Should You Buy Property Through a Trust Under the New CGT Rules?

First things first: none of this is law yet

Before getting into opinions, this part matters. The changes announced in the 2026–27 Federal Budget are proposed measures, not legislated law. Legislation still needs to pass through Parliament, consultation is ongoing, and final details may still evolve.

That means uncertainty. And uncertainty creates noise.

So treat everything below as the framework currently on the table. Not the final rulebook.

What has actually been proposed?

The first is capital gains tax. From 1 July 2027, the proposal replaces the 50 per cent CGT discount for individuals, trusts and partnerships with cost base indexation and a minimum 30 per cent tax rate on capital gains. The change is prospective. 

Gains that accrued before 1 July 2027 are intended to keep the 50 per cent discount. And new builds would have a choice between the old and new arrangements.

The second is negative gearing. From 1 July 2027, negative gearing is proposed to be limited to new builds. For established residential property purchased after Budget night, 7.30pm on 12 May 2026, rental losses would be quarantined. 

They could only be applied against residential property income or capital gains, and carried forward. Properties held before Budget night are expected to be grandfathered.

The third is the one aimed squarely at trusts. From 1 July 2028, trustees of discretionary trusts would pay a minimum tax of 30 per cent on the taxable income of the trust. Beneficiaries, other than companies, would receive a non-refundable credit for the tax paid by the trustee.

Non-refundable.

Because that is where the income splitting benefit of a family trust largely disappears. If a beneficiary is on a marginal rate below 30 per cent, the excess credit is lost. If they are above it, they pay top up tax anyway.

Why trusts are suddenly in the spotlight

For years, the pitch for buying property through a discretionary trust rested on a few pillars.

Income splitting across family members on lower tax rates. The 50 per cent CGT discount flowing through to beneficiaries. Asset protection. Estate planning flexibility.

Under the proposed rules, the first two pillars take a direct hit. The minimum trust tax compresses the benefit of streaming income to lower rate beneficiaries. And the CGT discount itself is being replaced for individuals, trusts and partnerships alike.

So the obvious question follows. If the tax advantages shrink, what is left?

What buying through a discretionary trust could actually look like

This is the part I think people need to hear clearly. If a discretionary trust buys an established residential property today, after Budget night, and the proposals become law, three layers apply.

Rental losses are quarantined to residential property income and gains. Capital gains accruing from 1 July 2027 face indexation and the 30 per cent minimum, not the 50 per cent discount. And from 1 July 2028, the trust’s net income itself sits under the trustee level minimum tax.

That is a very different equation to the one investors were running two years ago.

The part most people forget about trusts and negative gearing

Discretionary trusts were never a great negative gearing vehicle in the first place. Under long standing trust rules, losses cannot be distributed to beneficiaries. They stay trapped inside the trust until the trust has income to absorb them.

So if your main reason for buying property was offsetting rental losses against your salary, a discretionary trust never did that for you anyway. That was always a buy-in-your-own-name strategy.

Which means the proposed changes do not kill a trust benefit that existed. On the negative gearing side, they mostly narrow a gap that was already there.

So is the trust structure dead?

No, but the reasons for using one are changing. Asset protection has not gone anywhere. Neither has estate planning. For business owners, professionals and families with genuine protection needs, those benefits were never about tax in the first place.

And the proposal contains carve outs worth knowing about. Fixed trusts and widely held trusts are expected to sit outside the minimum tax. So are complying super funds, charitable trusts, special disability trusts, deceased estates, and testamentary trusts in existence at Budget night.

There is also proposed rollover relief from 1 July 2027, running for three years, to let people restructure out of discretionary trusts into companies or fixed trusts without triggering income tax consequences.

That last point matters. Because it tells you the government expects structures to change, and is building a window for it.

What should you actually do right now?

Two things. And the order matters.

First, do not restructure anything based on an announcement. Winding up or shifting assets out of a trust before the rules are settled, and before the rollover window opens, can trigger CGT and stamp duty costs the relief is specifically designed to avoid. 

Plan now. Execute when the legislation is settled. And do it with a qualified accountant or tax adviser who knows your full position, because structure decisions are personal and this article is general information, not advice.

Second, come back to the asset. Because here is the truth about structures.

A trust does not make a weak property strong. A company does not make a poor location good. And no structure rescues an overpriced purchase.

If I was speaking with an investor today, the questions I would care about first are the same ones I always care about:

Is this a quality asset in a genuinely undersupplied location Is there real, durable rental demand Does the purchase still stack up without leaning on tax treatment Can you hold it comfortably through the full cycle

Get those right, and the structure conversation becomes a refinement. Get those wrong, and no structure saves you.

So should you buy through a trust under the new CGT rules?

Honestly? It depends. And anyone giving you a blanket yes or no is not doing the thinking.

For some investors, asset protection and estate planning will still justify a trust, even with a thinner tax case. For others, especially those relying on negative gearing against salary income, buying in personal names was always the cleaner path, and the proposed rules only reinforce that. And for new builds, the picture is different again, with negative gearing retained and a choice of CGT treatment on the table.

The reality is this. Structure follows strategy. Not the other way around.

Final word

The Federal Budget has put trusts, negative gearing and the CGT discount all on the operating table at once. If the proposals pass, buying property through a discretionary trust becomes harder to justify on tax grounds alone.

But the fundamentals of property investing in Australia have not moved.

Understand the proposals. Watch the legislation, not the headlines. Get personal advice before restructuring anything. And buy quality assets first, structures second.

Because in the Australian property market, the investors who win over the long term are the ones backing strong assets, not the ones chasing the cleverest structure.