Trust Structures for Non-Resident Property Owners: What Non-Resident Investors Must Know

As non-resident interest in Australian property continues to grow, the decision about trust structures (ownership structures) has become more important than ever. For non-resident property owners, using a trust can offer benefits like asset protection, tax planning, and succession flexibility. But setting up a trust as a non-resident isn’t simple. New tax laws and rising land tax surcharges are making this a high-stakes decision that must be navigated carefully.

Understanding Trusts for Non-Resident Property Owners

In Australia, a trust’s residency is based on:

• Where the trustee lives

• Where the trust’s assets are located

• Where the control and management happens

“Residency isn’t just about a passport,” says Dominic Murphy, Principal at TJD Accounting Services and an expert in international tax. “It’s about who actually controls the trust. If you live overseas but try to appoint someone in Australia as a trustee while making decisions yourself, the Australian Tax Office (ATO) will see through that.”

Key Rule: If even one trustee, controller, or beneficiary is a non-resident, the trust will be classified as “foreign,” which results in:

• Land tax surcharges (up to 5% in NSW, 4% in Victoria from 2025)

• Stamp duty surcharges (up to 8% in Victoria)

• ATO charging top tax rates (45%) on rental income for non-resident beneficiaries

These penalties can significantly increase the cost of property ownership for non-resident property owners using a trust.

Who Can Use Trusts Successfully?

Australian discretionary trusts only work tax-efficiently if everyone involved is either a citizen or permanent resident (PR).

“We see many non-resident families wanting to help their kids buy property here,” says Murphy. “But if even one person involved is a non-resident, the trust becomes foreign.”

Example 1: The PR Family

Susan is a PR in Sydney. Her non-resident parents want to help her buy an investment property. If the trust deed names Susan as the only trustee and beneficiary and excludes non-residents like her parents entirely, the trust may be seen as local.

Tip: Parents can fund the trust but must not have any control, benefit, or even be listed as potential beneficiaries.

Example 2: The Non-PR Family

Leng and her daughter are both non-residents. Even if they appoint an Australian trustee, the trust will still be treated as foreign, resulting in extra taxes and no discounts.

Example 3: Mixed Residency Families

If a non-resident parent funds a trust for their PR child, they must not be included in any form. Not as trustees. Not as backup beneficiaries. Not even mentioned.

“Gifts are the cleanest method,” Murphy says. “If parents aren’t sure, they can lend the money commercially, but this attracts withholding tax. Still, a resident trust gets capital gains tax discounts, which is a big advantage.”

Legal Requirements for Trusts in Australia

To be legal and effective for non-resident property owners, a trust must include:

• A formal trust deed with clear powers and beneficiary rules

• Explicit clauses excluding foreign persons

• FIRB (Foreign Investment Review Board) approval if needed

• A Tax File Number (TFN) and annual tax lodgements

A 2024 court case showed that trying to change a trust after a tax problem doesn’t work. You must get the structure right from the start.

Choosing the Right Trust Structure for Non-Resident Property Owners

Discretionary Trusts

Pros:

• Flexible in distributing money

• Capital gains tax discount (if resident)

• Potential tax credits for beneficiaries

Cons:

• Foreign status if even one person is non-resident

• Trustees may be taxed at 45% for foreign beneficiaries

SEO Tip: Trust structures for non-resident property owners must be carefully drafted to avoid these downsides.

Unit Trusts & Companies

• Unit trusts are fixed and good for group investments, but changes can trigger tax

• Companies have no capital gains discount and flat tax at 30%

• Must have at least one resident director

Unit trusts and companies are often used when residency conditions can’t be met, but they still attract higher taxes for non-resident property owners.

Trusts Are Not for Family Homes

Trusts are for investment properties only. If the house is going to be lived in by the owner, it will not get capital gains tax exemptions.

Foreign Surcharges Are the New Normal

Different Australian states have different land tax and stamp duty surcharges for foreign trusts. For example:

• NSW land tax surcharge: increasing to 5% in 2025

• Victoria and QLD have their own rules and definitions

These make it more expensive for non-resident property owners to use a trust unless they carefully exclude all foreign involvement.

Final Thoughts: Trusts Are Strategic, But Tricky

Trusts can work for non-resident property owners — but only if structured perfectly. Non-resident investors need to:

• Exclude all non-residents from the trust

• Get the paperwork right from the beginning

• Use local expert help, like TJD Accounting Services

“If you get it wrong, it’s costly. But if you get it right, it’s a powerful long-term strategy,” says Murphy.

Trusts for non-resident property owners are not a shortcut to savings — they’re a tool that needs expert handling.

——————-

Our team at TJD Accounting Services has over 40 years of experience in handling non-resident tax returns and providing financial guidance to overseas (foreign) investors. Let us help you make informed decisions to help protect your assets and finances.  

Email us at info@tjdaccounting.com.au or call +61 3 9379 4040. 

You may like to read another article feature on TJD Accounting on some possible solutions for foreign property investors: 
https://tjdaccounting.com.au/non-resident-property-owners-in-australia/https://tjdaccounting.com.au/capital-gains-tax-for-foreigners-australia/

Please watch this video as we talk about the significance of land tax on residents and non-residents: 
https://youtu.be/ztrEg_E8EmY