Investment Property Structure in Australia: Personal Name, Trust, Company or SMSF

Before you sign a contract, compare personal ownership, a trust, company and SMSF against tax, CGT, land tax, borrowing, asset protection and ongoing compliance. The right structure depends on your circumstances; this guide gives high-income Australians a practical framework for testing the options before they buy.

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The Four Structures at a Glance

Before diving into the detail of each, here is a high-level comparison to orient you:

Note: The tax rates in this table are for 2025 - 26 and do not include Medicare Levy (2%) where applicable.

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1. Personal Name

Rental income is taxed at your marginal rate; capital gains qualify for the 50% CGT discount after 12 months. The key advantage is negative gearing - a $20,000 net loss saves $9,400 at 47% and can be offset immediately against salary or business income. No other structure passes losses through to an individual.

The drawback for high earners: on a $400,000 gain, the discounted $200,000 still attracts $94,000 in CGT at the top rate. No asset protection.

Best for: Negatively geared investors, lower-income earners, short-term holders, and first-time investors who need simplicity.

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2. Family/Discretionary Trust

The trustee distributes net income and capital gains to beneficiaries each year at their own marginal rates. An eligible trust capital gain may receive a CGT discount, but a distribution to beneficiaries must be supported by the trust deed, valid resolutions and the relevant tax rules. The beneficiary's other income and circumstances determine the actual tax payable. See family trust guide.

Section 100A warning: ATO PCG 2022/2 requires that distributions reflect genuine economic outcomes. If beneficiaries do not actually receive and control their entitlement, the trustee is assessed at 47%. Paper-only arrangements are high-risk.

NSW land tax trap: Discretionary trusts are classified as "special trusts" and receive no land tax threshold (versus $1,075,000 for individuals). A Sydney property with $600,000 land value incurs $9,600/year in land tax in a trust - $0 in a personal name. Over 10 years: $96,000. Always model land tax against tax savings before proceeding.

Stamp duty on restructuring: Transferring a property into a trust post-purchase triggers stamp duty at market value - ~$40,490 on a $1M NSW property. Get the structure right before you sign.

Best for: Families with lower-income beneficiaries, long-term holders outside NSW (or with low land values), investors who will maintain annual trust administration.

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3. Company Structure

A company generally pays 30% tax unless it qualifies as a base rate entity for the year. Rent is generally base rate entity passive income, so a company that mainly earns rent will usually not qualify for the 25% rate. Check the company's full income mix before modelling its tax. The critical drawback: companies cannot access the 50% CGT discount. A company generally does not receive the individual or trust 50% CGT discount. The actual tax outcome depends on its tax rate and whether, when and how profits are later paid to shareholders. Trust outcomes depend on the deed, eligible beneficiaries, capital losses and tax-integrity rules. See tax strategy service.

Profits can only be extracted as franked dividends or via Division 7A-compliant loans. You cannot simply withdraw rental profits without triggering a tax liability.

Best for: Investors who have modelled company tax, later dividend tax, CGT, land tax and administration costs together. Retaining profits does not by itself make a company the best property structure. Not suitable if you plan to eventually realise a capital gain.

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4. SMSF (Self-Managed Super Fund)

Rental income is taxed at 15% in accumulation phase, 0% in pension phase. CGT: 10% in accumulation (one-third discount); 0% in pension. For a full breakdown see SMSF property guide.

Key rules: No residential property may be purchased from, or rented to, a related party. Commercial property can be leased to your own business at arm's length. Sole purpose test applies - the property must exist to provide retirement benefits, not personal use. Breaching these rules can make the fund non-complying: 45% tax on the entire asset base.

Borrowing via LRBA: The property is held in a bare trust until the loan is repaid. The lender's recourse is limited to the property - other SMSF assets are protected. Requires specialist legal and accounting setup; errors in the bare trust structure can void the LRBA.

Best for: Investors 10 - 15 years from retirement with $300,000+ in combined super, long-term holders, and business owners purchasing commercial premises they can lease to their own business.

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Decision Framework

Use these six questions as a starting point - then get specific advice before you commit.

1. Need negative gearing now? → Personal name. Losses cannot be distributed from a trust.
2. Family members on lower tax rates? → Discretionary trust to distribute income and CGT gains to lower-taxed beneficiaries.
3. Buying in NSW? → Model land tax before proceeding with a trust. High land values can wipe out the income-splitting benefit entirely.
4. Plan to sell and realise a capital gain? → Avoid company structure. Use personal name or trust to preserve the 50% CGT discount.
5. 10 - 15 years from retirement with $300k+ in super? → SMSF warrants serious consideration. No other structure matches the 15% accumulation and 0% pension phase rates.
6. Asset protection a concern? → Trust or SMSF. Personal name offers no protection from creditors.

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Case Study 1: The Doctor Who Bought in the Wrong Name

Dr Sarah, specialist physician, Sydney, $450,000/year income. Bought an investment property in personal name for $900,000 in 2017. Sold in 2025 for $1,300,000 - $400,000 gain.

• Personal name: $200,000 assessable (after 50% discount) × 47% = $94,000 CGT
• Discretionary trust (distributing discounted gain to husband James, income $80,000): Tax on $200,000 at ~30% marginal rate = ~$60,000
• Saving: ~$34,000 - $40,000 on the CGT alone - plus eight years of rental income taxed at 47% vs 30%

Structure advice cost ~$3,000. Stamp duty to transfer after purchase: $40,000+. The structure decision must be made before you sign the contract.

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Case Study 2: The Couple Who Used an SMSF

Michael (PM, $180,000) and Lisa (nurse, $90,000), late 40s. Combined SMSF balance $620,000. In 2022 they purchased a $500,000 commercial property via LRBA ($120,000 deposit, $350,000 loan) and leased it to a third-party business at $42,000/year.

• Net rental income ~$35,000/year. Tax in SMSF at 15%: $5,250/year vs $12,950 - $16,450 personally. Annual saving: $7,700 - $11,200.
• On pension phase entry (~2035): property taxed at 0%. If sold at $900,000 (gain $400,000): $0 CGT vs $94,000 personally.

SMSF property is a long-term retirement strategy, not a shortcut. For the right client in the right circumstances, it produces the best after-tax outcome of any structure available.

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Common Mistakes to Avoid

• Buying before getting structure advice. Restructuring after exchange triggers stamp duty and CGT. The time to decide is before you make an offer.
• Ignoring land tax in NSW. Discretionary trusts lose the $1,075,000 threshold. Model the annual land tax bill against any tax saving before committing.
• Forgetting exit costs. Trusts, companies, and SMSFs all have costs to unwind. Know your exit strategy before you enter.
• Copying someone else's structure. What works for a multi-beneficiary business family is wrong for a single professional with no income-splitting opportunity.
• Mixing investment property with a business trading trust. Commercial risk in the same trust can expose the property to creditors.
• Setting up an SMSF without genuine long-term planning. It is a retirement vehicle. Using it primarily to access a property now, without considering ongoing compliance and diversification, is likely a mistake.

For a broader look at tax minimisation strategies that work alongside your investment structure, see tax minimisation guide.

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Frequently Asked Questions

Get the Structure Right Before You Buy

The structure decision made before exchange determines the tax outcome for the entire life of the investment. Getting it wrong costs real money. Before you buy your next property, book a Property Structure Review with Andrew - one conversation can save decades of unnecessary tax.

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Andrew Romano is a Chartered Accountant and SMSF Specialist based in Sydney. He works with high-income professionals, business owners, and investors on tax planning, superannuation strategy, and investment structure advice.

Tax rates and thresholds referenced in this article are for the 2025 - 26 income year. This article is general in nature and does not constitute financial or tax advice. You should seek advice specific to your circumstances before making any investment structure decision.