---
title: "Your Kids Won't Inherit Your Wealth. The ATO Will. Unless You Do This."
description: "Most Australian property investors have no estate plan. When they die, up to 47% of their capital gains go to the ATO. Family trusts, CGT strategies, and the 3-property structure that protects generational wealth."
author: Yan Zhu
date: 2026-03-05
category: Guides
url: https://premiumrea.com.au/blog/family-trust-wealth-transfer-property-australia
tags: ["family trust", "wealth transfer", "estate planning", "CGT", "property structure", "tax minimisation", "Australia"]
---

# Your Kids Won't Inherit Your Wealth. The ATO Will. Unless You Do This.

*By Yan Zhu, Co-Founder & Chief Data Officer at PremiumRea — 2026-03-05*

> You spent twenty years building a property portfolio. You sacrificed holidays, drove the same car for a decade, and made mortgage payments while your mates were spending. And if you die without a structure, the ATO takes nearly half of everything you built.

Here is a question that makes most property investors deeply uncomfortable: what happens to your portfolio when you die?

Not in the abstract, philosophical sense. In the concrete, ATO-sends-a-bill sense.

Most Australians have no idea. They assume their kids will inherit the houses, sell them eventually, and live happily ever after. The reality is considerably less cheerful. Without proper structuring, capital gains tax on inherited investment properties can consume 30-47% of the accumulated gains. On a portfolio that has appreciated by $1.5 million over 20 years, that is $450,000-$700,000 flowing to the government rather than to your children.

I am an actuary by training. I spend my days quantifying risk. And the single biggest uninsured risk I see in Australian property investors is the absence of an estate and ownership structure plan. It is not exciting. It is not sexy. But it is the difference between your grandchildren owning property and your grandchildren paying your tax bill.

## The CGT time bomb hiding in every portfolio

When you die, your investment properties transfer to your beneficiaries at your original cost base — not at current market value. This is a critical distinction that catches families off guard.

Suppose you bought a house in Cranbourne for $450,000 in 2015. By the time you pass away in 2040, it is worth $1.4 million. Your daughter inherits the property. She does not pay CGT on inheritance — Australia abolished inheritance tax decades ago.

But here is the catch. When your daughter eventually sells that property, her cost base is your original $450,000 (adjusted for improvements and holding costs). The taxable gain is $950,000. Even with the 50% CGT discount for holding over 12 months, she is paying tax on $475,000 of gain. At a marginal rate of 37%, that is $175,750 in tax.

If she is a high earner and the gain pushes her into the 45% bracket plus Medicare levy, the bill could exceed $220,000.

Now multiply that across a portfolio of three or four properties. The cumulative CGT liability can easily reach $500,000-$700,000. That is not wealth transfer. That is wealth destruction.

> "The ATO does not send a bill when you die. They send it when your children try to do anything with what you left them. And by then, the numbers are eye-watering." — Yan Zhu, PremiumRea

## The three-phase ownership structure

At PremiumRea, we advise clients to think about property ownership in three distinct phases, each with its own optimal structure.

**Phase 1: Properties 1-2 (Individual Names)**

Your first two investment properties should sit in individual names — either solely or as tenants in common (not joint tenants, which has its own estate planning complications). The reasoning is straightforward: individual ownership attracts the lowest land tax rates in Victoria. The land tax-free threshold is more generous for individuals, and the marginal rates are lower.

With two properties totalling perhaps $200,000-$250,000 in land value, annual land tax in individual names is approximately $1,900-$2,500. In a family trust, the same land value attracts approximately $3,500-$4,000 due to the trust surcharge and lower threshold.

Individual ownership also means negative gearing losses flow directly to your personal tax return, reducing your taxable income dollar-for-dollar. For high-income earners in the 45% bracket, a $10,000 annual loss on an investment property translates to a $4,500 tax refund. That cash flow benefit is immediate and meaningful.

**Phase 2: Properties 3-4 (Family Trust with Corporate Trustee)**

Once your combined land values approach $1 million in individual names, Victoria's land tax rates start biting hard — jumping from roughly $1,950 to $4,650 at the $1.5 million threshold. This is the trigger point to establish a family trust.

A family trust with a corporate trustee (not an individual trustee — the corporate structure provides asset protection) costs approximately $1,500-$2,000 to establish and $3,000 per year to maintain (including accounting, ASIC fees, and the additional land tax).

The benefits compound over time: flexible income distribution to lower-earning family members (your spouse, adult children, or a retiree parent), asset protection from personal liability, and — critically — the ability to distribute capital gains across multiple beneficiaries when you eventually sell.

Instead of one person being hit with a $475,000 taxable gain, you can distribute that gain across four family members. Each receives $118,750 in taxable gain, which may fall into much lower tax brackets. The aggregate tax saving can be $50,000-$100,000 per property.

**Phase 3: Ongoing Wealth Transfer**

The trust does not die when you do. This is the fundamental advantage for estate planning. Properties held in a family trust do not form part of your personal estate. They are not subject to probate. They do not trigger a CGT event on your death. The trust simply continues, with the next generation of appointors and beneficiaries stepping into the structure.

Your children inherit control of the trust (by becoming appointors and directors of the corporate trustee), not the properties themselves. The properties remain in the trust. There is no disposal, no CGT event, no ATO bill. The wealth transfers seamlessly.

This is the single most powerful wealth preservation mechanism available to Australian property investors, and the majority do not use it because nobody explained it to them in plain English.

## The setup: what it actually costs and involves

Let me demystify the process, because too many investors assume trusts are complicated and expensive. They are neither.

**Establishment costs:**
- Corporate trustee registration (ASIC): approximately $600 + GST
- Trust deed preparation (lawyer or accountant): $600-$1,980
- Total one-time setup: $1,200-$2,580

**Annual running costs:**
- ASIC annual review fee for the corporate trustee: approximately $310
- Additional accounting for trust tax return: $800-$1,200
- Additional land tax (trust surcharge): varies, but roughly $1,500-$2,000 extra per year on typical investment values
- Total annual overhead: approximately $2,600-$3,500

Now compare that to the CGT saving. If a family trust saves your beneficiaries $80,000 in CGT on a single property sale, that annual overhead pays for itself many times over. Even holding for 20 years at $3,000 per year ($60,000 total), the trust saves your family a net $20,000 or more on just one property. Across a portfolio of three or four properties, the savings are six figures.

The trust deed should name a broad class of beneficiaries — typically "the family of [Appointor]" — to maintain maximum flexibility for future distributions. The appointor role is the real power seat: whoever is appointor controls who the trustee is and how distributions are made. This is the role you transfer to your children as part of your estate plan.

**Critical timing note:** Transferring existing properties from individual names into a trust triggers stamp duty and CGT. This is why we advise clients to set up the trust before purchasing property 3 or 4, not after. Retrospective restructuring is prohibitively expensive. Plan ahead.

## Common mistakes that destroy the tax benefit

I see three mistakes repeatedly.

**Mistake 1: Using joint tenancy instead of tenants in common.** Joint tenancy means that when one owner dies, the property automatically transfers to the surviving owner. This sounds convenient, but it removes all estate planning flexibility. The surviving owner now holds the full property in their name, concentrating land tax liability and eliminating the ability to distribute gains across beneficiaries.

**Mistake 2: Establishing a trust too late.** As noted above, transferring properties into a trust after purchase triggers double taxation — stamp duty on the transfer plus CGT on the deemed disposal. I have seen clients face $40,000-$60,000 in restructuring costs that would have been zero if they had planned ahead.

**Mistake 3: Not having an ABN for at least one beneficiary before settlement.** This is a technical trap. If you purchase a property through a trust and no beneficiary has an ABN, the trust may be subject to withholding tax on certain income. Ensure at least one adult beneficiary has an active ABN before the trust begins transacting.

> "The best time to set up a family trust was before you bought your third property. The second-best time is before you buy your next one." — Yan Zhu, PremiumRea

## Frequently asked questions

**Do I need a trust if I only have one or two properties?**
Probably not yet. The additional land tax and administration costs outweigh the benefits at this stage. Focus on maximising negative gearing deductions in individual names. Revisit once your portfolio approaches three properties or $1 million in combined land value.

**Can a trust hold a property purchased with a first-home-buyer stamp duty concession?**
No. First-home-buyer concessions require purchase in an individual's name. The property must be used as a principal place of residence (or at least nominally so). Trusts are excluded from all first-home-buyer programs in Victoria.

**What happens if I want to add a granny flat to a trust-held property?**
The trust can enter into a building contract for the granny flat addition. Construction costs are borne by the trust and increase the cost base. The rental income from the granny flat flows to the trust and can be distributed to beneficiaries. The trust can also claim depreciation on the granny flat structure.

**Is SMSF a better option than a family trust for property?**
They serve different purposes. SMSF offers a 0% CGT rate after age 60 in pension phase — unbeatable for long-term hold strategies. But SMSF has severe restrictions: no structural renovations, no granny flat additions, no subdivision. Family trusts offer flexibility; SMSF offers ultimate tax efficiency with rigidity. For most investors building a multi-property portfolio, the answer is both — personal names for the first two, trust for three and four, SMSF for a long-term hold play.

## References

1. [Australian Taxation Office, 'Inheriting a dwelling — CGT cost base rules', updated April 2025.](https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/inheriting-assets)
2. [State Revenue Office Victoria, 'Land Tax — Trust Surcharge Rates 2025', updated January 2025.](https://www.sro.vic.gov.au/land-tax-trust-surcharges)
3. [Australian Securities and Investments Commission (ASIC), 'Company Registration and Annual Review Fees', 2025.](https://asic.gov.au/for-business/registering-a-company/fees-and-payments/)
4. [CPA Australia, 'Family Trusts — A Practical Guide for Small Business', 2024.](https://www.cpaaustralia.com.au/)
5. [Australian Taxation Office, 'Negative Gearing — Rental Property Deductions', 2025.](https://www.ato.gov.au/individuals-and-families/investments-and-assets/rental-properties)
6. [Law Institute of Victoria, 'Estate Planning and Property Ownership Structures', 2024.](https://www.liv.asn.au/)
7. [State Revenue Office Victoria, 'Land Tax Rates and Thresholds 2025', comparison individual vs trust.](https://www.sro.vic.gov.au/land-tax)
8. [PremiumRea advisory: 3-phase ownership model and trust structuring recommendations.](#)

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Source: https://premiumrea.com.au/blog/family-trust-wealth-transfer-property-australia
Publisher: PremiumRea (Optima Real Estate) — Melbourne buyers agent