Structure matters more than the property
The ownership structure you choose can impact your tax efficiencies and asset protection over the life of your portfolio.
- Explore how different structures may affect tax and deductions.
- Understand the asset protection differences before you buy.
Comparing property structures
There is no one‑size‑fits‑all structure. Discover the general pros and cons of each entity type.
Individual Ownership
Individual or joint ownership is often the simplest approach to holding property.
- May allow negative gearing against personal income.
- Potentially eligible for the 50% CGT discount after 12 months.
- Consideration: Offers no intrinsic asset protection and profits are taxed at your marginal rate.
Discretionary Trust
Trusts offer a way to manage family assets and distribute income.
- Allows distribution of rental income to family members.
- Often suited for positively geared properties and long-term holding.
- Consideration: Land tax thresholds may be reduced; losses are trapped within the trust.
Company Structure
Corporate entities are sometimes used by business owners with retained profits.
- Subject to a flat corporate tax rate (around 25–30%).
- Can be a vehicle to deploy retained business profits into property.
- Consideration: Companies do not receive the 50% CGT discount.
SMSF Property
Self-Managed Super Funds allow property purchases within the superannuation environment.
- Rental income is typically taxed at a concessional rate of 15%.
- Effective CGT can be significantly reduced for retirement planning.
- Consideration: Strict rules apply; you cannot live in the property, and compliance costs are significant.
Five questions to choose your structure
The right structure depends on your personal circumstances. Consider these five questions:
1. Income levels
Evaluate the income gap between you and your partner. Large gaps may make trusts appealing.
2. Gearing
Determine if the property is likely to be positively or negatively geared to assess tax offsets.
3. Income source
Consider whether your income is purely PAYG salary or if you have business income with retained profits.
4. Time horizon
Clarify how long you intend to hold the property to evaluate the importance of CGT discounts.
5. Risk profile
If you work in a high-risk profession, asset protection mechanisms often become a critical factor.
Frequently asked questions
There is no single best structure for buying an investment property in Australia. The most appropriate structure depends on your personal income level, gearing strategy, time horizon, and need for asset protection.
Losses generated by a negatively geared property held in a discretionary trust are generally trapped within the trust. They cannot be distributed to offset your personal PAYG salary.
No, companies do not receive the 50% Capital Gains Tax (CGT) discount. All capital gains realized by a company are typically fully taxable at the applicable corporate tax rate.
