Buying Property Through a Family Trust in 2026: What Has Changed

Buying property through a family trust was once straightforward: a popular tax-efficient strategy used by professionals, investors, and business owners across Australia. But in 2026, the landscape changed. Major banks restricted new trust borrowers, some paused trust lending entirely, and APRA's new DTI caps created additional complexity. For clients considering trust structures (or already holding property in trusts), the question is: what is still possible, and how do you navigate a tightening market? This guide walks through the current environment, explains what changed, and outlines your realistic options.

How Trust Lending Works in Australia

The Basic Structure

A family trust is a legal entity that holds assets (property, shares, cash) for the benefit of its beneficiaries. When a trust borrows to buy property:

1. The trustee (usually a company, sometimes an individual) applies for the loan
2. The lender lends to the trustee in its capacity as trustee, not to the trust itself, because trusts are not legal entities
3. The trustee (or the beneficiaries, depending on structure) provides a personal guarantee backing the debt
4. The property is held in the trust's name

From a lender's perspective, they are lending to the trustee (a person or company with personal liability) who happens to be operating in a trust capacity. The trust structure itself does not eliminate personal responsibility; it layers a legal entity around the property ownership.

Tax Efficiency

Trusts allow income distribution flexibility. A trust earning $100K can distribute it to beneficiaries in different income tax brackets, minimising overall tax. A property held in a trust can distribute rental income efficiently. Estate planning benefits also exist: the property passes through the trust structure rather than through individual wills.

Liability Protection

There is limited liability protection. The beneficiaries who guarantee the loan are still personally liable for the debt. The trust structure primarily protects against creditors of individual beneficiaries reaching trust assets, not against loan default.

What Changed in 2026

CBA Restriction (November 2025, Effective Early 2026)

Commonwealth Bank announced a significant restriction: new home loans for properties held in family trusts are no longer available. Existing loans can be maintained, but new applications and refinances are restricted. CBA's rationale centres on compliance complexity and responsible lending obligations around trust distributions and beneficiary income assessment.

Macquarie Pause (January 2026)

Macquarie Mortgages paused new trust lending pending a policy review. The pause was expected to last two to four months, but no restart date has been confirmed as of February 2026.

APRA DTI Cap (February 2026)

The new Debt-to-Income cap at 6x income applies to all new residential lending, including trusts. When assessing trust borrowers, lenders must identify all beneficiaries' income, assess the trustee's repayment capacity, and ensure DTI compliance. This increases complexity and reduces approved loan amounts for some applicants.

Tightening Across the Board

Beyond CBA and Macquarie, most retail lenders have tightened trust lending criteria: higher rates, more stringent income assessment, and additional guarantor requirements.

What This Means for Borrowers

• Fewer options: With CBA and Macquarie no longer available, the field narrows to regional banks (NAB, Westpac, smaller lenders), credit unions, and specialist non-bank lenders.
• Higher costs: With fewer lenders competing for trust business, pricing has widened. Trust loans typically cost 0.5 to 0.75% more than standard owner-occupier loans, and 2026 restrictions are pushing premiums higher (0.75 to 1.0%+ in some cases).
• Longer processing: Manual assessment of trusts is resource-intensive. Expect six to eight week timelines compared to three to four weeks for standard loans.
• Guarantor complexity: Most lenders now require all adult beneficiaries (not just the trustee) to guarantee the loan. This increases complexity if beneficiaries have other debts or credit issues.
• Stricter income assessment: With DTI restrictions, trust income is assessed more conservatively. If the trust holds investment property generating income, lenders assess the net (after mortgage) contribution, reducing apparent borrowing capacity.

Corporate Trustee vs Individual Trustee

Most trust structures use a corporate trustee, a private company established to act as the trustee. This is standard because:

• Continuity: If an individual trustee dies, the trust requires restructuring. A company trustee is perpetual.
• Liability protection: Directors of the company are protected from personal liability in most cases.
• Succession planning: A company trustee simplifies succession and allows multiple directors.

From a lending perspective:

• Retail lenders often prefer corporate trustees because the company (with proper ACN and director details) is easier to assess than an individual trustee.
• CBA's restriction applies to all trusts, regardless of whether the trustee is corporate or individual.
• Lenders typically require the company directors (and often beneficiaries) to guarantee the loan personally, negating the company liability protection.

Guarantor Requirements

When you borrow through a trust, the trustee and beneficiaries typically provide personal guarantees. This means that if the trust cannot repay the loan, the lender can pursue you personally, claiming against your personal assets rather than just the trust's property.

Lenders typically require:

• All company directors (if corporate trustee)
• All adult beneficiaries (varies by lender, but increasingly required)
• Sometimes the settlor (the person who established the trust)

If there are multiple guarantors and they all have sufficient personal income, this strengthens the loan application. If one guarantor has credit issues or insufficient income, lenders may decline unless other guarantors are strong. Under APRA's DTI cap, each guarantor's personal income is assessed: a guarantor with $300K income but an existing $1.5M mortgage at 6x DTI is maxed out and cannot guarantee additional trust debt.

Costs of Trust Lending

• Interest rate premium: 0.5 to 1.0% above equivalent non-trust loans, due to assessment complexity and lender appetite constraints.
• Legal fees: Setting up or restructuring a trust property purchase involves legal work (trust deed, guarantee documents, property conveyancing). Expect $1,500 to $3,500 in legal fees beyond standard conveyancing.
• Valuation fees: Lenders often require professional valuations rather than automated valuations. Additional cost: $300 to $800.
• Annual trust accounting: If the trust receives income (rental income, distributions), annual trust tax return filing and accounting is required. Cost: $500 to $2,000 per year depending on complexity.
• Refinance complexity: When you refinance a trust loan, lenders re-assess the trust structure, beneficiaries, and guarantors. This can take longer and cost more than refinancing a standard loan.

Why Specialist Brokers Matter More Than Ever

When trust lending options were abundant, a standard broker could pitch to 10 to 12 lenders and get approvals. In 2026, with CBA and Macquarie offline and retail lenders tightening, specialist knowledge is critical.

• Lender selection: A specialist broker like Exec Finance knows which remaining lenders actively lend to trusts, which are tightening further, and which have the most flexible criteria.
• Documentation strategy: Specialist brokers know which lenders prioritise corporate vs individual trustees, how to present guarantors' income optimally, and what supporting documentation strengthens applications.
• Alternative structures: In some cases, it may be more efficient to restructure, for example holding the property in your personal name or using a company structure instead of a trust. A specialist broker advises on trade-offs.
• Relationships with remaining lenders: With a tightening market, relationships matter. Specialist brokers with strong connections to active trust lenders can negotiate better terms, faster processing, and flexible assessment.

Exec Finance, as part of the MedX Finance Group, has deep experience in trust lending for professionals, executives, and high net worth individuals. Our relationships across private banking and specialist lenders mean we can access options that are not available through standard broker channels.

Negative Gearing Limitations in Trusts

If you own an investment property personally with a mortgage, rental income minus mortgage interest and expenses often results in a tax loss. You can offset this loss against your employment income, reducing your tax bill.

In a trust structure, income and losses remain within the trust. You cannot pass losses through to beneficiaries for individual tax purposes in most cases. This means negative gearing losses are "trapped" in the trust.

Some trusts distribute negative gearing losses to specific beneficiaries (if the trust deed allows), but this is complex and tax-advice territory. For most trust structures, negative gearing is less tax-efficient than personal ownership. This is an important consideration when deciding whether a trust structure is worth the additional lending complexity and cost.

State Land Tax Implications

• New South Wales: Land tax applies to land values over approximately $580K (threshold varies). Most family trusts do not qualify for exemption, so land tax applies.
• Victoria: Most discretionary family trusts do not qualify for exemption. Land tax applies at 0.3 to 0.6% depending on land value.
• Queensland: Similar: exemptions available but typically not for discretionary family trusts.
• Western Australia and South Australia: Similar land tax frameworks with exemption tests.

Holding property in a discretionary family trust often triggers land tax that would not apply to personal ownership. An accountant should model this before committing to a trust structure.

Current Best Practices for Trust Lending (2026)

• Consider alternatives first: Ask yourself whether a trust is necessary. If it is for tax efficiency, run the numbers with an accountant. If it is for liability protection, discuss with a lawyer. Sometimes personal ownership or company ownership is simpler.
• Use a specialist broker: The retail lending landscape has changed dramatically. A specialist broker knows which lenders are active, how each assesses trusts, and can position your application optimally.
• Get guarantors' approval: Before applying, ensure all required guarantors understand the commitment and have sufficient income and borrowing capacity. If guarantors are approaching their DTI limits, the loan may not be approvable.
• Plan for tax: Work with your accountant to model trust holding vs. personal holding. Include land tax, negative gearing treatment, and distribution planning. The tax advantage must outweigh the lending complexity.
• Build in timeline: Trust lending takes six to eight weeks. If you are in a competitive property situation, plan for longer timelines or consider non-trust structures to accelerate approval.