing accounting and compliance costs also apply.
- Limited Negative Gearing: Trusts can't pass property losses on to individual beneficiaries, so you lose out on certain tax offsets.
- Financing Complexity: Lenders have tighter criteria. Expect more paperwork and fewer options.
- Land Tax: In some cases, land tax may be higher for trust-held property—especially for small portfolios or individual property owners.
These aren’t dealbreakers for most investors, but you’ll want advice to structure things right.
Common Search Terms Covered
- Buying property in a trust / under a trust / through a trust
All refer to the same concept: the property is held by a trustee on behalf of beneficiaries. - Can a trust borrow money to buy property?
Yes, though finance is more specialised. - Use trust to buy property in Australia
Common among investors, business owners, and families wanting tax or asset protection benefits.
Should You Buy Property in a Trust?
Trusts aren’t for everyone—but if you're investing for the long term, planning for future generations, or want more control over tax and asset protection, they’re worth considering.
Speak with your accountant or legal advisor before setting up a trust.
Need help with lending options?
At Digital Finance Solutions, we specialise in loans for property trusts, SMSFs, and more. We’ll walk you through the process and help you choose the right finance strategy.
Disclaimer
The information in this article is general in nature and does not constitute legal, tax, or financial advice. You should seek professional advice specific to your personal situation before making any decisions related to trusts or property investment.
Digital Finance
Digital Finance Solutions was born out of a passion for property investment and a desire to help others achieve their financial goals.
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