Trust Structure Home Loans Australia 2026

Last updated: July 2026 · Reviewed by John Pierre Saliba, Director and Mortgage Broker, MFAA Accredited

Why Buy Property Through a Trust?

Trusts are one of the most commonly used structures for holding investment property in Australia, and for good reason. The benefits are significant when the structure is set up correctly and the right lender is matched to the application.

• Asset protection: Property held in a trust is generally protected from personal creditors. If you face a personal legal claim or business failure, assets held by the trust are separated from your personal estate.
• Tax distribution flexibility: A discretionary trust allows the trustee to distribute rental income and capital gains to beneficiaries in lower tax brackets, such as adult children or a spouse with lower income. This can significantly reduce the overall tax paid on investment returns.
• Estate planning: Trusts provide a mechanism for passing property to the next generation without triggering a sale or transfer of title. The beneficiaries of the trust can change over time, making succession planning more straightforward than individual ownership.
• Separating personal and investment assets: Keeping investment properties in a trust creates a clear boundary between your personal home and your investment portfolio. This can simplify accounting, reduce personal exposure, and make portfolio management cleaner.

Types of Trusts Used for Property

Family trust (discretionary trust)

The most common structure for property investment. The trustee has discretion over how income and capital are distributed among the beneficiaries. This flexibility is the primary advantage. The trustee can adjust distributions each financial year to optimise the tax position of the family group. Most lenders who accept trust lending are familiar with this structure.

Unit trust

A unit trust has fixed entitlements. Each unit holder owns a defined proportion of the trust's assets and income. This structure is more common when unrelated parties are investing together, such as a joint venture between two families or business partners. Lender appetite for unit trusts is more limited than for discretionary trusts, and the documentation requirements are stricter.

Hybrid trust

A hybrid trust combines elements of both discretionary and unit trusts. It offers some flexibility in income distribution while maintaining fixed capital entitlements. Hybrid trusts were more popular before the ATO tightened its scrutiny of these structures. Fewer lenders accept hybrid trust borrowers, and those that do require detailed legal review of the trust deed.

Why Lenders Are Cautious About Trust Lending

Banks and non-bank lenders approach trust lending with caution for several practical reasons.

• Complex ownership structure: The borrower is the trustee (either an individual or a company), not a person. The lender needs to verify that the trustee has the legal authority to borrow and to offer the property as security. This adds layers of legal review that do not exist for personal name lending.
• Guarantor requirements: Because the trust itself is not a legal entity with personal accountability, lenders require the individuals behind the trust to guarantee the loan personally. This creates additional documentation and assessment steps.
• Trust deed restrictions: Some trust deeds, particularly older ones, contain clauses that restrict or prohibit the trustee from borrowing money or granting a mortgage over trust property. If the deed does not explicitly permit these actions, the lender cannot proceed.
• Verification of trustee powers: The lender's legal team must confirm that the trustee has the power to borrow, to mortgage trust assets, and to provide guarantees. Each lender has its own checklist of required trust deed provisions.

What Lenders Require

Every lender has slightly different requirements, but the following items are common across most trust lending applications.

• Compliant trust deed: The deed must explicitly allow the trustee to borrow money and to charge (mortgage) trust assets as security for that borrowing. This is the single most important document in any trust lending application.
• Personal guarantees: Directors of a corporate trustee, or individual trustees, must sign personal guarantees. This makes them personally liable for the debt.
• ABN and TFN for the trust: The trust must have its own Australian Business Number and Tax File Number, confirming it is a registered and active entity.
• Two years of trust tax returns and financials: Lenders assess the trust's income history, expenses, and financial position. Most require at least two years of lodged tax returns.
• Evidence the trust is properly established and active: This includes the stamped trust deed, any variations or amendments, corporate trustee ASIC extracts, and confirmation the trust has been filing tax returns.

Trust Deed Issues That Can Derail Your Application

The trust deed is where most trust loan applications fail. These are the issues I see most frequently.

• Restrictive clauses: Older deeds may contain wording that limits or prevents the trustee from borrowing. Some deeds restrict borrowing to specific purposes or cap the amount the trustee can borrow. If the lender's solicitor identifies these restrictions, the application stops until the deed is amended.
• Missing stamping: Trust deeds in most states must be stamped (duty paid) when created. If the original deed was never stamped, or if amendments were not stamped, the lender will not accept the deed as valid.
• Outdated deeds: Trust deeds drafted before 2005 often lack the specific clauses that modern lenders require. The language around borrowing powers, mortgage powers, and guarantor provisions may be insufficient or absent entirely.
• Corporate trustee without proper ASIC registration: If the trust has a corporate trustee, the company must be current on the ASIC register, have all annual review fees paid, and list the correct directors. A deregistered or non-compliant corporate trustee is an immediate disqualification.

LVR and Rate Differences

Trust loans come with lending constraints that do not apply to personal name borrowing.

• LVR cap: Most lenders cap trust loans at 80% LVR. This means a minimum 20% deposit plus costs. A small number of lenders will consider 90% LVR for trust borrowers, but these typically come with stricter criteria around income verification, trust deed compliance, and trustee structure.
• Interest rates: Rates on trust loans may be slightly higher than equivalent personal name loans. The difference is typically 0.10% to 0.30% depending on the lender. Some lenders price trust loans identically to personal lending, which is why comparing across 50+ lenders matters.
• Fewer lender options: With only 20 to 25 lenders actively accepting trust borrowers, there is less competition. This makes it even more important to work with a broker who knows which lenders have appetite for trust lending and which offer the best rates and terms for your specific structure.

NSW Land Tax Surcharge for Trusts

NSW imposes a land tax surcharge on certain trust types unless specific conditions are met. This is separate from standard land tax and can add a significant annual cost to holding property through a trust in NSW.

The surcharge applies to trusts where the trust deed does not contain clauses that prevent foreign persons from being beneficiaries. Even if all current beneficiaries are Australian residents, if the deed theoretically allows a foreign person to become a beneficiary, the surcharge may apply.

The surcharge rate is up to 4% of the taxable land value, on top of the standard land tax. For a property with $1 million in land value, this could mean an additional $40,000 per year in land tax.

Your solicitor should review the trust deed and, if necessary, amend it to include the required foreign person exclusion clauses. This is a straightforward amendment but must be done before the land tax assessment date to take effect for that year.

Family Trust vs Company vs Personal Name

Choosing the right ownership structure for investment property depends on your financial goals, risk profile, and lending requirements. Here is how the three main structures compare.

Family trust

• Asset protection from personal creditors
• Flexible income distribution to lower-taxed beneficiaries
• No CGT discount for the trust itself, but the 50% discount flows through to individual beneficiaries
• More complex lending: fewer lenders, typically 80% max LVR, personal guarantees required
• Trust deed must be compliant and regularly reviewed

Company

• Limited liability protection for directors and shareholders
• Flat 25% or 30% corporate tax rate on rental income (no access to individual tax brackets)
• No 50% CGT discount on capital gains
• Lending is similar in complexity to trusts, with fewer lender options
• Profits must be distributed as dividends, which are then taxed at the individual's marginal rate

Personal name

• Simplest structure for lending: full range of lenders, highest LVR options, best rates
• Full 50% CGT discount for properties held more than 12 months
• No asset protection: the property is part of your personal estate
• Income taxed at your marginal rate with no flexibility to distribute to others
• No additional compliance costs or trust administration

There is no universally correct answer. Many investors hold their first one or two properties in personal name for simplicity and lending access, then move to a trust structure as their portfolio grows and asset protection becomes more important. Speak with your accountant about the tax implications and speak with us about the lending differences before committing to a structure.