Buying property through a company, trust or SMSF
Buying property through a company, trust or self-managed super fund (SMSF) means the property is acquired through a different legal structure rather than simply in your personal name.
These structures can be used for different reasons, including investment, business, asset-protection or estate-planning considerations. They also come with different legal, tax, lending and compliance requirements.
The important part for a property buyer is to choose and establish the appropriate structure before signing the contract, and make sure the purchaser is correctly named.
Different structures can have different tax, asset-protection, estate-planning and financing implications. Whether those implications are beneficial depends on the structure and your circumstances.
Because the consequences can extend beyond conveyancing, get the relevant tax, financial and legal advice before establishing the structure or signing a contract. Your conveyancer also needs to know the correct purchasing entity before the contract is prepared or signed.
Buying property through a company
A company is a separate legal entity that can own property in its own name. The company's shareholders own shares in the company rather than owning the property directly.
Things to consider:
- Grants and concessions. First-home buyer grants and duty concessions are generally designed around individuals purchasing eligible homes in their own circumstances, so a company structure can affect eligibility. Check the current rules for the relevant state or territory before relying on a concession.
- Borrowing. Lending requirements can be different when a company is the purchaser, and not every lender offers the same products or terms for company borrowers.
- Tax. The company's tax position can differ from an individual owner's, and the treatment depends on the company's activities, the property and how income or gains arise.
- Naming the purchaser. If a company is buying the property, the contract needs to correctly identify the company as purchaser. Your conveyancer may also need evidence that the person signing has authority to act for the company.
Buying property through a self-managed super fund (SMSF)
An SMSF property must satisfy the superannuation rules, including the sole purpose requirements. Generally, fund members and related parties cannot use residential SMSF property for their personal benefit.
Things to consider:
- Borrowing. SMSFs can borrow to acquire certain assets in limited circumstances under the superannuation borrowing rules, commonly through a limited recourse borrowing arrangement (LRBA). The structure and documentation need to be established correctly before the purchase.
- Cost and lender availability. SMSF borrowing can have different lending requirements, costs and product availability from an ordinary home loan.
- Type of property. SMSF rules can differ depending on the type and use of the property. Business real property is subject to specific rules, so don't assume the rules that apply to a residential investment property apply in the same way to commercial property.
An SMSF property isn't the same as buying an investment property personally
An SMSF property is an investment of the super fund. The fund's investment strategy, superannuation rules and restrictions apply to the property, and the property cannot simply be treated as your personal asset.
Buying property through a trust
A trust is a legal structure in which a trustee holds and manages assets for the benefit of beneficiaries under the terms of the trust deed. The trustee is the entity that enters into the property transaction and holds the legal title, subject to the structure and applicable law.
Trusts can take different forms, including discretionary and unit trusts. Their legal and tax characteristics can differ significantly, so the appropriate structure depends on what the trust is being used for and the advice you've received.
Things to consider:
- The trust deed. The trust deed establishes the powers and rules of the trust. Before buying, make sure the trustee has the power to acquire the property and that the structure has been properly established.
- What your advisers will need. Your conveyancer and other advisers may need the trust deed and trustee details when preparing or reviewing the transaction.
- Grants and concessions. Eligibility for first-home buyer concessions, grants and other benefits can depend on who the purchaser is and how the relevant state or territory rules define eligibility. A trust structure can affect that eligibility.
The exact requirements depend on the state
The way a company, trustee or SMSF is identified on a contract and registered on title depends on the legal structure and the state or territory where the property is located.
The important practical point is that the purchaser needs to be correctly identified from the beginning. Changing the purchasing entity after a contract has been signed can create legal, tax, duty or financing complications.
Get the structure right before signing
Before signing a contract, make sure you know:
- who the legal purchaser will be
- whether the company, trust or SMSF has been properly established
- who has authority to sign
- whether the entity is permitted to acquire the property
- how the purchase will be financed
- whether the structure affects grants, concessions or duty
- whether the relevant tax and financial advice has been obtained
Don't sign in your personal name intending to transfer it into the trust or company later without getting advice first. Changing the purchaser after signing can have legal, duty, tax or contractual consequences depending on the transaction.
Does the name on the contract need to match the loan?
The ownership structure, purchaser named in the contract and borrowing arrangements need to be coordinated. The exact requirements depend on the entity, lender and transaction, so establish the structure and financing before signing.
Comparing the structures
This comparison is general information, not a recommendation of any structure.
| Structure | Common reasons it may be considered | Key considerations |
|---|---|---|
| Personal name | Owner-occupied property or straightforward investment | Personal ownership, lending and tax position |
| Company | Business or investment ownership | Company governance, lending, tax and compliance |
| Trust | Investment, estate-planning or asset-structuring purposes | Trust deed, trustee, beneficiaries, tax and compliance |
| SMSF | Investing superannuation in permitted assets | Super rules, investment strategy, restrictions and specialised financing |
Where your conveyancer fits in
Your conveyancer isn't the person who should choose your structure for you. But once you've decided on the appropriate structure with your accountant, financial adviser or lawyer, they need to know exactly who is buying before the contract is signed.
Getting the purchaser details right at the start can avoid problems later.
If you're buying through a company, trust or SMSF, tell us before the contract is signed so we can make sure the transaction is set up for the correct purchasing entity.
