Property Development Tax Structures: Company or Trust

The structure you develop through sets three things that land straight on your bottom line: the tax rate on your profit, whether a bad project can reach your house, and how much it costs to get the cash out at the end. There is no single best structure for property development in Australia. The right one depends on whether you are building to sell or building to hold, how many parties are in the deal, which state the land sits in, and how you plan to exit. Get it right at the start and it is close to free. Get it wrong and unwinding it can cost you transfer duty a second time, on the same dirt.

This guide works through the real options a developer chooses between: developing as an individual, a partnership, a company (usually a special purpose vehicle), a discretionary trust, a unit trust, and the hybrid most active developers land on, a development company owned by a discretionary trust. It covers what each does to your tax rate, your asset protection, your land tax bill, and your ability to distribute profit, with the current rates and thresholds cited to primary sources. None of it is advice for your specific deal. Structure is a conversation with your accountant and solicitor, and the numbers below change with your circumstances.

What is the best tax structure for property development?

There is no universally best tax structure for property development, but for a developer building to sell, the most common answer is a company as the development entity, often with its shares held by a discretionary trust. The reason is simple. When you buy land to develop and sell, the profit is almost always taxed as ordinary income rather than as a capital gain, so the 50% Capital Gains Tax (CGT) discount that makes trusts and individuals attractive for long-term investors usually does not apply to you. Once the discount is off the table, a company’s flat 25% or 30% rate, its ability to retain profit for the next project, and the risk isolation of a fresh entity per site tend to matter more than trust flexibility.

That default flips in specific cases. If you are building to hold and rent, then selling years later as a capital asset, the Capital Gains Tax (CGT) discount comes back into play and a trust or individual can beat a company, though that advantage is narrowing as the 50% discount is replaced from 1 July 2027 with cost-base indexation and a 30% minimum tax on real gains, covered below. If you are bringing in outside equity, a unit trust or a company with a shareholders’ agreement is usually cleaner than a discretionary trust. And if the whole project is a one-off subdivision of land you have held for years, the answer may be to change as little as possible. The structure follows the deal, not the other way around.

The practical takeaway: decide your structure before you exchange, model the after-tax result under the treatment most likely to apply to you, and treat any headline margin that ignores tax as only half the picture.

Why your profit type decides the structure before anything else

The first question is not “company or trust”, it is “will my profit be trading income or a capital gain”, because that single answer removes half the usual arguments. Most development profit is ordinary income. When you acquire land intending to develop, subdivide and sell, the Australian Taxation Office (ATO) generally treats that land as trading stock from the point the development venture begins, and your profit is assessed as ordinary income, not as a capital gain. The Australian Taxation Office (ATO) says the same in plainer terms on its guidance that property sales forming part of a business are treated as ordinary income.

This is where most generic “trust versus company” articles lead developers astray, because they are written for buy-and-hold investors. For an investor holding a rental for a decade, the Capital Gains Tax (CGT) discount is the main event, and a discretionary trust that can stream a discounted gain to a low-income beneficiary looks unbeatable. For a developer selling stock, three of those advantages tend to fall away at once:

• The 50% Capital Gains Tax (CGT) discount applies only to a capital gain on an asset held more than 12 months. Trading stock produces ordinary income, not a capital gain, so there is nothing to discount.
• The small business Capital Gains Tax (CGT) concessions need a capital gain on an active asset. Trading stock is a revenue asset and does not qualify, so the 15-year exemption and the 50% active asset reduction are generally not available on development profit.
• The main residence exemption is gone the moment the land becomes trading stock.

The practical effect is that a developer choosing a structure is choosing mainly on tax rate, timing, asset protection, and profit extraction, not on access to capital concessions. If your project is genuinely on capital account, a long-held site realised in an enduring way rather than a developed one, the calculus changes and the discount matters again, though the capital-account side is itself shifting: the 2026-27 Federal Budget announced replacing the 50% discount for individuals and trusts, from 1 July 2027, with a cost-base indexation method and a 30% minimum tax on real gains. That reform is now law, taking effect from 1 July 2027, so even the build-to-hold advantage that favours a trust is changing. That reform, and which side of the revenue-or-capital line you sit on, is covered in depth in the Capital Gains Tax on property development guide, and the rate mechanics in the income tax on development profit guide. Confirm your likely treatment with your accountant before you fix the structure, because everything below hangs off it.

The four structures at a glance

Most developers choose between five vehicles, and the honest one-line summary of each is below. Treat this as a map, not a recommendation, and read the detail underneath before acting.

The rate figures come from the Australian Taxation Office (ATO) resident tax rates and company tax rate rules. The land tax column is a general position only, and the state-by-state detail further down is where the real money sits. The discretionary-trust rows are also being recast by the 2026-27 Budget: the 50% Capital Gains Tax (CGT) discount is replaced from 1 July 2027, and a 30% minimum tax on discretionary trust income is announced from 1 July 2028, both covered below, so treat the trust advantages here as current but changing.

Developing as a sole trader or individual: when does it make sense?

Developing in your own name is the cheapest to set up and the most exposed, so it tends to suit only the smallest one-off projects. There is no entity to register, no separate tax return, and no ongoing compliance cost. The trade-offs are that every dollar of profit is taxed at your marginal rate, up to 45% plus the 2% Medicare levy, so 47% at the top, per the Australian Taxation Office (ATO) resident tax rates, and there is nothing between a project that goes wrong and your personal assets.

For a developer, the marginal rate is the sting. Development profit is lumpy: a project that nets, say, $400,000 in a single year pushes most of that profit into the top bracket, where a company would have paid a flat 25% or 30%. You also lose the ability to retain profit at the company rate to fund the next deal, because the profit is simply yours and taxed now. On the exposure side, a builder dispute, a defect claim, or a lender shortfall can reach your home. Most developers grow out of the sole trader structure after their first small project, and many never use it because their lender or their own risk appetite pushes them into a company from the start.

One nuance worth flagging: the second marginal bracket dropped from 16% to 15% from 1 July 2026, and is legislated to fall to 14% from 1 July 2027, under the Federal Government’s personal tax cuts. That helps a low-income spouse receiving a distribution far more than it helps a developer whose profit lands in the top bracket, which is exactly why structures that spread income matter.

Partnerships and joint ventures: how are they taxed?

A partnership does not pay tax itself; it works out its net income and each partner is taxed on their share at their own marginal or company rate. That flow-through is the appeal for two or three active parties who want profit and, importantly, early losses to land directly in their own returns rather than being trapped in an entity. The Australian Securities and Investments Commission (ASIC) summary of business structures sets out the basics, and the partnership lodges its own return but passes the result through.

The catch is liability. In a general partnership the partners are jointly and severally liable, which means a creditor can pursue any one partner for the whole debt, not only their share. For a development, where the debts run to millions, that is a serious exposure, and it is why many “partnerships” between developers are actually run through companies or a unit trust with corporate partners rather than as bare partnerships between individuals.

There is also a distinction that trips people up. An unincorporated joint venture, where each party takes their share of the output (the finished lots) rather than a share of the profit, is treated differently from a partnership that shares net income. The line matters for Goods and Services Tax (GST) and for who reports what, and it is easy to draft a document that says “joint venture” but behaves like a tax law partnership. Landowner and developer arrangements, where one party brings the land and the other the delivery, are the classic example, and the tax outcome depends heavily on how the agreement is written. Where outside investors are involved rather than two active principals, a unit trust or company usually replaces the partnership, mostly to contain that liability and to give passive investors a clean, transferable interest.

The company structure: the developer default

What tax rate does a development company pay, 25% or 30%?

A development company pays a flat 30%, unless it is a base rate entity, in which case it pays 25%. Under the Australian Taxation Office (ATO) company tax rules, a company is a base rate entity for an income year if its aggregated turnover is under $50 million and no more than 80% of its assessable income is base rate entity passive income (broadly rent, interest, dividends and net capital gains). A company that buys land, develops it, and sells the finished product is earning active trading income, so it will usually clear the 80% test comfortably and pay 25%.

The flat rate is the whole point for a build-to-sell developer. Compared with the 47% top marginal rate an individual would pay, a 25% company rate leaves far more profit inside the business to fund the next acquisition. The company does not get the 50% Capital Gains Tax (CGT) discount, which is often listed as a disadvantage, but for a developer selling trading stock there is no capital gain to discount in the first place, so that disadvantage is largely theoretical. It only bites if the company later holds an appreciating asset on capital account, which is a build-to-hold decision, not a build-to-sell one, and even there the discount is being replaced from 1 July 2027, so the gap a company gives up is narrowing.

Watch the passive income test if the company holds completed stock and rents it out while waiting to sell, because a company earning mostly rent can tip over into the 30% rate. Model the rate you will actually pay, not the one you hope to.

Why do developers use a separate special purpose vehicle for each project?

Developers put each project in its own special purpose vehicle (SPV), a company set up to do one job, so that the risks of one site cannot reach another. If a project runs into a builder insolvency, a defect claim, or a funding shortfall, the exposure is contained within that project’s special purpose vehicle (SPV) and the developer’s other projects, and personal assets, sit outside it. This is standard practice, and it is often a lender requirement: construction financiers generally want to lend to a clean, single-purpose borrower with no unrelated liabilities on its balance sheet.

The special purpose vehicle (SPV) also keeps the accounting clean. One project, one entity, one set of accounts, one profit figure, which makes the deal easy to sell down, refinance, or bring a co-investor into. The cost is administrative: each special purpose vehicle (SPV) is a separate company with its own registration, tax return, and Australian Securities and Investments Commission (ASIC) fees, and a developer running several at once carries that overhead across all of them. For most developers the risk isolation is worth the cost, which is why the special purpose vehicle (SPV) per project is close to universal above the smallest deals. The Australian Taxation Office (ATO) has publicly warned about arrangements that misuse special purpose vehicles to divert development profits into concessionally taxed entities such as self-managed super funds, so the structure has to be commercially genuine, not a profit-shifting device.

How do you get profit out of a development company?

Getting profit out of a company means paying a dividend, paying a wage, or, if you are not careful, triggering a deemed dividend under Division 7A. When the special purpose vehicle (SPV) has paid its 25% or 30% tax, the after-tax profit sits inside the company. To get it into your hands, the company pays a franked dividend: you include the dividend plus the franking credit in your income, and the credit offsets the tax the company already paid, so you only top up the difference between the company rate and your marginal rate. A top-bracket shareholder still ends up paying close to 47% overall, but the timing is yours: profit can stay in the company at 25% and fund the next project, with the top-up tax deferred until you actually draw it out.

The trap is Division 7A of the Income Tax Assessment Act 1936. If the company instead lends money to a shareholder or an associate, or pays their private expenses, that amount can be treated as an unfranked deemed dividend and taxed in full, unless it is put on a complying loan with a written agreement and minimum repayments. The minimum interest rate is the Australian Taxation Office (ATO) Division 7A benchmark interest rate, which is reset each year, so check the current figure. Developers get caught by this when they take drawings from the company during a project without documenting them properly. The fix is planning the profit extraction before you need the cash, not after.

The discretionary (family) trust: flexibility and its limits

How is trust income taxed?

A discretionary trust does not pay tax on income it distributes; the beneficiaries do, at their own rates, and the flexibility to choose who receives what each year is the main attraction. If a project nets $300,000, the trustee can distribute across several adult beneficiaries and a corporate beneficiary, so the income is taxed at a spread of rates rather than all at the top. That is genuinely valuable where a developer has family members on low incomes, or a “bucket” company available to cap the rate at 30%.

Two rules keep this honest. First, any trust income the trustee does not distribute is taxed in the trustee’s hands at the top marginal rate of 47% under the tax law, so leaving income undistributed is expensive. Second, and increasingly a compliance focus, is section 100A. Where a beneficiary is made presently entitled to income but the benefit is redirected to someone else under an arrangement with a tax-reduction purpose, the Australian Taxation Office (ATO) can treat it as a reimbursement agreement and tax the trustee at the top rate instead. The classic example is distributing to a low-income adult child who never actually receives the money. Distributions made in the course of ordinary family or commercial dealing are excluded, but the guidance in Taxation Ruling TR 2022/4 and Practical Compliance Guideline PCG 2022/2 has narrowed what developers can safely do. This is a live compliance area, so the distribution plan needs to be real. A further change is on the horizon: the 2026-27 Federal Budget announced a 30% minimum tax on the income of discretionary trusts from 1 July 2028, with some exclusions and rollover relief, which would narrow the streaming benefit for higher-income family groups. It is an announced measure, so confirm the position before you rely on the flexibility.

Why can’t a trust use a development loss?

A trust cannot distribute a loss, so if a development inside a discretionary trust loses money, that loss is trapped in the trust and can only be carried forward against the trust’s own future income, subject to the trust loss rules. For a developer this is a real drawback. Development is risky and lumpy, and a project that runs at a loss in an individual’s or a partnership’s hands can offset their other income in the same year. Locked inside a trust, the same loss just sits there until the trust earns enough to use it, which may be years, or never if the trust winds up.

This is one reason some developers prefer a company or hold their first, riskier projects more simply. It is also why the trust loss rules, and the family trust election that can make them easier to satisfy, are worth understanding before you commit. The flip side is that a trust’s flexibility on the upside is real, so the choice often comes down to how confident you are in the project and whether you value downside loss use or upside distribution flexibility more.

Land tax and trusts: the surcharge that catches developers

In several states a trust is taxed more harshly for land tax than an individual or company, and for a developer holding land through the pre-construction period that surcharge is a direct holding cost. This is the single most underrated factor in the trust decision, and it varies by state, so it is covered in its own section below. The short version: New South Wales denies a special trust the land tax threshold entirely, and Victoria applies a trust surcharge from a much lower threshold than for individuals. Because land tax is an annual holding cost that runs for every year you own the site before you sell, a trust that loses the threshold can quietly add tens of thousands to a slow-moving project.

The unit trust: the joint venture and syndicate workhorse

A unit trust suits deals with outside investors because ownership is fixed in units, like shares, so each party’s entitlement to income and capital is clear and transferable. Where a discretionary trust gives the trustee a free hand each year, a unit trust ties distributions to unit holdings, which is exactly what a passive co-investor wants: certainty that their 30% of the units gets 30% of the profit. Income flows through to the unit holders in their fixed proportions and is taxed in their hands.

This is why unit trusts, and their fixed-trust variants, are the common vehicle for property syndicates and multi-party developments. A developer can hold their units through their own discretionary trust or company, keeping their internal flexibility, while the unit trust sits cleanly above the project. Land tax treatment differs from a discretionary trust in some states, because a fixed or unit trust can sometimes have unit holders assessed on their interests rather than the trust losing the threshold, though the rules are technical and state-specific. The mechanics of raising money through these vehicles, including the wholesale versus retail investor tests and when a scheme must be registered, are set out in the property syndicate capital-raising guide.

The hybrid most developers land on: a company owned by a discretionary trust

The structure many active developers settle on is a development company that does the work, with its shares owned by a discretionary trust, because it combines the company’s flat rate and risk isolation with the trust’s distribution flexibility. The development company (the special purpose vehicle) buys the land, runs the project, and pays 25% or 30% on the profit. Instead of individuals owning the shares, a discretionary trust owns them. When the company pays a franked dividend, it flows up to the trust, and the trustee can then distribute that franked income across beneficiaries at their own rates.

The appeal is that you get three things at once: the company caps the rate on retained profit at 25% and ring-fences the project’s risk; the trust on top gives you flexibility over who receives the distributed profit and when; and the shares themselves sit inside the trust rather than in your personal name, which helps on asset protection and succession. It is the structure several specialist property accountants describe as their common recommendation for developers building to sell, precisely because it answers the “flat rate plus flexibility” problem the pure company and pure trust each solve only halfway.

It is not free. You are running two entities, not one, with the compliance cost of both, and the franking and Division 7A rules still have to be managed carefully when profit moves between them. A related pattern separates the roles further: a landholding trust owns the site and a separate development company delivers the works under a development agreement for a fee, which can help isolate the land from construction risk and manage duty and Goods and Services Tax (GST) at the margins. These are structures to design with your accountant on the specific numbers, not to copy blind, but they are worth understanding so you can ask the right questions.

Asset protection: which structure actually protects you?

Asset protection comes from separating the person who controls the project from the assets worth protecting, and on that test a company or a trust beats developing in your own name, while a bare partnership offers little. A special purpose vehicle (SPV) company confines the project’s liabilities to the company, so a claim against the project does not automatically reach your home or your other projects, provided you have not given personal guarantees that pull those assets back in. That proviso matters: construction lenders very often require a personal guarantee from the developer, which can undercut the protection the structure was meant to provide, so read what you are signing.

A discretionary trust protects assets differently. Because no beneficiary has a fixed entitlement to trust property, a beneficiary’s creditor generally cannot reach the trust’s assets, which is why holding the shares in the development company through a trust, rather than personally, adds a layer. The weak points are the appointor and trustee roles, and any loan accounts owed back to you, which a creditor may pursue. A partnership between individuals gives the least protection of the common structures, because joint and several liability means one partner can be chased for the whole debt. For a developer, the honest position is that structure reduces exposure but rarely eliminates it, especially once guarantees are on the table, so it works alongside insurance and sensible project risk management rather than replacing them.

Land tax by state: where structure changes the bill

Land tax is where the choice of structure produces the biggest state-by-state difference, because several states tax trusts more harshly and aggregate holdings differently. For a developer, land tax is an annual cost that runs for every year you hold the site before it sells, so a structure that loses a threshold can materially move your feasibility on a slow project. The position below is current at the time of writing; always confirm the figure for the relevant year with the state revenue office, because thresholds and surcharge rates move.

New South Wales

New South Wales sets a general land tax threshold of $1,075,000 and a premium threshold of $6,571,000 for 2025, with tax of 1.6% on the value between the two thresholds and 2% above the premium, per Revenue NSW. The catch for developers is the special trust rules: a special trust, which includes most discretionary trusts, gets no tax-free threshold and is taxed at 1.6% from the first dollar up to the premium threshold, then 2% above it. On a $2 million site, an individual pays land tax only on the slice above $1,075,000, while a discretionary trust pays on the whole $2 million, a difference that repeats every year you hold. A fixed or unit trust can sometimes access the threshold if it meets the fixed-trust conditions, which is one reason unit trusts appear in New South Wales developments.

Victoria

Victoria applies land tax from a general threshold of $50,000, and a separate trust surcharge scale that begins at just $25,000 of taxable landholding, per the State Revenue Office. The general threshold was cut from $300,000 to $50,000 from 1 January 2024 as part of the COVID debt levy, which pulled far more development sites into land tax than before. A trust holding land in Victoria therefore starts paying the surcharge almost immediately, which is a meaningful holding cost on a site carried for a year or two. Victoria’s absentee owner surcharge adds a further 4% for absentee owners, including certain trusts with absentee beneficiaries, under the absentee owner surcharge rules, so a trust with an overseas beneficiary can be caught even if the developer is local.

Queensland

Queensland gives individuals a $600,000 land tax threshold but companies and trustees only $350,000, per the Queensland Revenue Office, so holding through a company or trust brings land tax on at a much lower value. Queensland also assesses each trust separately, which can help a developer spread holdings, but the lower entity threshold usually dominates for a single project. Foreign companies and trustees of foreign trusts pay a surcharge of 3% on land valued at $350,000 or more, increased from 2% from 1 July 2024.

South Australia, Western Australia and Tasmania

South Australia, Western Australia and Tasmania each set their own thresholds and their own trust and grouping rules, so the position has to be checked state by state rather than assumed. South Australia applies a trust land tax surcharge with a lower threshold and has strong aggregation rules that group land held by related owners, which can push a developer into higher brackets faster than expected. Western Australia has no separate trust surcharge but aggregates land by owner. Tasmania sets its own threshold and scale. The common thread is that holding several sites, or holding through related entities, can trigger aggregation that lifts the marginal rate, so a developer with more than one project should map the group’s total holdings, rather than each site in isolation.

Australian Capital Territory and Northern Territory

The Australian Capital Territory levies land tax only on residential land that is rented or owned by a trust or company, calculated with a fixed charge plus a valuation-based component, so an owner-developer’s position depends on how the land is used and held. The Northern Territory has no land tax at all, which removes this factor from the structure decision entirely for Northern Territory sites. For both, confirm the current position with the territory revenue office before relying on it.

Stamp duty and foreign surcharges: get the structure right at acquisition

Choose your structure before you exchange, because transferring land into a structure later is a second dutiable transaction, and you can end up paying transfer duty twice on the same land. Duty is imposed on the acquisition of land, so if you buy in your own name and later move the site into a company or trust, that transfer is generally dutiable again at full rates, absent a specific concession. The cost of getting the entity right at the outset is a few thousand dollars in advice; the cost of getting it wrong can be tens of thousands in duplicated duty.

Two further points matter for structuring. First, landholder duty: acquiring shares or units in an entity that owns land can attract duty once your interest crosses a threshold (50% for private companies, but as low as 20% for private unit trusts in New South Wales and Victoria), so bringing a co-investor into a landholding entity is not automatically duty-free. Second, foreign surcharges: if any part of your structure is foreign-owned, foreign purchaser duty surcharges apply on top of ordinary duty, and they are steep. New South Wales charges surcharge purchaser duty of 9% from 1 January 2025, and a discretionary trust can be deemed foreign unless its deed specifically excludes foreign beneficiaries, which catches many developers by surprise. A foreign-owned structure will also generally need Foreign Investment Review Board (FIRB) approval before acquiring the land. A feasibility model does not work duty out for you; a developer carries the duty figure into the feasibility as a cost line, and standalone stamp duty calculators handle the duty itself.

GST and structure: does it change anything?

The choice of structure changes very little about Goods and Services Tax (GST): any entity carrying on a development enterprise above the registration turnover generally has to register, charge GST on new residential or commercial sales, and can claim input tax credits on costs. A company, a trust, and a partnership are treated broadly the same way for GST on a development. What does matter is getting the entity registered correctly, applying the margin scheme where it is available and beneficial, and, in joint ventures, deciding whether to form a formal GST joint venture so that the parties account for GST cleanly.

The margin scheme is the one to plan for, because it can reduce the GST payable on sales to one-eleventh of the margin rather than one-eleventh of the full price, and eligibility depends on how and when the land was acquired, not on the structure. The full detail sits in the Goods and Services Tax on property development guide. The point for structuring is that GST rarely drives the entity choice, so decide the structure on income tax, land tax, and asset protection, then handle GST correctly within whatever structure you land on.

How does this work in New Zealand?

New Zealand developers face a similar structure menu but a very different rate map, with a 28% company rate, a 39% trustee rate since 1 April 2024, and no general Capital Gains Tax (CGT). A company pays 28% on profit, which makes it attractive for retaining development income, while a trust now pays 39% on trustee income under the Inland Revenue Department (IRD) trustee tax rates, aligned with the top personal rate, so the old habit of parking income in a trust at 33% no longer works. A de minimis rule taxes trustee income at 33% only where it does not exceed $10,000 in the year (above that, all of it is taxed at 39%), which is immaterial for a development.

The transparent options are worth knowing. A Look-Through Company (LTC) is treated as transparent for tax, so its income and losses flow to the owners at their marginal rates, which can suit an early, loss-making project where the owners want to use those losses. A limited partnership works similarly. On the sale side, New Zealand has no broad Capital Gains Tax (CGT), but developers rarely rely on that, because the land sale rules tax profits from developing, dividing or dealing in land as income regardless of how long the land is held, and the associated-persons and ten-year rules can bring in gains that a casual investor would not expect. The bright-line test, reset to two years for residential land bought on or after 1 July 2024, sits on top of those rules for shorter holds. The bright-line detail is in the New Zealand bright-line test guide, and the 15% Goods and Services Tax treatment in the New Zealand GST on property development guide. The structuring lesson is the same as Australia: developer profit is income, so choose the entity on rate, loss use, and protection, not on a capital concession that mostly does not apply.

Where the structure decision hits your feasibility

Structure changes your after-tax margin and the land price you can justify, so it belongs in the feasibility, not in a separate conversation after the deal is done. Two projects with identical build costs and sales can deliver materially different cash to the developer depending on whether profit is taxed at 47%, at a flat 25%, or spread across beneficiaries, and depending on how much land tax the holding structure attracts each year. A feasibility that stops at pre-tax profit, which is where most models stop, hides that difference until it is too late to change the entity.

The practical workflow is to settle the likely tax treatment with your accountant, then model the outcome. Once you know the rate that applies, you can run the after-tax profit and see how it moves your development margin on cost and on revenue and the Residual Land Value (RLV) you can pay for the site. This is where a feasibility model earns its place. In a tool like Feasly you can apply a tax rate to a scenario, model the funding stack and holding costs, and compare two structures side by side as separate scenarios, then stress-test each with sensitivity analysis to see how the effective tax rate moves the margin and the land value you can justify. It won’t choose your structure or work out your land tax and duty, those are inputs you carry in from your accountant and the state revenue office, but it lets you see the after-tax consequence of the structure before you commit rather than after settlement, including how profit and distributions flow out at the end.

Frequently asked questions

Company or trust for property development?

For most developers building to sell, a company (often owned by a discretionary trust) is the more common choice, because development profit is ordinary income and the 50% Capital Gains Tax (CGT) discount that favours trusts usually does not apply. A trust tends to win where you are building to hold and will realise a genuine capital gain later, or where distribution flexibility across family members is the priority and the project risk is low, though both advantages are narrowing: the 50% discount is being replaced from 1 July 2027 and a 30% minimum tax on discretionary trust income is announced from 1 July 2028. The honest answer is that it depends on your exit and your circumstances, so model both and take advice.

Do I need a separate special purpose vehicle for each project?

Most developers use a separate special purpose vehicle (SPV) per project so the risks of one site cannot reach another, and because construction lenders often require a single-purpose borrower. The cost is running several entities at once, each with its own compliance. For a first small project the overhead may not be justified, but above that the risk isolation is usually worth it.

Can I use the 50% Capital Gains Tax discount in a trust for a development?

Generally no, because the 50% Capital Gains Tax (CGT) discount applies to a capital gain, and most development profit is ordinary income from trading stock, not a capital gain. Holding the project in a trust does not convert trading income into a discountable capital gain. The discount only helps where the land is genuinely on capital account, which is a build-to-hold situation, not a build-to-sell one. Note the discount itself is being replaced from 1 July 2027, but that does not change the developer answer: trading-stock profit was never eligible.

Does my choice of structure change my stamp duty?

Structure does not usually change the duty on the initial land purchase, but choosing the wrong entity and transferring the land later can cost you duty a second time, and a foreign-owned structure attracts foreign purchaser duty surcharges on top. Decide the entity before you exchange, and treat the duty as a cost line in your feasibility rather than a figure the model works out.

Can I change structure part-way through a project?

You can, but it is usually expensive, because moving land or a project between entities can trigger transfer duty and a tax event, and it can disturb your financing. It is far cheaper to get the structure right before you exchange contracts than to restructure once the site is in the wrong entity. If you are already mid-project and unsure, take advice before moving anything.

The bottom line for developers

The tax structure for a property development is a decision about rate, risk, and profit extraction, and it should be made before you exchange, on the specific numbers of the deal. For most developers building to sell, the profit is ordinary income, the Capital Gains Tax (CGT) discount does not apply, and a company (frequently owned by a discretionary trust) gives the best mix of a flat rate, retained profit for the next project, and risk isolation. For build-to-hold, family groups, or multi-party deals, a trust or unit trust may serve better, though the announced replacement of the 50% discount from 1 July 2027 and the 30% minimum tax on discretionary trust income from 1 July 2028 are narrowing the trust advantage, so weigh them in. Land tax, foreign surcharges, and duty on getting the entity wrong can each move the numbers more than the headline income tax rate, so they belong in the feasibility from the start.

None of this replaces advice from an accountant and solicitor who know your position, and the rates and thresholds here change year to year, so confirm them against the primary sources before you rely on them. What you can do yourself is refuse to judge a deal on its pre-tax margin. Model the after-tax result under the structure most likely to apply, compare the alternatives, and let the numbers, not a rule of thumb, decide how you build.

This guide is general information for property developers, not legal, tax, or financial advice. Rates, thresholds and rules change and depend on your circumstances and structure. Confirm the current position with the Australian Taxation Office (ATO), the relevant state revenue office, or Inland Revenue in New Zealand if a New Zealand deal is in play, and your own tax and legal advisers before you rely on any figure here.