The classic case for a discretionary trust holding an investment property is income splitting: the trustee streams rent and capital gains to whichever beneficiary is on the lowest marginal rate that year. The classic case against is cost - setup, ongoing accounting, stamp duty on the way in, and now (from 1 July 2028) a 30% minimum tax floor that caps the streaming benefit. Under the proposed 2027 reform, the trade-off shifts. Here are the numbers.
The sample property
$1.6M established Sydney residential property, $1.2M IO loan at 6.5%, $72,800 gross rent. Same numbers either way - this is an apples-to-apples on structure. 6-year hold, sale 1 July 2032. Numbers below are from the Byrz engine running both structures against the same property.
Side-by-side under the proposed 2027 reform
| Line | Joint personal | Discretionary trust |
|---|---|---|
| Final asset value (2032) | $2,122,354 | $2,122,354 |
| Loan balance at sale | −$1,102,776 | −$1,102,776 |
| CGT at sale (post-2027 split + 30% floor) | −$67,184 | −$67,184 |
| Total cashflow over hold (after tax) | −$196,788 | −$181,234 |
| Final after-tax equity | $702,547 | $628,193 |
| One-time cost to move property into structure | $0 (current) | −$153,000 |
| Net after structure change cost | $702,547 | $475,193 |
What the numbers say
Staying in joint personal ownership beats moving into a discretionary trust by $227,354 over the 6-year hold. Three drivers:
- Stamp duty + CGT crystallisation on the move. Transferring an existing residential property into a trust triggers stamp duty (~5% of value) and CGT on the disposal at market value. On a $1.6M property that's typically $130k+ in transactional cost alone.
- The trust minimum tax cap. From 1 July 2028 the streaming advantage to low-rate beneficiaries is capped at 30%. Most of the 6-year hold sits in that capped zone, so the historical income-splitting win is muted.
- The negative-gearing restriction doesn't discriminate by structure. Trust losses already carried forward inside the trust regardless. The 2027 restriction matters MORE to personal ownership than trust, because personal ownership loses the salary offset that the trust never had.
When the trust still wins
The above scenario picks the most common case - an existing property where moving in is expensive. The trust wins when:
- You're buying new. No crystallisation cost. Stamp duty applies once either way. Trust streaming over a long hold can still pay off, especially if you have variable-income beneficiaries (students, retirees, parental leave).
- Long hold horizons (15+ years). Structure change cost amortises across more years; the structural tax saving compounds.
- Asset-protection considerations. Trusts provide more separation between the property and the owner's personal liabilities. Not a tax point, but it matters for some professions.
- Multiple properties. A single trust holding a portfolio amortises setup + compliance cost across the properties.
The decision
For a single existing established residential property with a 6–10 year hold, joint personal ownership usually wins on the numbers. Trust ownership becomes competitive when you're buying new, holding very long, or structuring a portfolio. The 2028 trust minimum tax tilts the trade-off further toward simpler structures.
For your specific property - with your hold horizon, your beneficiary mix, and your marginal rates - the comparison will land differently. The Byrz sample report shows the full per-structure breakdown, and a $49 property report runs the same engine against your numbers.