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.
