Home Loan Ownership Structures in Australia — Joint, Tenants in Common, Trusts and SMSF
This article provides general information only and does not constitute financial advice. For advice tailored to your situation, consult a licensed financial adviser. Learn more.
Contents
How you own a property determines how it is taxed, how it passes at death, how equity is divided between owners, and what happens if one owner wants to sell. Getting the ownership structure right before you buy — not after — avoids expensive stamp duty, CGT, and legal consequences of restructuring later.
Common Ownership Structures
| Structure | Who holds title | Key feature | Mortgage access |
|---|---|---|---|
| Sole ownership | One individual | Full control; full liability | Standard |
| Joint tenancy | Two or more individuals equally | Right of survivorship — share transfers automatically to co-owner at death | Standard |
| Tenants in common | Two or more individuals (any split) | Each owns a specified share; share forms part of estate at death | Standard |
| Discretionary (family) trust | Trustee holds on behalf of beneficiaries | Income distribution flexibility; no individual owner | Possible but complex |
| Unit trust | Trustee holds; beneficiaries hold units | Fixed interest; useful for investment partnerships | Possible; limited lenders |
| Company | Corporation owns property | No CGT discount; no personal liability | Possible; fewer lenders |
| SMSF | SMSF trustee under limited recourse borrowing | Investment only; strict rules apply | LRBA specialists only |
Joint Tenancy vs Tenants in Common
This is the most common decision for couples buying together:
Joint tenancy: Both owners hold the entire property jointly — there are no separate shares. The key implication is the right of survivorship: if one owner dies, their interest automatically passes to the surviving owner, regardless of what the will says. Joint tenancy cannot be easily separated without a legal process (severance).
Tenants in common: Each owner holds a defined share (e.g., 50/50 or 60/40). Each share can be left in a will, sold, or mortgaged independently. This structure is commonly used for:
- Investment properties where investors want proportional ownership that matches their financial contribution
- Couples where one partner has a significantly larger deposit contribution and wants that recorded
- Business partners investing together without the right of survivorship
Tax implications: For investment properties, the ATO requires you to declare rental income and deductions in proportion to your ownership share. A 60/40 tenants in common structure means the 60% owner declares 60% of income and deductions. This can be used strategically when one investor is on a lower marginal tax rate.
Family Trusts and Property
A discretionary (family) trust can hold investment property. Income from the trust (rent, dividends) can be distributed flexibly among beneficiaries each year — optimising tax by distributing to lower-income family members. However:
- Trusts are not eligible for the main residence CGT exemption — holding the family home in a trust loses the exemption
- The trust (not an individual) owns the property, so the 50% CGT discount still applies after 12 months
- Most mainstream lenders will lend to a trust but with more documentation requirements; some may charge a slightly higher rate or require personal guarantees from trustees
- Land tax thresholds often do not apply to trusts — some states assess land tax on trust-held property from the first dollar
SMSF Property Loans (LRBAs)
A self-managed superannuation fund (SMSF) can purchase investment property using a limited recourse borrowing arrangement (LRBA). This allows the SMSF to borrow, with the lender’s recourse limited to the purchased asset — they cannot claim against the SMSF’s other assets.
Key rules and restrictions:
- The property must meet the sole purpose test (providing retirement benefits to members)
- Members and related parties cannot live in or use the property — no personal use
- The property must be transferred into the SMSF’s name once the loan is repaid
- LRBA interest rates are typically 0.5–1.5% above standard investment loan rates
- Only specialist SMSF lenders provide LRBAs — major banks have mostly exited this market
Why Restructuring Later Is Expensive
Changing the ownership structure of a property after purchase typically triggers:
- Stamp duty: Transferring property between owners (even spouses) is usually a dutiable transaction in all states (with some exceptions for marriage / de facto breakdown)
- CGT: If the property has increased in value, a transfer is a CGT event — the gain is assessed on the transferred portion, even if no cash changes hands
This is why getting the structure right before purchase matters significantly. Speak with a solicitor and a registered tax agent before signing a contract.
Frequently Asked Questions
What is the difference between joint tenancy and tenants in common in Australia? Joint tenancy means both owners hold the entire property together with the right of survivorship — if one dies, the other automatically inherits the interest. Tenants in common means each owner holds a defined share (can be any split) that forms part of their estate when they die. Couples typically use joint tenancy for the family home; investors often use tenants in common for investment properties.
Can I put my investment property in a trust in Australia? Yes — a discretionary (family) trust can hold investment property and offers income distribution flexibility. However, trusts cannot claim the main residence CGT exemption, may face higher land tax in some states, and add legal and accounting complexity. Lender options are more limited for trusts.
Can an SMSF buy a residential investment property in Australia? Yes — an SMSF can buy residential investment property, potentially with an LRBA (loan). Strict rules apply: the property must meet the sole purpose test, neither members nor related parties can use it, and the loan must be through a specialist SMSF lender. This is a complex area — SMSF property investment requires specialist advice.
Property ownership structures have significant legal, tax, and estate planning implications. Speak with a licensed solicitor and registered tax agent before making ownership decisions. For financial planning advice, speak with a licensed financial adviser via MoneySmart.