Commercial Property Ownership Structures in Australia: How to Choose
General information only, not financial, tax or legal advice. Ownership structures carry tax, duty, land tax and estate consequences that differ by state and by individual circumstance, and they are costly to change once a property has settled. Speak to a licensed adviser about your own situation.
TL;DR
Commercial property ownership structures in Australia come down to five options: personal or joint names, a company, a discretionary (family) trust, a unit trust, or a self managed super fund. Each trades something away. Personal names are cheap but expose you personally. A company contains liability but misses the capital gains discount. A discretionary trust gives distribution flexibility and strong asset protection, though several states tax trusts harder. A unit trust suits partnering because entitlements are fixed. An SMSF is concessionally taxed but locks up your capital. The right answer turns on your income, assets, partners and exit plan, so settle it with an accountant and a lawyer first.
Why this is the one decision you cannot easily redo
Most things in commercial property are reversible. You can refinance, renegotiate a lease, change agents, or sell. The ownership structure is different, because it is locked in the moment contracts are exchanged.
Moving a property to another entity later is a transfer, which generally triggers stamp duty again in the relevant state and can trigger a capital gains event. That is a serious cost to repair a five minute decision, so experienced buyers settle structure before they start looking. Our guide to how to buy commercial property shows where it sits.
The five commercial property ownership structures at a glance
Personal or joint names: Asset protection: Weakest, personally exposed; Income flexibility: None, follows title; Capital gains: CGT discount past 12 months; Land tax: Usually most favourable; Borrowing: Simplest
Company: Asset protection: Contained, but shares are your asset; Income flexibility: Limited, follows shareholding; Capital gains: No CGT discount; Land tax: Often no threshold; Borrowing: Director guarantees
Discretionary trust: Asset protection: Strong, no fixed entitlements; Income flexibility: Highest, decided yearly; Capital gains: Discount flows to individuals; Land tax: Separate, often harsher; Borrowing: Corporate trustee needed
Unit trust: Asset protection: Moderate, units are your asset; Income flexibility: Fixed, follows unitholding; Capital gains: Discount flows to individuals; Land tax: Turns on fixed trust status; Borrowing: Unitholders assessed
SMSF: Asset protection: Strong, outside your estate; Income flexibility: None, super rules apply; Capital gains: Concessional inside super; Land tax: Treated as a trust in some states; Borrowing: Limited recourse only
Treat that as a map, not an answer. Every row has exceptions turning on the state and on what else you own.
Personal or joint names
Buying in your own name, or jointly with a spouse, is the simplest and cheapest option to run. No separate entity, no annual financial statements, and lenders are comfortable with it.
The trade-off is exposure. If you are a business owner, a professional with a practice, or a director carrying guarantees elsewhere, the property sits in the same pool a creditor can reach. For many readers that rules it out.
You also get no say in who receives the income. Net rent is assessed to whoever is on title, in their proportion, and that cannot change without a transfer.
A company
A company is a separate legal entity, so liabilities it incurs generally stay there. That is genuine protection against claims arising from the property itself. It is weaker in reverse, because your shares are an asset in your own name, so if a creditor comes after you personally their value is in play. A company owned by a trust is the common response, which tells you how layered this gets.
Companies retain earnings at the company tax rate, useful if you do not need the cash personally. The drawback is capital gains, because companies do not receive the discount available to individuals and trusts, so a long hold with real growth is taxed less favourably on exit. Dividends also follow shareholding, so distributions are inflexible.
A discretionary (family) trust
A discretionary trust is the most common vehicle for buying commercial property in a trust. No beneficiary holds a fixed entitlement to income or capital, and that single feature is the source of both its asset protection and its flexibility.
The trustee decides each year who receives the net income, so distributions follow each beneficiary's position. The capital gains discount can also flow through to individual beneficiaries, so a long hold is treated better than in a company.
Where discretionary trusts get expensive
Losses are trapped in the trust and cannot offset your personal income, so early negative cash flow gives you no immediate benefit. Trusts in most states must also vest after a set period, commonly around eighty years, which matters for a multi generational holding.
Then there is land tax. Several states apply a separate, less generous regime to trusts, which can mean no general threshold or a surcharge rate. The same property at the same price can carry a materially different annual bill depending on whether a trust or an individual holds it. Confirm the current position with your state revenue office and accountant, because this cost runs for the life of the hold.
A unit trust
A unit trust divides the beneficial interest into fixed units. Income and capital follow unitholding in proportion, like shares in a company but with trust tax treatment, including the ability to pass the capital gains discount through to individual unitholders.
That fixed entitlement is why unit trusts are the usual vehicle for buying with other people. Each party's share is defined, units can be issued for further capital, and units can be transferred on exit, though duty may apply.
Parties can hold units through whatever entity suits them, including an SMSF beside a family trust, though super rules impose requirements on related unit trusts. The trade-off is that your units are an asset in your own name, so a unit trust shields you from the property's liabilities, not your own.
A self managed super fund
Buying through an SMSF puts the asset in a concessional tax environment, and for a business owner there is a further attraction: an SMSF can generally acquire business real property and lease it to a related business, provided the lease is on genuine arm's length terms at market rent.
The constraints are real. Contribution caps limit the capital you can get into the fund, the sole purpose test governs everything it does, and you cannot access the asset or its income until you meet a condition of release. Borrowing is restricted to a limited recourse borrowing arrangement, fewer lenders offer them since the major banks withdrew, and leverage is lower.
An SMSF commercial property structure also carries the heaviest compliance load. Our guide to commercial property in an SMSF covers the mechanics.
What lenders will actually accept
Lenders assess the borrowing entity, so your choice changes the paperwork, the pricing and sometimes the answer.
Personal and joint names: the most straightforward application.
Companies and trusts: widely accepted, but most lenders want a corporate trustee and director guarantees, so some protection goes back to the bank.
Unit trusts: lenders look through to the unitholders, so every party's position is on the table.
SMSFs: the narrowest market, with lower leverage and more conditions.
Settle this before you make an offer. See commercial property finance and commercial property loans in Australia.
Buying with partners: the agreement matters as much as the structure
Co-ownership fails on relationships far more often than on structure. The structure decides how income and capital flow. The agreement decides what happens when people disagree, so a unitholders agreement or co-ownership deed should settle the awkward questions while everyone is friendly:
Who decides what, and what needs unanimous consent rather than a majority.
How capital calls work, and what happens if a party cannot fund theirs.
How a party exits, how the price is set, and who gets first refusal.
What happens on death, divorce, disability or insolvency.
How a deadlock is broken, so the asset is not frozen.
A partner who will not sign a document covering those points has told you something useful.
The other costs your structure touches
Your entity also drives stamp duty on commercial property, GST on commercial property and who claims commercial property depreciation. All three follow the owner, and duty rules differ by state.
How to actually make the decision
No structure is best for everyone. The answer falls out of your own facts, so take these to your accountant and lawyer.
Your risk profile. Do you carry business or professional liability, or personal guarantees?
Your income position now and in ten years. Who needs the income, and will that change?
Your exit intention. A long hold weighs capital gains. A short hold weighs entry costs.
The state the property is in. Land tax and duty are state based, and trust rules vary.
Your partners, if any. Fixed entitlements point to a unit trust.
Your super balance. An SMSF only works if the fund can afford the purchase.
This is a decision for an accountant and a lawyer who know your position, not for an article on the internet, including this one.
Where to go from here
Structure is rarely the only open question. Yield, lease quality, tenant risk and finance all move together, and our pillar guide to commercial property investing in Australia pulls those threads together.
Cal Doggett has spent more than twenty years in Australian commercial property and has transacted over $550 million. His Fortify Your Wealth video series covers how he thinks about structure, risk and asset selection, and the Commercial Property Mastery course goes deeper for anyone wanting the full framework.
Frequently asked questions
Is it better to buy commercial property in a trust or a company?
Neither is universally better. A discretionary trust usually wins on distribution flexibility and capital gains, because the discount can flow through to individual beneficiaries. A company suits retaining earnings where a growth exit is not the focus. Land tax and your risk profile usually decide.
Can I buy commercial property in my SMSF and lease it to my own business?
Generally yes, if the property qualifies as business real property and the lease is on genuine arm's length terms at market rent. This is a specific exception to the rules restricting dealings between a fund and related parties. Document the lease and pay the rent.
Does a trust pay more land tax than an individual?
Often, yes. Several Australian states apply a separate, less generous land tax regime to trusts, which can mean no general threshold or a surcharge rate. Treatment differs by state and by trust type, and fixed trusts are sometimes treated differently. Check your state revenue office.
Can I change the ownership structure after I buy?
You can, but it is treated as a transfer, which generally triggers stamp duty in the relevant state and may trigger a capital gains event. Narrow restructure concessions exist, mainly for small businesses. Assume a change is expensive, which is why structure is worth getting right first.
What is the best structure for asset protection?
A discretionary trust with a corporate trustee is generally the strongest common option, because no beneficiary holds a fixed entitlement a creditor can reach. An SMSF also sits largely outside your personal estate. Note that lenders usually require guarantees, which hands part of that protection back.