One of the most common questions property investors ask me is:
“What is the best structure to buy my investment property in?”
The answer is almost never straightforward, even though I wish I was.
That’s because the “right” structure depends on far more than simply tax rates. It depends on your income, family circumstances, borrowing capacity, future investment plans, land tax exposure, cash flow requirements, and where you are in your investment journey.
A structure that works brilliantly for one investor can create unnecessary tax, land tax, and borrowing complications for another.
Choosing the wrong structure can cost tens of thousands of dollars over time. Choosing the right one can create flexibility, improve tax efficiency, preserve borrowing capacity, and support long-term wealth creation.
In this blog, I’ll try to elaborate as much as I can to tell you what you need to consider.
The Four Main Structures
Most Australian property investors purchase through one of four structures:
Each comes with different implications for:
Land tax is often overlooked, yet it can materially change which structure makes sense.
This is particularly important if you are buying in New South Wales, where land values can escalate quickly.
Example: Buying a NSW Investment Property
Assume:
If purchased in personal name or company
If eligible for the threshold, no land tax may apply until total taxable land holdings exceed the threshold.
Annual land tax payable: $0
If purchased in a discretionary trust
Most discretionary trusts in NSW do not receive the general land tax threshold.
This means land tax may apply from the first dollar.
Using a simplified example:
If annual land tax were approximately 1.6% of taxable land value:
$900,000 × 1.6% = $14,400 per year
Over 10 years:
$144,000
That is a massive structural cost difference.
This is one of the clearest examples of why structure selection should never be based solely on “tax flexibility.”
A trust may offer income distribution benefits, but if the land tax cost significantly outweighs those benefits, another structure may be more appropriate.
Structure decisions should never be made in isolation.
The real question is:
What do you already own in each state?
If you already hold:
… your next purchase should be assessed strategically.
Adding another NSW property to your personal name may push you over land tax thresholds and materially increase annual holding costs.
Alternatively, purchasing interstate may diversify exposure and preserve tax efficiency.
Example: Existing NSW Portfolio Exposure
Investor currently owns:
Total NSW taxable land:
$1,050,000
Now they purchase another property with land value of:
$300,000
Total:
$1,350,000
This pushes them above threshold and may trigger annual land tax.
A better strategy may have been:
A major mistake investors make is structuring only for the immediate purchase.
The better question is:
What does property number two, three, and four look like?
The right structure should support future borrowing capacity.
For example:
If buying personally today causes your servicing to tighten significantly, it may restrict your ability to acquire the next property.
If a company or trust structure better supports income retention, debt recycling, or lender servicing outcomes, it may improve long-term scalability. This is where having an investor focused strategic broker and buyers agent, may assist with your property portfolio building (if this is one of your longer term goals).
This is why strategic investors plan several acquisitions ahead.
Example: Yield and Borrowing Strategy
Investor buying:
Property A
Low yield creates cash flow pressure.
If held personally and negatively geared:
Interest + expenses = $42,000
Rent = $26,600
Annual loss: $15,400
At a 47% marginal tax rate:
Tax benefit = $7,238
Net after-tax holding cost: $8,162
This may make personal ownership attractive.
*IMPORTANT note that the above calculation is only an example and following the 12 May 2026 Federal Budget announcement, negative gearing may be limited to those with existing properties, or from 1 July 2027, applicable to new builds (and other exceptions) only.
However, if the next acquisition is intended to be:
Property B
Then this purchase is likely closer to neutral or even positively geared depending on the deposit sit, so negative gearing is not a relevant consideration and instead, considering how income/profit should be distributed is more strategic.
Your structure should reflect your family’s medium and long-term goals.
Important questions include:
Example: Trust Distribution Flexibility
Rental profit:
$40,000
If held personally by a taxpayer earning $250,000 PAYG income:
Tax may be approximately:
$40,000 × 47% = $18,800
After-tax income:
$21,200
If held in a discretionary trust and distributed to a lower-income spouse taxed at 30%:
Tax:
$40,000 × 30% = $12,000
After-tax income:
$28,000
Annual tax saving:
$6,800
Savings over 10 years:
$68,000
This is where trust flexibility can be powerful.
Historically, high-income PAYG earners often purchased their first investment property personally to maximise:
For many investors, this strategy made perfect sense.
However, following the 12 May 2026 Federal Budget announcements, the investment property landscape has shifted.
Proposed changes affecting:
mean older “default” strategies may no longer produce the same advantages.
What worked five years ago may no longer be optimal.
Historically:
were often favoured because of the 50% CGT discount after 12 months.
Companies generally do not receive this discount.
That often made company ownership less attractive for long-term growth assets.
However, as tax settings evolve, CGT access may no longer be the dominant deciding factor.
Investors should now weigh CGT alongside:
The type of property you have the budget to purchase matters.
Lower Yield / Higher Growth Asset (3–4% yield)
Often better aligned with:
Higher Yield / Cash Flow Asset (6–8% yield)
May suit:
Example
Property A – Metro located property (eg Brisbane, Perth, Sydney)
Purchase: $900,000
Yield: 3.5%
Better where tax deductions are useful -eg personal purchase.
Property B – Regional Cash Flow
Purchase: $550,000
Yield: 6.1%
Positive cash flow may suit trust distribution strategies.
Different asset classes often justify different structures.
Buying through an Self-Managed Super Fund can offer:
But SMSFs also involve:
An SMSF should only be considered where it aligns with retirement objectives.
There Is No Universal “Best” Structure
As mentioned throughout this blog, the right answer depends on:
This is why sophisticated investors do not make structural decisions based on generic online advice.
They model outcomes.
They assess multiple scenarios.
They coordinate advice across their professional team.
The Best Investment Structure Requires Collaboration
The right structure often requires input from:
At Taxwell Advisory, we help investors assess structure strategically — not just for today’s purchase, but for the portfolio they want to build over the next decade.
Because the best structure is rarely about this property alone.
It is about positioning your entire investment journey for long-term success.
Action Items for Property Investors
Action Items for Family Trusts
The Treasurer handed down the 2026–27 Federal Budget on 12/5/26 night, introducing the most significant proposed changes to investment property, capital gains tax (CGT), and discretionary trust taxation in more than 20 years.
While these measures are not yet law, the current Senate numbers suggest the core reforms are likely to pass, potentially in a stricter form. Most changes commence from 1 July 2027, which creates an important planning window for investors, business owners, and families to review their structures and strategies well before implementation.
Key Proposed Changes
Investment Property & Negative Gearing
From 1 July 2027, negative gearing on residential property will be limited to new builds only.
Importantly:
Capital Gains Tax (CGT) Changes
The current 50% CGT discount will be replaced from 1 July 2027 with:
Key points:
Family Trusts
From 1 July 2028, discretionary (family) trusts will face a 30% minimum tax on distributions.
Exemptions include:
This proposal materially reduces the tax effectiveness of distributing income to low-income adult beneficiaries.
The real implications of this is that the use of Bucket Companies is potentially significantly reduced or made redundant, as distributions from Trust to Bucket Companies does not allow for franking/tax credits.
Superannuation
Notably, superannuation remains untouched.
There are currently:
As a result, superannuation becomes significantly more attractive in terms of tax environment relative to personally held investments.
Action Items if you are a Property Investor
If you currently own investment properties, the key considerations from the Budget Announcements are:
This requires careful consideration of tax payable, cash flow impact, future growth assumptions, refinancing constraints
The proposed changes may reduce demand for established investment properties once new buyers lose access to negative gearing benefits.
Investors should review:
Action Items for Family Trusts
If you have discretionary trusts, you should consider reviewing structures well before 2028.
Areas to assess include:
The proposed rollover window may provide an opportunity to restructure without triggering immediate CGT consequences, noting that ASIC guidance/support on this is yet to be announced.
Key Takeaways
Before considering property investment through an SMSF, it is important to:
For many years, discretionary trusts have been one of the most effective structures for building and holding investment wealth in Australia.
They offered flexibility, strong asset protection benefits, and importantly, the ability to distribute income strategically among family members to legally minimise tax.
However, recent Federal Budget announcements have shifted the conversation.
While the proposed measures have not yet passed into law, they have prompted many investors to reassess whether traditional trust structures will remain as attractive in the years ahead.
As a result, Self Managed Super Funds (SMSFs) are increasingly becoming part of the conversation.
The Changing Tax Landscape for Trust Structures
Historically, discretionary trusts have allowed income distributions to be directed to beneficiaries on lower marginal tax rates.
This meant families could distribute investment income to a spouse or adult family member with little or no taxable income, often achieving an effective tax outcome anywhere between 0% and 30%, depending on the beneficiary mix.
This flexibility has been one of the key reasons trusts have been so widely used for property and wealth accumulation.
However, under the proposed Federal Budget measures, certain trust distributions may effectively be subject to a minimum 30% tax floor.
If implemented, this would significantly reduce the tax arbitrage that has historically made discretionary trusts so effective.
In practical terms, this could cause many trust structures to operate more similarly to companies from a tax perspective, where earnings are generally taxed within the 25% to 30% corporate tax framework, depending on circumstances.
While the legislation is still proposed and not yet law, it has caused investors to start exploring alternative structures.
Why SMSFs Are Receiving Greater Attention
Unlike discretionary trusts, superannuation remains largely unaffected by these proposed changes.
This is where SMSFs become particularly attractive.
Income generated within an SMSF is generally taxed at 15% during accumulation phase, which remains materially lower than most personal marginal tax rates and below the proposed trust tax floor.
The capital gains treatment can also be highly favourable.
Where an SMSF holds an asset for more than 12 months, it generally receives a one-third capital gains tax discount.
This reduces the effective capital gains tax rate from 15% to 10%.
For long term property investors, this can create significant tax efficiencies.
In retirement phase, subject to transfer balance cap limits and eligibility requirements, investment earnings and realised capital gains can potentially become tax free.
This concessional tax treatment is one of the reasons many sophisticated investors are taking a closer look at SMSF property investment.
Does This Mean You Should Buy Property Through an SMSF?
Not necessarily.
While the tax advantages can be compelling, SMSF investing is not suitable for everyone.
Like any structure, it comes with both benefits and trade-offs.
Potential Advantages
Lower ongoing tax environment
Rental income is generally taxed at 15% during accumulation.
Concessional capital gains treatment
An effective 10% CGT rate for assets held longer than 12 months.
Long term retirement wealth creation
Assets are accumulated within a concessionally taxed environment.
Greater control
Members have direct oversight of investment decisions.
Potential tax free retirement outcomes
Depending on circumstances, earnings in pension phase may be tax exempt.
Potential Drawbacks
Strict compliance requirements
SMSFs are heavily regulated by Australian Taxation Office.
Limited access to funds
Super is preserved until retirement conditions are met.
Higher setup and administration costs
Ongoing accounting, audit, compliance and administration obligations apply.
Investment restrictions
SMSFs must satisfy the sole purpose test and comply with strict related party rules.
Borrowing limitations
Property acquisitions generally require limited recourse borrowing arrangements, which can involve more complexity and tighter lending criteria.
SMSF Investing Requires Strategy, Not Hype
There is a growing amount of noise around SMSF property investment.
Some of it is well founded.
Some of it is driven by aggressive property marketing.
The reality is that an SMSF should never be established simply because it appears tax effective.
It should be established because it forms part of a broader, well considered retirement and wealth creation strategy.
If you have:
then establishing an SMSF could be a highly effective structure for building long term wealth.
For disciplined investors with a clear strategy, SMSFs can provide a powerful framework to acquire quality assets in a concessionally taxed environment while maintaining greater control over retirement capital.
The key is ensuring the structure is right for your circumstances, not simply reacting to proposed tax changes.
Final Thoughts
The proposed Federal Budget trust changes have caused many investors to reconsider how they structure future investments.
While trusts remain valuable in many situations, SMSFs are increasingly being recognised as a legitimate alternative for investors focused on long term, tax effective wealth accumulation.
The right structure depends on your goals, timeframe, cash flow, borrowing capacity, and retirement strategy.
SMSF investing is not for everyone.
But for the right investor, with the right advice and a clear long term plan, it can be a highly effective wealth building vehicle.
Disclaimer:
This article is general information only and does not constitute financial product, investment, legal, or taxation advice. Establishing an SMSF involves significant legal and compliance obligations. You should obtain advice from appropriately licensed professionals to determine whether an SMSF is suitable for your personal circumstances
Quick Action Checklist
Before lodging your 2026 tax return, ensure you:
✔ Gather all property-related invoices and receipts
✔ Review your loan statements for deductible interest
✔ Confirm depreciation schedules are up to date
✔ Identify repairs versus capital improvements
✔ Keep accurate rental income and expense records
✔ Seek professional tax advice before claiming unusual expenses
For many Australian property investors, tax deductions can significantly improve cash flow and reduce overall holding costs.
Yet every year, thousands of investors either miss legitimate deductions they are entitled to claim or incorrectly claim expenses that may trigger unnecessary scrutiny from the Australian Taxation Office.
Understanding what you can legally claim in 2026 is essential to maximising after-tax returns while remaining fully compliant.
This guide outlines the key deductions available to Australian investment property owners and the records you need to keep.
Interest charged on money borrowed to purchase, improve, or refinance an income-producing property is generally tax deductible.
This often includes:
Important:
Only the portion directly related to producing assessable rental income is deductible.
If borrowed funds are used partly for private purposes, the interest must be apportioned.
If you engage a property manager, these costs are typically fully deductible.
This includes:
Professional management expenses are generally straightforward claims when properly documented.
Ongoing holding costs associated with your investment property are generally deductible, including:
This is one of the most misunderstood deduction categories.
You can generally claim repairs that restore the property to its original condition, such as:
You generally cannot immediately deduct improvements or upgrades, such as:
These are usually treated as capital works and claimed over several years.
Depreciation is often one of the most overlooked tax benefits available to investors.
This may include deductions for:
Plant and Equipment
Assets such as:
Capital Works
Structural elements such as:
A professionally prepared depreciation schedule can often unlock substantial deductions over many years.
Insurance directly related to your rental property is generally deductible, including:
These costs help protect your investment while reducing taxable income.
Fees paid for managing the tax affairs of your investment property are generally deductible.
This can include:
This is one deduction many investors forget to carry forward.
Costs incurred to secure tenants are generally deductible, including:
These are considered part of generating rental income.
Common Claiming Mistakes Investors Make
Many property owners unintentionally overclaim or underclaim due to:
Claiming improvements as immediate repairs
Missing depreciation opportunities
Incorrectly claiming private-use periods
Poor record keeping
Not apportioning mixed-use loan interest correctly
Even small errors can create unnecessary compliance risk.
Record Keeping Matters More Than Ever in 2026
The ATO’s increasing use of data matching means documentation is critical.
Keep:
Strong records support legitimate claims and simplify tax-time compliance.
Final Thought
Owning investment property offers powerful tax advantages but only when deductions are claimed correctly.
A proactive review of your deductible expenses can improve cash flow, strengthen portfolio performance, and reduce compliance risk.
If you own an investment property and want clarity on what you can legally claim in 2026, speak directly with the founder of Taxwell Advisory.
What Investors Should Do Now
Before the end of the financial year, investors should:
Review existing trust distribution strategies
Assess whether bucket company arrangements remain effective
Model the impact of the proposed tax reforms
Revisit retained earnings strategies
Seek professional tax advice before making year-end decisions
For years, discretionary trusts and bucket companies have been powerful structuring tools for Australian investors and business owners.
But with the proposed 2026 Federal Budget reforms, many investors are now asking:
Is this the end of bucket companies and traditional trust strategies?
Not quite.
The proposed changes may significantly reshape how these structures are used, but they do not make them obsolete.
What they do signal is a shift away from outdated, passive tax planning and toward more strategic, actively reviewed structuring
Early review creates options.
Waiting until after legislation is finalised may leave fewer opportunities to adapt.
Why Bucket Companies Became So Popular
Bucket companies became widely used because they provided a practical way for discretionary trusts to manage taxable income.
Rather than distributing all trust income to individuals who may already be taxed at higher marginal rates, trustees could distribute surplus income to a company taxed at the corporate rate.
This provided two key advantages.
Lower Immediate Tax Exposure
For many investors, this created an opportunity to cap tax payable at the corporate tax rate rather than individual marginal rates.
Greater Timing Flexibility
Income retained in the company could often be managed strategically over future years through dividends and franking credit planning.
This made bucket companies a highly effective tax deferral mechanism for many sophisticated investors.
What Has Changed in 2026?
The proposed 2026 reforms are aimed at tightening trust taxation and reducing perceived tax deferral advantages.
While legislation is still progressing, the key policy direction suggests:
The Australian Taxation Office has also continued increasing data matching and compliance activity around trust structures.
The overall message is clear:
Traditional trust planning strategies are under greater regulatory focus.
Are Trusts Still Worth It?
Absolutely.
One of the biggest misconceptions is that trusts exist purely for tax minimisation.
In reality, trusts continue to offer significant strategic benefits beyond tax outcomes.
Asset Protection
A well-structured trust can help separate investment assets from personal ownership risks.
Estate Planning Flexibility
Trust structures can provide greater control over how wealth is managed and transferred across generations.
Investment Structuring
Trusts can still provide flexibility for long-term portfolio growth, succession planning, and strategic ownership arrangements.
The purpose of trusts is evolving, not disappearing.
What About Bucket Companies?
Bucket companies are not necessarily dead.
What is changing is their role.
Where they were previously used primarily for short-term tax deferral, investors now need to assess whether they continue to deliver strategic value.
A bucket company may still remain appropriate where:
Retained capital accumulation is part of the broader strategy
Franking credit planning remains relevant (this is subject to the final version of the tax reform)
Long-term business or investment structuring requires corporate retention
The question is no longer whether every trust should have one.
The question is whether it still serves your broader financial strategy.
The End of Set-and-Forget Structuring
The biggest takeaway from the proposed reforms is this:
Static structures are becoming riskier.
What worked five years ago may no longer be optimal in 2026 and going forward.
Sophisticated investors are moving toward proactive annual reviews rather than relying on structures established years earlier without reassessment.
Tax structuring is no longer something to set up once and ignore.
It requires ongoing strategic review.
Final Thought
Bucket companies and trusts are not dead.
But the era of passive, automatic tax planning may be ending.
The 2026 tax reforms are a reminder that effective structuring requires ongoing review, adaptation, and strategic advice.
For investors operating through trusts or corporate beneficiary structures, now is the time to review whether your current strategy remains fit for purpose.
Disclaimer
This article is general information only and does not constitute taxation, legal, or financial advice. The proposed 2026 reforms are subject to legislative change and outcomes will depend on individual circumstances. Professional advice should be obtained before acting on this information.
Yes. We assist with establishing discretionary trusts, companies, and SMSFs, while providing practical guidance on how to operate them correctly.
We work with property investors, business owners, professionals, family groups, and individuals needing help with an Accountant who they can rely on, pick up the phone to call or email before major decisions are made to advise them on the immediate and longer term tax outcomes.
The right structure depends on your income, asset position, investment goals, risk profile, and long-term plans. We assess your circumstances and provide tailored recommendations designed for both tax efficiency and asset protection. The best is to contact and speak with the founder directly, to assess your situation, obligation free.
There is no one-size-fits-all answer. A helpful and detailed answer is provided in our Insights section. Contact the founder directly to discuss the tax implications on each of the above structures.
Please refer to our Fees section for full details. Our pricing is highly competitive, reflecting our specialist focus on structuring and advisory services for property investors, including Trusts, Companies, and SMSFs. By staying highly specialised, we keep our service model efficient while delivering a more personalised and tailored experience for each client.
No. Too often we see extra fees added for what should be included in standard accounting services. At Taxwell, we believe building strong client relationships is the most important part of what we do. If there are additional fees for specific professional work outside the agreed scope, this will always be disclosed upfront prior to any work commencing, so there are no surprises. This approach is designed to build confidence and make it easy for our valued clients to reach out with any questions or needs, so we can help you improve your position both immediately and in the long term.
You will deal directly with the founder of Taxwell every step of the way, rather than being passed between junior staff or offshore teams. This ensures you receive consistent, high-level advice and direct access when making important tax and structuring decisions.
Yes. We work with property investors to ensure they are claiming all available deductions, structuring correctly, managing capital gains tax implications, and implementing tax planning strategies within Australian tax law.
Not necessarily. An SMSF can be a powerful investment structure for the right circumstances, but it is not suitable for everyone. We help assess whether it aligns with your broader financial goals. See my detailed article for more educational content. Reach out to the founder directly to understand the tax implications and annual compliance requirements of SMSF. Also check out our Insights section on SMSFs in general.
Timeframes vary depending on the structure and documentation required, but most straightforward setups can typically be completed within 3–5 business days once all required information has been provided. If you need urgent help, reach out to founder directly, and we can discuss if faster alternatives (1-3 business days) are viable. For SMSFs used for property investment, additional time is usually required. This is due to multiple setup checkpoints, regulatory requirements at establishment stage, and the time involved in super fund rollovers. In these cases, you should allow approximately 2–4 weeks for the SMSF to be fully established and ready to purchase property.
Simply contact the founder directly via phone call, WhatsApp, or email. We’ll review your current position, identify opportunities, and recommend practical next steps tailored to your circumstances.
This is usually an obligation free call with our founder directly where we understand your current position, discuss your objectives, identify risks or opportunities, and provide practical recommendations for the most effective next steps.
Yes. Many clients engage Taxwell for specialist advice and structuring while continuing to work with their existing accountant for personal tax returns.Our specialty is company, trust, and SMSF setup and ongoing compliance, allowing us to work alongside your existing advisers to ensure your structures are set up and managed correctly.
We take a proactive approach focused on strategy, structure, and long term planning, not just yearend compliance and tax returns. We believe your accountant should be someone you can rely on throughout the year as your circumstances change and important decisions arise. At Taxwell, we work closely with clients to provide practical tax advice when it matters most, particularly around major decisions such as property investment, structuring, and long term wealth planning.
No. Our specialist focus is on company, trust, and SMSF setup, compliance, and strategic tax advisory. In most cases, personal tax returns are handled directly by the client or their general accountant, while Taxwell provides specialist accounting for the more technical structuring and compliance requirements of company, trust and SMSF. This allows us to remain highly focused in the areas where we provide the greatest value.
