3 Things to Consider Before Investing in Property in a Trust

Should you invest with a trust

3 Things to Consider Before Investing in Property in a Trust

Investing in property is a popular strategy for many Australians, and one option that people consider is purchasing property through a trust. 

There are several potential benefits to this approach, including asset protection, tax efficiency, and flexibility in distributing income. However, before jumping into this type of investment, it’s important to weigh a range of factors to ensure it’s the right choice for your situation.

Here’s what you need to know.

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Understanding Property Investment Trusts

If you’re thinking about buying an investment property, it’s worth investigating all the potential ownership structures to make sure you find one that makes sense for your current financial circumstances and future investment goals. 

You could own the property outright in your name, or you could purchase the property in a joint ownership structure with someone else.

Another strategy you might not have thought of is a trust structure. 

Types of Trusts in Australia

If you are considering investing in a trust, you will need to understand the different types of trusts you could potentially invest in: 

  • Discretionary Trusts: Also known as family trusts, these trusts provide flexibility in distributing income and capital among beneficiaries (usually family members), which can be advantageous for tax planning purposes. 
  • Unit Trusts: These trusts operate similarly to a company, with investors holding “units” in the trust. The income and capital gains are distributed proportionately according to the number of units held by each investor. 
  • Hybrid Trusts: Combining aspects of both discretionary and unit trusts, hybrid trusts offer some flexibility with income distribution while maintaining a more structured investment environment.

Advantages and Disadvantages of Investing with a Trust 

Along with researching what type of trust you would want to invest in, you also need to think about the overall advantages and drawbacks of going this route. 


  • Tax Benefits: Trusts can offer potential tax benefits by distributing income and capital gains among beneficiaries, often to those in lower tax brackets to minimise the overall tax liability. 
  • Asset Protection: Property held within a trust is generally protected from the personal financial issues or claims against individuals within the trust. 
  • Estate Planning: Trusts can provide a structured approach to estate planning, ensuring assets are managed and distributed according to the trust’s objectives. 


  • Complexity: Managing a trust can be more complex than managing an individual investor’s property directly, requiring professional advice and additional administration. 
  • Costs: Establishing and maintaining a trust can incur additional costs compared to investing in property as an individual. 
  • Limited Access to Funds: Accessing capital within the trust can sometimes be restricted, reducing the flexibility for investors when needing funds for other purposes.

You may be interested in reading: The Pros and Cons of a Family Trust for Property Investing

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Should You Invest with a Trust? 3 Key Factors to Consider Before Investing

Besides the type of trust and overall advantages and disadvantages, there are four more things you should factor into your decision. 

1. Tax Implications

In a trust structure, the tax burden typically falls on the beneficiary, and not the trust itself. This can provide flexibility in terms of income distribution and tax planning – especially if you have set up a family trust (or discretionary trust).  

However, each trust structure will have different tax consequences, so you need to consult with a property tax advisor to fully understand your responsibilities, including:


  • Income tax
  • Capital gains tax (CGT) 
  • Land tax
  • Stamp duty 

You may be interested in reading: The 4 Types of Tax On Investment Property You Need to Know

2. Your Financial Goals

Before investing in property with a trust, you need to consider your financial goals and objectives. 

Some trusts allow for flexibility in terms of asset distribution and tax advantages, which may suit your specific financial objectives. On the other hand, certain trust structures are less flexible and incur higher fees. 

So, make sure to research and understand how a trust might fit into your plans. 

Here are some questions you might find helpful to ask yourself:


  • What are my long-term financial goals and how will investing in property through a trust support these goals?
  • How flexible is the trust structure I’m considering? Will it allow me to adjust the asset distribution if my financial situation changes in the future?
  • What are the fees associated with setting up and maintaining the trust, and how will these impact the overall return on my investment?
  • Have I consulted with a financial advisor or attorney who specialises in trusts to ensure I’m making a decision that is in my best interest?
  • What level of control will I have over the property once it’s in the trust?
  • How does investing in property through a trust fit into my overall estate planning strategy?
  • How will the trust structure affect my ability to borrow against the property or refinance it in the future?
  • Do I understand how the trust will be managed, and am I comfortable with this level of oversight?
  • What are the potential consequences if I need to sell the property or remove it from the trust?
  • How will the income and capital gains from the property be distributed amongst the beneficiaries?
  • Am I prepared for the potential personal liability associated with acting as a trustee or having an active role in the trust’s operation?

3. Investment Strategy

An investment strategy is also a key factor to consider before investing in a trust because it lays out a clear roadmap to achieving your financial goals. It allows you to analyse and understand the potential risks and returns associated with different trust investments, ensuring that they align with your risk tolerance and financial objectives. 

A well-thought-out strategy also ensures diversification, balancing out your investment portfolio to optimise returns and minimise risk. 

Without a robust investment strategy, you risk making ill-informed decisions that may not serve your financial goals effectively.

Setting Up a Property Investment Trust

Setting up a property investment trust in Australia involves several steps, including creating a trust deed, applying for an Australian Business Number (ABN) and Tax File Number (TFN), and opening a separate bank account. 

Each step requires property investors to fulfil very specific requirements, so you should read our detailed guide on how to set up a trust.

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Working with Professionals

If you decide, after factoring in all these considerations, to invest in property using a trust, you should assemble a team of professionals to help you manage your finances, meet all the legal requirements, and ensure that your investment is as tax efficient as it can be. 

Tax Specialists

Tax specialists play a vital role in ensuring the tax efficiency of your investments and that you are meeting all your tax obligations.

Key Takeaways

  • Investing in property through a trust can offer benefits like asset protection, tax efficiency, and flexibility in distributing income, making it a popular strategy among Australians.
  • Trust structures for property investment include Discretionary Trusts, Unit Trusts, and Hybrid Trusts, each with distinct features suitable for varying financial situations and goals.
  • Prior to investing in a trust, consideration should be given to the tax implications, aligning the investment with financial goals, and having a solid investment strategy.
  • You should consult with professionals, such as financial planners, solicitors, and tax specialists, to navigate the complexities and legal compliance aspects of setting up and managing a trust.

Ultimately, your decision to invest in a trust should come down to what makes the most financial sense for your circumstances. 

If you need help making this decision, contact Property Tax Specialists today. With our expertise in trust structures and property investments, we can provide valuable guidance to ensure your decision aligns with your financial goals and circumstances.


Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to property buyers and investors. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal, tax or investment advice. You should, where necessary, seek your own advice for any legal, tax or investment issues raised in your affairs.

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