Trust vs SMSF vs company, after the May 2026 Budget changed the maths.
For two decades the advice was almost reflexive. Earn a high income, buy property, and someone tells you to “put it in a trust.” The structure was sold as the smart-money move: split the income, protect the asset, capture the capital gains discount.
Then 12 May 2026 happened. The Federal Budget did not tinker with property tax. It rewrote the rules that made the discretionary trust attractive in the first place. And most of the comparison articles you will find online still read like it is 2024.
This is the current-rules version. We will walk through individual ownership, discretionary trusts, self-managed super funds and companies, with the real mechanics, the real numbers, and one thing almost nobody writing about this is saying: in 2026, the structure decision is no longer mostly about tax. It is about asset protection, borrowing capacity, and which lender will actually fund the deal.
A note before we start. We are mortgage brokers, not accountants. Choosing a structure for tax reasons is your accountant’s call, and we will keep pointing you back to them. What we can do is explain how each structure works and, critically, how each one changes what you can borrow.
The short answer (and why it just changed)
If you want the one-line version: for most new residential acquisitions in 2026, individual or joint ownership remains the sensible default, a discretionary trust is now a more finely balanced decision than it used to be, an SMSF suits a specific long-horizon retirement strategy and not much else, and a company is a genuine contender for higher-yield, income-focused holdings while working against you on a pure capital-growth asset.
What changed is the tax gap between these structures. The Budget narrowed it. Three measures did the damage to the old playbook, and the third one specifically targets trusts.
The point is simple. When the tax advantages of a structure shrink, the non-tax reasons to use it (or avoid it) start driving the decision. That is the lens this article is built around.
What the May 2026 Budget actually did
Three announced measures matter for anyone choosing a structure today. None of them should be read in isolation, and the dates are everything.
Negative gearing is being narrowed to new builds
From 1 July 2027, losses from established residential properties acquired after 7:30pm AEST on 12 May 2026 will only be deductible against rental income or capital gains from residential property, not against your salary. Negative gearing against other income is being limited to new builds. Properties you already held at the announcement are grandfathered and unaffected. Positive and neutrally geared properties are not touched. (Source: Australian Taxation Office; Budget 2026-27.)
Why it matters to structure: the negative-gearing benefit was one reason high earners held property in their own name (the loss offsets a high marginal rate). That reason weakens for new established-property purchases from here.
The 50% CGT discount is being replaced
For individuals, trusts and partnerships, the 50% capital gains tax discount is being replaced with cost base indexation plus a 30% minimum tax rate on capital gains, for gains that accrue after 1 July 2027. Investors in new builds will be able to choose the old 50% discount or the new arrangement. (Source: Australian Taxation Office; Baker McKenzie analysis.)
Why it matters to structure: the 50% discount applied to individuals and trusts equally, so it was never a reason to prefer a trust. But companies never got the discount. As the discount is replaced by indexation across the board for individuals and trusts, one of the historic arguments against companies softens at the margin, while the case for individuals and trusts on CGT also changes. Everyone needs to re-model.
A 30% minimum tax on discretionary trusts
This is the one aimed squarely at the trust. The Government has announced a 30% minimum tax on discretionary trust income from 1 July 2028. It is not yet law. It would apply at the trustee level: if a discretionary trust distributes income to beneficiaries on marginal rates below 30%, the trustee faces a top-up tax to bring the effective rate to 30%. (Source: Australian Taxation Office.)
Read that twice, because it removes the core tax trick of the discretionary trust: distributing income to a low-income spouse, an adult child at university, or a retired parent to be taxed at their lower rate. If that distribution is going to be topped up to 30% anyway, the income-splitting advantage largely disappears for distributions to low-rate beneficiaries.
To soften the transition, the Government has flagged rollover relief running from 1 July 2027 to 30 June 2030, intended to let family groups restructure out of discretionary trusts into companies or fixed trusts without triggering an immediate CGT or stamp duty bill. (Source: RSM Australia; Holding Redlich.)
Important context on trusts, and we will repeat it: these proposals are not yet legislated and are not due to take effect for a couple of years. But the legislative direction is set. Anyone setting up a trust today should be modelling both the current rules and the announced direction, because a structure that works under today’s rules may need restructuring under the new ones. Your accountant needs to run both.
Individual or joint name: the default that got stronger
Most residential investors, including high earners, still hold property in their own name or jointly with a spouse. It costs nothing to set up. Currently it carries the 50% CGT discount on assets held more than 12 months (until the indexation change applies to gains accruing after 1 July 2027). Losses currently offset other income, subject to the negative-gearing changes above.
The trade-offs are real. There is no income-splitting flexibility beyond how you hold title. There is limited asset protection: the property sits in your personal name, exposed to your personal creditors and to family law. And a high-income owner pays tax on rental profit at their marginal rate, which can reach 47% including the Medicare levy.
For straightforward buy-and-hold, this is still the structure lenders fund most easily and price most keenly. That matters more than it sounds, and we will come back to it.
Discretionary (family) trust: powerful, but the halo is fading
A discretionary trust holds the property through a trustee, with income distributed at the trustee’s discretion among a class of beneficiaries. Setup runs roughly $1,500 to $3,000 plus ongoing accounting each year. (Source: Capital Five Partners.)
What a trust is genuinely good at
Asset protection. Because the trustee holds legal title and beneficiaries have no fixed entitlement, assets inside a properly run discretionary trust are generally harder for a beneficiary’s personal creditors to reach. For business owners and professionals exposed to litigation risk, that protection can be the whole reason to use a trust, independent of any tax outcome.
Distribution flexibility and succession. A trust can direct income to different beneficiaries year to year and can pass control across generations without the asset changing hands. Those features are not affected by the tax announcements.
What just got weaker
The income-splitting tax advantage. The proposed 30% minimum trust tax from 1 July 2028 targets exactly the move that made trusts tax-efficient for families with a high earner and lower-income relatives. If it becomes law, distributing to a sub-30% beneficiary stops producing the saving it once did.
The CGT angle was never a trust-specific win. Trusts got the same 50% discount individuals did, and that discount is being replaced for both.
The land tax trap people forget
In NSW, a discretionary trust is deemed a “foreign trust” and hit with surcharge land tax unless its deed specifically and irrevocably excludes foreign persons as beneficiaries. The foreign owner surcharge is 5% for the 2026 land tax year, and it applies from the first dollar of land value with no tax-free threshold. Many older trust deeds were drafted with a wide beneficiary class and fail this test by default. (Source: Revenue NSW; NSW Government.)
A trust can be a strong choice for the right investor with a genuine asset-protection need. It is no longer the automatic answer for a high earner chasing a tax outcome. Your accountant needs to model whether the protection benefit justifies the cost and complexity now that the tax edge is narrowing, and they need to factor in the announced direction. This is general information, not personal tax advice.
Self-managed super fund: a retirement tool, not a portfolio engine
An SMSF can buy investment property, but inside a tight box. It is the most restricted structure here and the rules are enforced firmly.
How the lending works
An SMSF can only borrow through a Limited Recourse Borrowing Arrangement (LRBA). Borrowed funds buy a single asset held in a separate bare trust until the loan is repaid, and if the fund defaults the lender can only take that one asset, not the rest of the fund. Each property needs its own arrangement. You cannot use the loan to fund structural improvements that change the character of the property. (Source: Moneysmart; ATO.)
The sole purpose test
Everything the fund does must be solely to provide retirement benefits. No member or related party can live in, holiday in, or take any personal benefit from an SMSF-owned residential property. Break that and the consequences are severe.
The tax profile (the current rules)
Inside super, rental income is taxed at 15%, long-term capital gains are taxed at an effective 10%, and earnings supporting a pension can be 0%. That concessional treatment is the attraction. But layered on top is Division 296: legislated in March 2026 and effective from 1 July 2026, it adds an extra 15% tax on earnings attributable to total super balances above $3 million, rising to 25% on balances above $10 million. (Source: SuperGuide; Heffron.)
For someone building a $3m to $10m property portfolio, Division 296 is not a footnote. A large SMSF property holding can push a total super balance over the threshold and into the extra tax. Whether an SMSF fits has to be assessed against your whole retirement strategy, your contribution caps, and your time to preservation age. That is a conversation for you, your accountant and an SMSF specialist, not a default. General information only, not personal advice.
Company: stronger than its reputation, on the right asset
A company holding property pays a flat rate on its profit. For years the standard line, including an earlier draft of this article, was that companies are rarely right for residential. That is too blunt. The honest answer is that a company is a yield-versus-growth decision, and on the right asset it can be one of the strongest structures available.
Where a company wins: income
A company pays a flat 30% on rental profit. Against a high earner’s marginal rate of up to 47% including the Medicare levy, that is a real and repeating saving, and on a higher-yielding asset where income is a large part of the return it compounds year after year. (Source: ATO.)
Two things make this stronger in 2026, not weaker. First, the proposed 30% minimum tax on discretionary trusts from 2028 removes the trust’s income-splitting advantage, so on income a company and a trust now sit close to level at around 30%. Second, a company can retain and reinvest. Profit taxed at 30% can be held inside the company and redeployed into the next deposit at a 30% cost, rather than the roughly 53 cents in the dollar a top-rate individual keeps. A discretionary trust generally cannot do this, because undistributed trust income is taxed at the top marginal rate, which forces the income out each year. For an investor compounding a portfolio, that retention capacity is the company’s quiet advantage, and franking credits attach to the eventual dividends so the 30% is not lost.
Where a company loses: capital growth
Companies are carved out of the new capital gains tax regime. From 1 July 2027, individuals and trusts swap the 50% discount for cost base indexation, but companies keep their existing treatment, which means no discount and no fresh indexation. (Source: Australian Taxation Office; BDO.) On a long-held growth asset, a company therefore pays tax on the whole nominal gain, while an individual or trust is taxed only on the real gain above inflation. The lower the yield and the more the return rides on capital growth, the more that exit cost counts against the company.
The practical detail that matters
The rate is 30%, not 25%. The 25% base rate entity rate requires no more than 80% of income to be passive, and rent is passive income, so a company that mostly collects rent usually fails the test and pays 30%. (Source: Wolters Kluwer.)
Losses are not wasted, they are banked. A company cannot pass a rental loss out to you to offset your salary, but it can carry that loss forward indefinitely to offset the company’s future profits, subject to the usual loss-recoupment tests. As negative gearing against personal income is narrowed for established property from 2027, a structure that quarantines a loss and carries it forward against future rental income becomes more relevant, not less. Your accountant confirms the loss tests are satisfied for your company.
Getting the money out is its own step. The 30% is a genuine saving while profits stay in and are reinvested. Take them as a dividend and you top up to your marginal rate, so the benefit was deferral rather than an absolute saving. Take them as a loan and Division 7A rules impose minimum interest and repayments. The common high-end resolution is a company owned by a discretionary trust, which keeps the company rate and franking while restoring distribution flexibility on the post-tax profit.
So a company suits income-focused and commercial holdings, developments, and investors who will genuinely retain and reinvest. It is weaker for a low-yield house bought purely for capital growth. Which side of that line your purchase sits on is a question for your accountant to model against your full position. General information only, not personal tax advice.
What no one else is saying
The 2026 structure decision is a lending decision as much as a tax decision, and the comparison articles are silent on it. Every structure changes what you can borrow, how much, at what rate, and from whom. The Budget is shrinking the tax gaps between these structures. As those gaps close, the borrowing differences become the deciding factor, and almost nobody comparing trust vs SMSF vs company online accounts for it. This is a research-led insight, not a personal recommendation.
Here is the part that sits in our lane rather than the accountant’s. Two investors with identical incomes and deposits can end up with very different borrowing capacity purely from the structure they choose.
A loan to a discretionary trust usually needs personal guarantees from the directors of the trustee company, and not every lender prices trust loans the same way or counts trust-distributed income the way you expect. An SMSF loan through an LRBA is a narrow, specialist market: fewer lenders, lower loan-to-value ratios (often around 70% to 80% for residential, lower for commercial), higher rates, and no ability to top up later. A company loan is assessed on the company plus director guarantees and can interact awkwardly with serviceability. Personal ownership is, bluntly, what the widest set of lenders fund most cheaply.
This compounds with a constraint we have written about before: APRA’s debt-to-income settings mean the structure that preserves the most usable borrowing capacity, across the most lenders, is often worth more to a portfolio builder than a marginal tax saving in any single year. (See our piece on what APRA’s DTI rules mean for high-income investors and the borrowing capacity audit.) Lock the wrong structure to a single lender’s appetite and you can cap your own portfolio before it starts, the same way cross-collateralisation quietly does.
How lenders actually treat each structure
A practical summary of the borrowing reality, structure by structure. This is the broker’s column, and it is where the real-world constraint usually shows up.
Individual or joint name. The widest lender panel, the sharpest pricing, the simplest assessment. Income is your income, guarantees are straightforward. This is the benchmark every other structure is measured against.
Discretionary trust. Most major lenders will lend to a trust with a corporate trustee, but you will give personal guarantees, documentation is heavier, and the way trust income is assessed for servicing varies between lenders. The right lender choice matters more here than people assume.
SMSF via LRBA. A specialist segment. Expect fewer lenders, lower LVRs, higher rates, tighter rules, and no scope to increase the loan against that property later. The structure has to be right before you commit, because unwinding it is expensive.
Company. Assessed on the entity and director guarantees, workable for the right purpose, but it interacts with serviceability and Division 7A in ways that need planning. Strong for income-focused holdings, less common for a pure capital-growth house.
The orchestrated answer is rarely “pick the lowest tax rate.” It is “model the tax outcome with your accountant, then choose the structure your lender will fund on terms that let you keep buying.” That coordination, between you, your accountant and your broker, is the actual work. It is what our Property Wealth Strategy and Finance Plan is built to do.
A decision framework: the questions to take to your accountant
Use these to have a sharper conversation. The decision is theirs to model and yours to make. Our job is the lending half.
What is my genuine asset-protection exposure? If you run a business or work in a litigation-exposed profession, the trust’s protection may justify its cost on its own.
What is my real time horizon, and is this money I want locked in super? An SMSF only makes sense if you are comfortable the asset stays in the retirement system until you can access it.
Am I buying for growth or income? Growth assets have historically suited individuals and trusts; higher-yield, income-focused and commercial assets are where a company can earn its keep.
How exposed am I to the announced changes? If income-splitting through a trust is central to your plan, model what happens if the 30% minimum trust tax becomes law in 2028, and whether the 2027 to 2030 rollover window is relevant to you.
Which structure preserves my borrowing capacity? This is the one your accountant cannot answer and we can. Bring us in before the structure is locked, not after.
FAQ
Is a trust still worth it for property in 2026?
It depends on why you want one. If the driver is asset protection or succession, a trust can still be a strong choice. If the driver was income-splitting tax savings, the proposed 30% minimum trust tax from 2028 weakens that case considerably. The proposals are not yet law, so model both scenarios with your accountant before deciding.
What is the best structure to buy an investment property in Australia?
There is no single best structure. For most new residential purchases, individual or joint ownership remains the sensible default. Trusts suit asset-protection needs, SMSFs suit specific retirement strategies, and companies suit income-focused or commercial portfolios. The right answer depends on your tax position (your accountant’s call) and your borrowing capacity (ours).
Can I buy property through my SMSF in 2026?
Yes, within strict limits. The fund must satisfy the sole purpose test, borrow only through a Limited Recourse Borrowing Arrangement, hold the property in a bare trust, and ensure no member or related party derives any personal benefit. SMSF lending is a specialist market with lower LVRs and higher rates.
Does a company pay less tax on an investment property?
It depends on the asset. On rental income, a company’s flat 30% beats a high earner’s marginal rate of up to 47%, and the company can retain and reinvest profit and carry losses forward against future income, which suits higher-yield holdings. On capital growth a company is weaker, because it gets neither the CGT discount nor the new cost base indexation and pays tax on the whole nominal gain. Note the rate is usually 30%, not 25%, because rental income is passive. Your accountant models which effect dominates for your asset.
How did the May 2026 Budget change property structures?
It narrowed negative gearing to new builds from 1 July 2027, replaced the 50% CGT discount with indexation and a 30% minimum tax on gains accruing after 1 July 2027, and announced a 30% minimum tax on discretionary trust income from 1 July 2028. Together these shrink the tax differences between structures.
Will my existing trust or property be affected?
Properties held at the 12 May 2026 announcement are grandfathered from the negative-gearing change. The trust and CGT measures have future start dates and are partly not yet legislated. Existing arrangements should be reviewed against the announced direction with your accountant, who can also advise on the 2027 to 2030 restructure rollover.
Does the structure I choose affect how much I can borrow?
Yes, significantly. Lender panels, loan-to-value ratios, pricing and servicing assessment all differ by structure. Two investors with identical incomes can have materially different borrowing capacity depending on whether they buy personally, in a trust, in a company or through an SMSF.
The bottom line
For years the investment property ownership structure conversation was a tax conversation, and the discretionary trust usually won it. The May 2026 Budget has quietly changed that. As the tax gaps between structures close, the decision shifts to the things that were always there underneath: how well the structure protects your assets, how it fits your retirement plan, and, the part most people miss, how much it lets you borrow and from whom.
Get the structure right and your portfolio compounds. Get it wrong and you can cap your own borrowing or lock yourself into a vehicle that is expensive to unwind. The smart move is to model the tax outcome with your accountant and the lending outcome with your broker, before you sign anything.
That is the conversation we have every week. If you are weighing up how to hold your next purchase, book a complimentary 30-minute strategy call and we will map the lending side of the decision with you: buildprotectfs.com.au/contact. You can also start with our free guides at buildprotectfs.com.au/guides.
Sources
- Australian Taxation Office, Tax reform: reforming negative gearing and capital gains tax: https://www.ato.gov.au/about-ato/new-legislation/in-detail/individuals/tax-reform-boosting-home-ownership-reforming-negative-gearing-and-capital-gains-tax
- Australian Taxation Office, Tax reform: introducing a minimum tax on discretionary trusts: https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/tax-reform-introducing-a-minimum-tax-on-discretionary-trusts
- Australian Taxation Office, Changes to company tax rates: https://www.ato.gov.au/tax-rates-and-codes/company-tax-rate-changes
- Australian Taxation Office, Ownership of SMSF investments: https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-investing/ownership-of-smsf-investments
- Australian Government, Budget 2026-27, Tax reform: https://budget.gov.au/content/04-tax-reform.htm
- Moneysmart (ASIC), SMSFs and property: https://moneysmart.gov.au/property-investment/smsfs-and-property
- Revenue NSW, Land tax and trusts: https://www.revenue.nsw.gov.au/taxes-duties-levies-royalties/land-tax/trusts
- NSW Government, Adjustment to foreign investor surcharges and indexation of land tax thresholds: https://www.nsw.gov.au/media-releases/adjustment-to-foreign-investor-surcharges-and-indexation-of-land-tax-thresholds
- Reserve Bank of Australia, Monetary policy decision June 2026 (cash rate 4.35%): https://www.rba.gov.au/media-releases/2026/mr-26-12.html
- Baker McKenzie, Australia Budget Bites: CGT discount and negative gearing: https://www.bakermckenzie.com/en/insight/publications/2026/05/australia-budget-bites-cgt-discount-and-negative-gearing
- RSM Australia, Federal Budget 2026: implications for property, capital gains and trusts: https://www.rsm.global/australia/insights/federal-budget-2026/implications-property-capital-gains-trusts
- Wolters Kluwer, Demystifying base rate entities: https://www.wolterskluwer.com/en-au/expert-insights/demystifying-base-rate-entities
- SuperGuide, Division 296 super tax explained: https://www.superguide.com.au/super-booster/super-tax-accounts-3-million
Build & Protect Financial Services. Credit Representative 539491 of Australian Finance Group Ltd (ACN 066 385 822), Australian Credit Licence 389087. This article is general information only and does not constitute personal financial, credit or tax advice. Tax strategy and structure decisions should be made with your accountant, who knows your full picture. Consider your own circumstances and seek advice from a licensed professional before acting.