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.
| 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 |
The following surcharges apply to land held in trusts (including discretionary/family trusts):
Victoria
Queensland
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'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)
Trust ($750k land, VIC)
Land tax is calculated on the total value of all taxable land owned by the same entity in a state:
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.