Land Tax: Individual vs Trust Ownership
Trust structures have long been popular for property investment, offering asset protection and flexible income distribution. But several states now impose land tax surcharges on trusts, making the decision more complex. Here's how individual and trust ownership compare for land tax purposes.
| Individual Ownership | Trust Ownership | |
|---|---|---|
| NSW threshold | $1,075,000 | $1,075,000 (+ 2% foreign trust surcharge) |
| VIC threshold | $50,000 | $25,000 (lower) + 0.375% surcharge |
| QLD threshold | $600,000 | $600,000 + 0.5% surcharge |
| PPR exemption | Available | Not available |
| Asset protection | Limited | Strong |
| Income distribution | Fixed to owner | Flexible across beneficiaries |
Trust Surcharges by State
The following surcharges apply to land held in trusts (including discretionary/family trusts):
Victoria
- Surcharge: 0.375% on total land value
- Trust threshold: $25,000 (vs $50,000 individual)
- On $500k land: ~$4,685 extra vs individual
Queensland
- Surcharge: 0.5% on total land value
- Same threshold as individuals: $600,000
- On $800k land: $4,000 extra vs individual
NSW note: NSW imposes a 2% surcharge on trusts where the trust deed allows foreign persons as beneficiaries. Standard family trusts without foreign beneficiary provisions are generally treated the same as individuals.
Victoria: The Biggest Impact
Victoria's trust surcharge has the most significant impact due to the combination of a lower threshold and the surcharge rate. Here's a comparison for a $750,000 land value:
Individual ($750k land, VIC)
- Threshold: $50,000
- Standard land tax: ~$2,975
- Total annual cost: $2,975
Trust ($750k land, VIC)
- Threshold: $25,000
- Standard land tax: ~$3,369
- Trust surcharge: $2,813
- Total annual cost: $6,182
When Individual Ownership Makes Sense
- You live in VIC or QLD: The trust surcharges add significant annual costs
- PPR exemption is important: Trusts cannot claim the principal place of residence exemption
- Simple portfolio: One or two investment properties without complex succession needs
- Low risk profile: No significant litigation or creditor risks in your profession
When Trust Ownership Still Makes Sense
- Asset protection: Shielding property from personal creditors, litigation, or business risk
- Estate planning: Easier succession without triggering stamp duty or CGT on death
- Income splitting: Distributing rental income to lower-income family members
- NSW properties: No trust surcharge for standard family trusts in NSW
- Commercial property: Trust surcharges typically only apply to residential land
- Large portfolios: Where income distribution benefits outweigh the surcharge costs
Aggregation Rules
Land tax is calculated on the total value of all taxable land owned by the same entity in a state:
- An individual's properties are aggregated under their name
- A trust's properties are aggregated under the trustee
- Properties held by different entities are assessed separately
- This means splitting between individual and trust can create two separate assessments, each below the threshold
- Caution: Some states have related-party rules that can aggregate across entities
Calculate your land tax under each structure
Model individual vs trust ownership scenarios with state-specific rates and surcharges.
Open Land Tax CalculatorsFrequently Asked Questions
What is the land tax surcharge for trusts in NSW?
NSW imposes a 2% land tax surcharge on residential land held by trusts where the trust deed allows foreign persons to be beneficiaries (known as foreign person surcharge trusts). Standard discretionary trusts without foreign beneficiary provisions are generally not subject to this surcharge and are treated the same as individuals.
How much extra land tax do trusts pay in Victoria?
In Victoria, trusts pay a surcharge of 0.375% on the total taxable land value, in addition to the standard land tax rates. Trusts also have a lower tax-free threshold of $25,000 compared to $50,000 for individuals. This means a trust with $500,000 in land value pays significantly more than an individual with the same holdings.
Can a trust claim the principal place of residence exemption?
No. The principal place of residence (PPR) exemption is only available to individuals who own and live in the property. A property held in a trust cannot claim this exemption, even if a beneficiary of the trust lives in the property. This is an important consideration when deciding between individual and trust ownership.
When does trust ownership still make sense despite land tax surcharges?
Trust ownership can still be advantageous for asset protection from creditors and litigation, estate planning and succession, income distribution flexibility across family members, and holding commercial property where surcharges may not apply. The land tax surcharge cost should be weighed against these benefits with professional advice.