Transferring property into a trust: is it worth it?
With the legislated changes to negative gearing and CGT rules, some investors are considering whether transferring their existing investment properties into a trust before the rules change would give them a better tax outcome. In almost all cases, the answer is no — and it carries significant risk.
The immediate costs of transfer
Stamp duty: A transfer of property — even to a trust you control — is treated as a disposal and a new acquisition for stamp duty purposes in most Australian states. On a $1 million property, stamp duty can be $40,000 to $60,000 or more. Only some specific exemptions apply (typically only for genuine family restructuring in limited circumstances).
CGT: The transfer is a disposal of the property at market value. If the property has increased in value since you bought it, you trigger a capital gains tax event immediately. You pay CGT on the gain now rather than when you eventually sell.
The anti-avoidance risk
The ATO has broad anti-avoidance provisions (Part IVA) that allow it to cancel any tax benefit obtained from an arrangement entered into with the dominant purpose of avoiding tax. Transferring property specifically to access more favourable trust rules after a policy change announcement is exactly the type of arrangement Part IVA is designed to target.
If the ATO determines the transfer was made primarily for tax avoidance purposes, it can:
- Cancel the purported tax benefit
- Impose penalties on top of the tax owed
When a trust might still make sense
The time to choose a trust structure is before you buy, not after:
- No stamp duty on the property transfer (because the trust buys it directly)
- No CGT event (because you never owned it personally)
- The trust structure is established for legitimate asset protection and income splitting reasons from day one
The bottom line
Transferring an existing property into a trust to "beat" proposed rule changes is not a viable strategy for most investors. The costs — stamp duty, CGT, and legal fees — typically exceed any tax benefit, and the arrangement carries anti-avoidance risk. Speak to a specialist tax advisor before taking any action.