The Federal Government's sweeping changes to capital gains tax, negative gearing and the taxation of family trusts are set to fundamentally alter the calculations for property investors. Choosing the right ownership structure has never been more important, and arrangements that made sense just a few years ago may now warrant a rethink.
For years, Australian property investors have been told that the secret to building a successful portfolio is to buy the right property, in the right location, at the right price.
But there's another decision that can be just as important, and one that investors often get wrong: whose name should go on the title?
Should you buy an investment property personally, jointly with your spouse, through a family trust or using a company?
Until recently, the answer was relatively straightforward.
Individual ownership generally worked well for negatively geared properties, discretionary trusts offered flexibility and potential tax savings, and companies were sometimes useful for investors looking to accumulate assets over the longer term.
The 2026 Federal Budget has thrown much of that conventional wisdom into question.
With major changes to capital gains tax commencing on 1 July 2027, restrictions on negative gearing and a new minimum tax on discretionary trusts scheduled for July 2028, investors need to reconsider whether their existing ownership structures remain fit for purpose.
And the stakes are high. Getting the structure wrong could cost tens of thousands of dollars over the life of an investment.
Personal ownership: Still the simplest option?
For most everyday property investors, buying in their own name remains the simplest and often the most sensible approach.
There are no trust deeds to prepare, no separate company accounts to maintain and generally fewer ongoing compliance costs.
Traditionally, one of the biggest advantages of personal ownership has been negative gearing.
An investor earning $150,000 a year who makes a $15,000 rental loss could generally deduct that loss against their salary, reducing their taxable income and delivering an immediate tax benefit.
However, the 2026 Budget has changed that calculation. Under the new arrangements, negative gearing concessions for residential property are being restricted to new builds, with grandfathering protection for properties acquired before the Budget announcement on 12 May 2026.
Investors purchasing established properties after that date can no longer assume they will be able to offset rental losses against their wages. Instead, losses are restricted to eligible residential property income and gains, with unused amounts carried forward. This fundamentally changes the attraction of buying a loss-making established property in your own name.
There is also the question of capital gains tax. Historically, individuals holding an investment property for more than 12 months could generally claim the 50% CGT discount.
From 1 July 2027, that discount is being replaced, for affected gains, by inflation-based indexation and a minimum 30% tax on real capital gains.
Importantly, gains accrued before that date retain their existing treatment. New residential builds also benefit from special rules allowing investors to choose between the existing discount and the new system.
Personal ownership remains attractive, particularly for investors with straightforward circumstances, but it is no longer automatically the obvious winner.
Family trusts: Has the golden age ended?
Discretionary family trusts have long been popular with more sophisticated property investors.
Their biggest attraction has been flexibility.
See also: Using trusts and companies for property investment
Rather than rental income and capital gains automatically belonging to one individual, a trustee can generally distribute income among eligible beneficiaries, subject to the trust deed and tax rules.
For example, rental profits might be distributed to a spouse on a lower marginal tax rate, reducing the family's overall tax bill.
Trusts can also provide advantages for asset protection, succession planning and managing family wealth across generations.
However, the Government's trust tax reforms have significantly reduced their appeal as income-splitting vehicles.
From 1 July 2028, discretionary trusts will generally face a minimum tax rate of 30% on income within the scope of the new rules.
The tax will be paid at trustee level, with individual beneficiaries receiving non-refundable credits for the tax paid. Consequently, income splitting with lower-tax beneficiaries may no longer deliver the same tax benefits.
For trusts distributing income to beneficiaries already paying tax at 30% or more, the overall impact may be considerably smaller.
There is an important qualification, however.
The Government has introduced an option for discretionary trusts to escape the minimum tax by electing to make fixed distributions to pre-nominated beneficiaries.
That could preserve the trust structure without the cost of transferring property to a different entity, although it comes at the expense of the flexibility that made discretionary trusts attractive in the first place.
The message is clear: trusts are not disappearing, but their usefulness as a straightforward tax-saving vehicle has diminished.
There is another disadvantage investors should remember. Rental losses incurred within a trust generally cannot be distributed to beneficiaries to offset their salary or other personal income.
For investors expecting several years of losses, this can make a trust significantly less attractive than personal ownership.
Nevertheless, trusts may remain appropriate where asset protection, succession planning and long-term family wealth management are the overriding considerations.
Companies: An overlooked alternative?
Companies have traditionally been regarded as a relatively unattractive vehicle for holding appreciating residential property. The main reason is their treatment under the capital gains tax regime.
Unlike individuals and eligible trusts, companies do not qualify for the 50% CGT discount. That remains a substantial disadvantage when a property is eventually sold.
Consider an investment property generating a $400,000 capital gain under the historical CGT rules. An individual eligible for the 50% discount would generally include only $200,000 in assessable income. A company, by contrast, would ordinarily be taxed on the entire $400,000 gain.
Although companies may pay tax at 25% where they qualify as base rate entities, companies primarily earning passive rental income will commonly be subject to the 30% corporate tax rate.
The distinction is important. Investors should not assume that placing rental properties in a company automatically delivers a 25% tax rate.
Companies do, however, have advantages. They can retain after-tax profits for reinvestment without requiring those profits to be immediately distributed to individual owners.
For investors building a substantial portfolio and intending to retain earnings, this can provide cash flow advantages.
The new CGT regime also changes the comparison. With individuals and trusts facing a minimum 30% tax on affected real capital gains, the historical CGT advantage over companies may narrow in some circumstances.
That does not mean companies have suddenly become the best property investment vehicle.
When company profits are eventually distributed as dividends, shareholders may face additional personal tax, although franking credits can reduce double taxation.
And transferring a property out of a company can itself trigger significant tax consequences.
Companies are therefore worth considering, but usually as part of a broader long-term investment strategy rather than simply as a way of reducing annual tax bills.
The hidden cost of changing structures
One of the biggest mistakes investors make is assuming they can simply move a property from one structure to another when their circumstances change.
Unfortunately, the tax system rarely makes that easy.
Transferring an investment property from personal ownership to a trust or company will ordinarily trigger a CGT event, potentially creating a substantial tax liability.
State and territory stamp duty may also apply.
For a property that has appreciated significantly, those costs can make restructuring prohibitively expensive.
The Government has recognised this problem by introducing a three-year restructuring relief window commencing on 1 July 2027, principally aimed at helping affected discretionary trusts move to alternative arrangements.
However, investors should not assume that federal CGT rollover relief automatically removes state stamp duty liabilities or applies to every proposed restructure.
Before making any changes, investors need to consider both the immediate costs and the long-term consequences.
A restructure that saves $5,000 annually in tax is hardly worthwhile if it triggers $100,000 in upfront costs.
Why 30 June 2027 matters
Another date investors should circle is 30 June 2027.
Because the new CGT arrangements distinguish between gains accrued before and after 1 July 2027, establishing a property's value at the transition date could become crucial.
For example, suppose an investor purchased a property for $600,000 and it is worth $1 million by 30 June 2027.
If the property is subsequently sold for $1.3 million, the tax treatment of the first $400,000 of growth will differ from the subsequent $300,000.
The investor will need appropriate records to establish the relevant values and calculate the gain under the transitional rules.
A professional valuation may be particularly worthwhile for properties with substantial unrealised gains, although investors should consider the permitted valuation and apportionment methods before incurring unnecessary costs.
See also: Why a 2027 property valuation could prove valuable under the new CGT rules
This is especially important for properties held in trusts, where decisions about ownership structure and future capital gains may now be closely connected.
So which structure should investors choose?
There is no universal answer.
For an investor purchasing a single residential property, personal ownership will often remain the most practical choice, particularly where simplicity, borrowing arrangements and eventual access to capital are priorities.
For a family with substantial assets, multiple beneficiaries and succession planning concerns, a trust may still offer valuable non-tax benefits despite the new minimum tax rules.
For investors intending to retain profits and build a portfolio over many years, a company may warrant closer examination, provided the CGT and eventual dividend consequences are fully understood.
Joint ownership also deserves consideration. Buying with a spouse can spread future rental income and capital gains, but the ownership percentages should be decided carefully because changing them later will often trigger tax and duty consequences.
The biggest change is that investors can no longer choose a structure based simply on the tax rules applying in the year they purchase.
They need to think about what happens when the property becomes profitable, when interest rates fall, when their income changes, when they retire and, ultimately, when they sell.
The cheapest structure today may prove to be the most expensive structure tomorrow.
My advice to investors is to review existing structures now, but resist the temptation to restructure simply because the Government has changed the rules. Sometimes the best decision will be to leave an existing investment exactly where it is.
For new purchases, however, the ownership decision deserves far more attention than it traditionally receives.
After all, you can renovate a kitchen, refinance a mortgage or change a property manager.
Changing the legal owner of an investment property is considerably more complicated, and potentially much more expensive.
Tax legislation and transitional arrangements should be checked against the investor's individual circumstances before implementing any ownership or restructuring decision.
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