Should You Buy Property Under a Trust or in Your Own Name? Here’s How to Decide

‍

Not sure whether to buy in your own name or under a trust? You’re not alone! Many buyers don’t realize a trust can be an option—let alone how it works.

‍

At Search Property, we help buyers navigate these decisions with expert guidance tailored to their investment goals. In this blog, we’ll break down what a trust is, its pros and cons, and whether it’s the right choice for you.

‍

‍

What Is a Trust Structure?

‍

‍

A trust is a way of owning property where one person or company holds the asset on behalf of someone else. In simple terms, you control the property, but you’re not the legal owner—someone else holds it for you.

‍

This setup can provide benefits like asset protection and tax advantages, but it also comes with downsides. Before deciding if it’s right for you, it’s important to weigh both the pros and cons of buying under a trust structure. Let’s break it down.

‍

‍

Advantages 

‍

Asset Protection

A trust helps shield your property from legal and financial risks. Since the trust legally owns the property—not you—creditors or legal claims against you personally can’t access it. This structure adds an extra layer of security for your assets.

‍

Tax Flexibility & Income Distribution

Owning property in a trust allows for greater flexibility in managing taxable income. Instead of all rental income or capital gains being taxed at your personal rate, a trust can distribute income to beneficiaries in lower tax brackets, helping to manage overall tax obligations.

With the trustee overseeing distributions, this structure supports long-term financial planning.

‍

‍

Disadvantages 

‍

Higher Costs

Setting up and maintaining a trust can be expensive. Trusts require ongoing legal and accounting fees, including a separate tax return, making them costlier than owning property in your name.

‍

Limited Use of Tax Losses

If your property makes a loss, you can’t use it to reduce your personal taxable income like you can when owning property directly. Instead, losses stay within the trust and can only offset future profits from the trust itself.

‍

Harder to Get Loans

Getting a home loan through a trust is more complicated. Lenders may require extra paperwork, and some banks don’t lend to trusts at all. If you own multiple properties under different trusts, managing loan applications can become even more challenging.

‍

‍

Buying property in your own name 

Buying property in your own name is straightforward and cost-effective, making it a popular choice for many investors and homeowners. 

‍

‍

Advantages 

‍

Cost Effective

One of the key advantages is simplicity—there are fewer legal and administrative complexities compared to purchasing through a company or trust. 

‍

Easier Borrowing Power 

Banks prefer lending to individuals, often offering better interest rates and loan terms. Additionally, individuals can benefit from tax advantages such as negative gearing, capital gains tax discounts (if held for over 12 months in Australia), and the ability to claim deductions related to the property. 

‍

‍

Disadvantages 

‍

Asset Protection

Personal ownership also comes with risks, particularly in terms of asset protection. If you face financial difficulties, legal disputes, or bankruptcy, the property could be at risk of creditors' claims. 

‍

Tax Flexibility 

High-income earners may face significant tax burdens on rental income, as it is taxed at their marginal rate. While personal ownership is a simple and accessible option, it may not provide the same level of tax flexibility or asset protection as other structures like trusts.

‍

‍

Which Option Is Right for You?

‍

‍

There’s no one-size-fits-all answer—it all depends on your financial situation, investment goals, and long-term plans.

‍

A trust could be a great option if you’re looking for asset protection, tax flexibility, and estate planning benefits. However, if you’re concerned about higher costs, implications, or complex loan approvals, buying in your personal name may be the better choice.

‍

At Search Property, we help buyers navigate these decisions with expert insights tailored to their needs. Before making a decision, it’s always best to consult a qualified accountant or financial advisor to ensure you choose the right structure for your goals. Book a FREE discovery call with our Search Property team. Feel free to watch the full breakdown in our YouTube video here.