Transferring property from a trust to a company can seem straightforward, but it often involves a range of costs and tax considerations. Whether you’re restructuring for asset protection, bringing in a business partner, or planning for the future, it’s important to understand the financial impact before making any decisions.
Moving a property from a trust to a company is generally treated as a new transaction by state revenue offices and the Australian Taxation Office. This means both transfer duty and capital gains tax may apply.
Many people are surprised by the combined cost of these obligations. Understanding any exemptions or rollover relief that may be available can make a significant difference.
If you need guidance on how a change in ownership structure could affect your lending options, the team at Kingslend Financial is available to help. You can reach them at 1300 068 880 or visit kingslend.com.au.
The following sections explain what to expect across duty, tax, legal fees, lending, and ongoing compliance. You’ll also find helpful questions to consider before proceeding.
The Main Cost Buckets To Expect
Transferring property from a trust to a company usually involves four main cost areas: state-based transfer duty, capital gains tax, professional fees, and any refinancing costs related to changing the borrower entity. Each cost can vary based on the property value, the state or territory, and how the transaction is structured.
Transfer Duty And State-Based Charges
Transfer duty, also known as stamp duty, is often the largest upfront cost. Most state revenue offices treat a trust-to-company transfer as a dutiable transaction, even if the parties are related.
Duty is calculated on the greater of the property’s market value or the purchase price, and rates differ by state. For example, in New South Wales, duty on a $900,000 property can exceed $35,000.
Some states offer small business restructure exemptions, but eligibility conditions are strict. Not every transfer will qualify.
Capital Gains Tax And CGT Event Risks
A capital gains tax (CGT) event occurs when a trust disposes of a CGT asset, including real property. Because a trust and a company are separate legal entities, the transfer is treated as a disposal by the trust at market value.
If the property has increased in value since the trust acquired it, the trust may face a taxable capital gain. The 50% CGT discount may apply if the trust has held the asset for more than 12 months, but this depends on the trust type and how income is distributed.
Legal, Conveyancing, And Registration Costs
A conveyancer or solicitor is needed for this process. The transfer requires title work, preparation of documents, and lodgement with the land titles office.
Conveyancing fees for a trust-to-company transfer typically range from $1,500 to $3,500, but complexity can increase costs. Registration fees, title search costs, and legal advice on the structure may add further expenses.
If the trust deed needs to be reviewed or amended, legal costs may rise.
Refinancing, Discharge, And New Loan Costs
If the trust holds a mortgage, the existing loan cannot simply be transferred to the company. The trust loan must be discharged and a new loan established in the company’s name.
Discharge fees, new loan establishment fees, and valuation costs all apply. Break costs may also be triggered if the existing loan is on a fixed rate.
Why A Transfer Can Trigger Tax And Duty
A trust-to-company transfer triggers both duty and CGT because of how Australian law defines ownership and taxable disposals. A change in who legally or beneficially holds a trust asset is treated as a separate transaction, not just a simple update.
How Market Value Rules Often Apply
The ATO requires related-party transfers of property to use market value for CGT purposes. This applies even if the actual consideration paid is lower, or if no money changes hands.
If a trust transfers property to a company for $0, the ATO still treats the trust as having disposed of it at full market value. Any gain between the trust’s original cost base and the current market value becomes assessable income for the trust.
When A Change In Beneficial Ownership Matters
Duty legislation focuses on both legal title and beneficial ownership. If a discretionary trust transfers property to a company owned by different individuals, or by the same individuals in different proportions, a change in beneficial ownership has occurred.
Even if the corporate trustee remains the same, the entity receiving the asset matters for duty purposes. Revenue offices look at who benefits from the property after the transfer, not just the structure on paper.
Why The Trust Deed And Ownership History Matter
The trust deed outlines what the trustee can do with trust assets. Before transferring, confirm that the deed allows the trustee to transfer the property to a company and under what terms.
The ownership history affects CGT calculations. How long the trust has held the property, the original cost base, and any capital improvements will influence the size of any taxable gain.
In some discretionary trust scenarios, unclear records can make this calculation more challenging.
Finance And Lending Issues During The Change
Changing the ownership structure of a property affects both the legal title and any existing finance secured against it. Lenders treat trust and company borrowers differently, which impacts eligibility and cost.
What Happens If There Is An Existing Mortgage
A mortgage is tied to a specific borrower entity. If a trust holds the property and the loan is in the trustee’s name, that loan cannot simply be assigned to a company without lender consent.
In most cases, the lender will require a full discharge and new application. Discharge fees, break costs on fixed-rate products, and the administrative cost of removing the mortgage from the title all apply.
If the market has changed since the original valuation, the new lender may require a fresh independent valuation.
Refinancing From Trust To Company Borrowing
Refinancing from a trust to a company means the company will be assessed as the new borrower. Lenders have different policies for company lending compared to individual or trust lending.
Some lenders require all directors to personally guarantee the loan. Others may apply higher interest rates or lower loan-to-value ratios for company borrowers.
Arranging finance in a company name often takes longer than a standard refinance. Getting pre-approval before proceeding can help avoid settlement delays.
How The Property Type Can Affect Lending
Whether the property is held as an investment or for business purposes affects which lenders will consider the application and what terms are offered. Fewer lenders offer investment property loans in company names than for individual names or family trusts.
Some lenders have tightened their policies around trust and company lending, so borrowing options after a restructure may be more limited. Seeking advice from a mortgage broker with experience in non-individual borrower structures can be helpful.
When Exemptions Or Relief Might Be Considered
There are situations where transfer duty exemptions or CGT rollover relief can reduce or defer some costs. These exemptions are available in some cases, but strict eligibility conditions apply.
State Duty Exemptions And Their Limits
Some states offer duty exemptions for small business restructures. For example, Queensland introduced a duty exemption for eligible restructures from a discretionary trust to a company in September 2020.
New South Wales has similar relief for qualifying small businesses. To access these exemptions, the restructure usually needs to involve the transfer of active business assets and maintain the same ultimate economic ownership.
Property held purely for passive investment may not meet the “active asset” requirement in some states.
CGT Rollover Relief In Restructure Scenarios
The small business restructure rollover is available to entities with an aggregated turnover under $10 million. It allows active assets to be transferred between eligible entities without triggering immediate income tax.
The cost base of the asset is carried across to the receiving entity, deferring rather than eliminating CGT.
For this rollover to apply, ultimate economic ownership must not change. In discretionary trust scenarios, this can be satisfied where there is no practical change in who benefits from the property.
A separate CGT rollover, the Section 124-N rollover, applies to unit trust-to-company conversions, but procedural requirements are strict and time-bound.
Why Relief Rules Need Specialist Review
Eligibility criteria for state duty exemptions and CGT rollovers are detailed. It’s easy for a restructure to fall outside the qualifying conditions.
Getting a private binding ruling from the ATO or written confirmation from the relevant state revenue office is worth considering for higher-value transfers. A tax specialist should review the trust deed, ownership structure, asset history, and state rules before preparing transfer documents.
Other Ongoing Costs After Settlement
Once the property is transferred and settlement is complete, ongoing costs and compliance obligations begin. Holding property in a company instead of a trust changes reporting requirements and state-based taxes.
Company Compliance And Annual Administration
A company structure requires annual ASIC fees, company tax returns, and sometimes audited financial statements, depending on the entity’s size. These costs are usually higher than the ongoing administration costs of a discretionary trust.
Company directors also have personal obligations under the Corporations Act, adding a layer of governance not present in trusts. Accounting fees typically increase when a company is added to an asset-holding structure.
Trust Tax Return And Financial Reporting
If the trust still exists and holds other assets, it continues to require an annual trust tax return. Winding up a trust after a transfer adds legal and accounting costs.
If the trust remains active but with fewer assets, administrative overhead may not change significantly. You could end up running compliance for two entities instead of one.
Financial statements for both entities need to reflect the transfer accurately. The cost base, any rollover elections, and the market value used at transfer should be documented and retained for future CGT calculations.
Land Tax And Record-Keeping Impacts
Land tax treatment differs between trusts and companies and varies by state. In most Australian states, property held in a discretionary trust does not benefit from the land tax threshold that applies to individual ownership.
Companies are subject to their own thresholds and surcharges. Changing the ownership structure can affect how land tax is calculated, especially if the company owns other land.
Some states also apply surcharge land tax to foreign persons, which can include certain company structures depending on shareholder composition.
How To Assess Whether The Move Is Worth It
Before committing to a trust-to-company transfer, it helps to weigh your goals against the full cost picture. In some cases, the transfer makes clear financial sense.
For others, the costs may outweigh the benefits, especially if the property is not actively used in a business.
Comparing Asset Protection And Estate Planning Goals
Asset protection and estate planning are common reasons for moving property from a trust to a company. A company structure can provide liability separation, but a well-structured trust with a corporate trustee can offer similar protection.
It’s important to confirm whether your specific protection goal truly requires a property transfer. Sometimes, a change in trustee or a deed amendment might achieve your aims at a significantly lower cost.
Estate planning outcomes can also differ between structures. Shares in a company may be transferred or bequeathed more simply in some cases.
However, the CGT and duty consequences at the time of death or transfer still need to be carefully considered.
Getting Legal And Tax Advice Before Signing
Legal and tax advice are both essential before preparing any transfer documents. A solicitor can help with the legal paperwork, while a tax specialist can model the CGT position and assess duty implications.
Seeking both types of advice before signing anything helps you avoid unexpected costs. Instructing a conveyancer without tax advice in place is a common source of expensive surprises.
State Differences To Check Early
The rules for duty exemptions, CGT rollover eligibility, land tax treatment, and foreign person surcharges can differ from state to state. For example, Western Australia has unique duty rules for trust restructures compared to Queensland or New South Wales.
The timing of when an exemption was introduced may also affect your situation. Always check the specific rules in the state where your property is located.
Relying on general advice can be risky, as each state’s approach may vary. Understanding these differences can help you make confident, informed decisions.
