Buying Investment Property: Should You Use Your Personal Name or a Trust with a Corporate Trustee?
Borrowing capacity is the biggest enemy of anyone (maybe except self-employed borrower but that is another article) wanting to accumulate an investment portfolio of multi properties.
That is why choosing the right ownership structure can have a big impact on not only on your tax bill but your borrowing capacity as well both now and in the future.
Before we get into the two common options below are, it’s important to note that suggestions on how to extent your borrowing capacity may conflict with advice on personal tax minimisation.
Buying in your personal name, or
Buying through a discretionary (family) trust with a corporate trustee.
Each structure has its advantages and disadvantages, depending on your personal circumstances, long-term goals, and risk appetite.
Let’s break down the tax implications in a simple way.
Option 1: Buying in Your Personal Name
Advantages
1. Simpler and cheaper to set up
There’s no need to set up a trust or company. You just buy the property directly and manage it as an individual.
2. Access to the 50% Capital Gains Tax (CGT) discount
Hold the property for more than 12 months and you’re eligible for a 50% CGT discount when you sell.
3. Negative gearing benefits flow directly to you
If your investment runs at a loss (i.e. expenses exceed rental income), that loss can offset your other income—reducing your overall tax bill.
4. Lower land tax thresholds (in some states)
Some states like NSW and QLD offer higher land tax thresholds to individuals compared to trusts or companies.
Disadvantages
1. Limited income splitting
Rental profits (or capital gains) are taxed at your marginal rate. If you're on a high income, you may pay 45% tax on profits.
2. Asset protection is weaker
If you're sued or face bankruptcy, your investment property could be at risk because it’s in your own name.
3. No flexibility
You're locked into your personal tax situation. You can’t distribute income to family members in lower tax brackets.
Option 2: Buying via a Trust with a Corporate Trustee
A discretionary (family) trust is a structure where a trustee (in this case, a company) holds the property for the benefit of beneficiaries (usually your family). The corporate trustee provides extra asset protection and limited liability.
Advantages
1. Income splitting = tax minimisation
The trust can distribute rental profits (and later capital gains) to beneficiaries in lower tax brackets, reducing the family’s overall tax bill.
2. Stronger asset protection
The property is legally owned by the trust, not you personally. If you're sued, the trust assets are generally out of reach.
3. Estate planning flexibility
Trusts can provide ongoing control and income distribution flexibility across generations.
4. Control stays with you
Even though the trust owns the property, you control the corporate trustee and therefore the decisions.
Disadvantages
1. No negative gearing benefits to you personally
If the property makes a loss, that loss stays in the trust—it can’t reduce your personal tax bill. It can only be carried forward to offset future trust income.
2. Set-up and ongoing costs
Setting up a trust with a corporate trustee can cost a few thousand dollars, and there are annual accounting and compliance costs.
3. No 50% CGT discount for companies
The trust itself gets the 50% CGT discount—but if you ever used a company to own the property directly (instead of a trust), it would not get the discount. This is why many investors prefer a trust with a corporate trustee, rather than a company owning the property directly.
4. Land tax traps
In some states, trusts pay higher land tax rates and have lower thresholds, or no threshold at all (e.g. in NSW and VIC).
Which Structure Is Better? -Table
It depends on your situation:
| Scenario | Likely Better Option |
|---|---|
| You earn a high salary and want to distribute rental profits to family members in lower tax brackets | Trust with corporate trustee |
| You're negatively gearing and want immediate tax deductions against your income | Personal name |
| You’re concerned about asset protection (e.g. you're a business owner or professional with exposure to risk) | Trust |
| You’re buying one property as a long-term hold with low income | Personal name |
| You want to build a portfolio and future-proof your tax position | Trust |
Buying an investment property in your own name is simple and effective for many people, especially when negative gearing and simplicity are priorities.
Using a trust with a corporate trustee adds complexity and cost—but it can offer significant long-term tax savings, asset protection, and estate planning flexibility, especially for high-income earners or those with families.
Note: This article is for information purposes only. Always speak with a qualified tax adviser or accountant before you sign a contract. Changing structures later can be costly due to stamp duty and CGT.