Trusts offer powerful tools for asset protection, tax planning, and long-term wealth.
When investing in property, choosing the right ownership structure is critical. Trusts are increasingly popular among Australian investors for their flexibility and strategic advantages. Here’s a breakdown of the most common trust types and how they can support your property goals.
Discretionary (Family) Trust
- Trustee has full discretion over income distribution
- Ideal for families seeking tax flexibility and asset protection
- Can distribute income to beneficiaries in lower tax brackets
- May face challenges with lender approval and negative gearing
Unit Trust
- Fixed entitlements — each investor owns “units” in the trust
- Preferred for joint ventures or unrelated parties
- Transparent ownership and income allocation
- Less flexible for tax planning compared to discretionary trusts
Hybrid Trust
- Combines features of discretionary and unit trusts
- Allows fixed capital entitlements with flexible income distribution
- Complex to set up and manage — requires expert advice
- Scrutinised closely by the ATO
Fixed Trust
- Beneficiaries have locked-in entitlements to income and capital
- May qualify for land tax thresholds in certain states (e.g. NSW)
- Preferred by SMSFs and entities needing predictable distributions
- Limited flexibility for changing beneficiary arrangements
Testamentary Trust
- Established via a will and activated upon death
- Used for estate planning and protecting inherited property
- Allows minors to receive income at adult tax rates
- Helps safeguard assets from misuse or legal disputes
SMSF with Bare Trust (LRBA)
- Used when buying property through a Self-Managed Super Fund
- Requires a bare trust to hold the property under borrowing rules
- Strict compliance and lending criteria apply
- Powerful for long-term retirement planning
Key Considerations Before You Choose
- Tax Strategy: Who are your beneficiaries and what are their tax profiles?
- Financing: Will lenders support your chosen trust structure?
- Estate Planning: Do you want control over how assets are passed on?
- Risk Management: Are you protecting assets from personal liability?
Need help selecting the right trust structure? Reach out to ROVO Finance for expert guidance tailored to your investment strategy and long-term goals.
