Many Asian families in Australia build wealth through property: a first investment unit, then a small subdivision, then townhouse projects or commercial sites, often with siblings, cousins or friends from the same community. Over time a family property group emerges, held across personal names, trusts and companies, financed by several lenders and guaranteed by family members.
If you are a developer or run a family property group, this article is written for you. It outlines, in general terms, the Australian legal issues that commonly arise in structuring, financing and passing on a property business.
Holding property: personal names, trusts, companies and SPVs
Each way of holding property has different consequences. Property in personal names is simple, but it is exposed to the owner’s creditors and to family law claims, and it passes under the owner’s Will. A discretionary trust can offer flexibility in distributing income, but it is treated differently for land tax and, where beneficiaries are overseas, for foreign surcharges. A unit trust gives fixed entitlements that suit unrelated investors. A company has its own tax position and can hold profits for reinvestment.
Developers often use a separate special purpose vehicle for each project, so the risks and lenders of one project are kept apart from another. The structure has to suit the lender, the GST position and the investors, and it should be chosen early, because moving property between entities later can trigger duty and capital gains tax.
Joint ventures and co-owner exits
Family and community developments are often agreed on a handshake. One party contributes the land, another the funding or building expertise. Problems surface when the project runs over budget, a party cannot meet a funding call, someone dies, or one owner wants to sell and another wants to hold.
A written joint venture or unitholders’ agreement can deal with contributions, funding calls and default, decision-making and deadlock, how profits and losses are shared, and how a party exits, including pre-emptive rights and how price is set. Where land is co-owned without such an agreement, Victorian law allows a co-owner to seek an order for sale or division. Our article on co-owners forcing the sale of property explains that process.
Finance and guarantees from family members
Development lenders commonly ask for personal guarantees from directors and sometimes third-party mortgages over relatives’ homes. A parent may sign a guarantee in English they do not fully understand.
Australian law gives some protection. In Garcia v National Australia Bank, the High Court held that in certain circumstances a guarantee given by a wife who did not understand it and received no benefit may be set aside. Banks that subscribe to the Banking Code of Practice also have obligations to guarantors. These protections depend on the facts, and a guarantee generally binds the guarantor’s estate after death, so guarantees need to be part of any estate plan.
GST and duty
Developers selling new residential premises generally have GST obligations, and purchasers of new residential premises or potential residential land may be required to withhold part of the price and pay it to the ATO. Whether the margin scheme is available depends on how and from whom the land was acquired. Developments in Victoria may also need to consider windfall gains tax, which can apply when rezoning increases land value.
Stamp duty can arise on transfers between family members and entities, and landholder duty can apply when someone acquires a significant interest in a company or unit trust that holds land. The rules are technical and need advice from a qualified tax adviser working with your lawyer.
Foreign investment and foreign surcharges
When a family member lives overseas, the structure may be affected even if most of the family is in Australia. Foreign persons generally need approval under the Foreign Acquisitions and Takeovers Act 1975 (Cth) to acquire residential land, and a company or trust in which a foreign person holds a substantial interest may itself be a foreign person. The temporary ban on foreign persons buying established dwellings, which began on 1 April 2025, has been extended to 30 June 2029, subject to exceptions.
Victoria also imposes foreign purchaser additional duty on certain residential purchases and an absentee owner surcharge for land tax. A discretionary trust with overseas beneficiaries may be caught unless its deed is drafted to address this. We have written separately about FIRB approval for buyers from Asia and about foreign owners holding property through trusts and companies.
Land tax and trusts
In Victoria, land held on trust is generally assessed to land tax at surcharge rates, subject to exceptions. Fixed and unit trusts may be assessed differently if the trustee notifies the State Revenue Office of the beneficiaries or unitholders, and there are limited nominations for a principal place of residence. Trustees must notify certain changes, and aggregation of holdings can affect the outcome. A group that has grown informally may not be meeting these obligations.
Succession of a property portfolio
A property group is hard to divide. Control of each trust and SPV passes under its own deed or constitution, not the Will, and joint venture partners may have rights when a party dies. Lenders may review facilities on the death of a guarantor. Our article on property portfolio succession when one child manages the properties discusses these issues in more depth.
Disputes with builders are a separate topic, covered in our article on domestic building disputes in Victoria.
How we work with you
Developers come to us directly or through their accountant, broker or financial adviser. With your consent, we work alongside your other advisers so that the structure, the finance and the succession plan fit together, and we share information only as you authorise. We meet in English, Mandarin or Cantonese and coordinate with lawyers in Asia where family members or investors are overseas. Timing depends on the matter, and we discuss it at the outset.
Questions to be asking
- Is each property held in the right entity, and what would it cost to change that later?
- Is every joint venture documented, including what happens on default, deadlock or death?
- Which family members have signed guarantees or mortgages, and did they understand them?
- Are any family members, beneficiaries or investors foreign persons for FIRB or state tax purposes?
- Has the trust given the right land tax notifications?
- Who will control each trust and company when the founders step back?
Frequently asked questions
What legal structure should a property developer use in Australia?
There is no single answer. The choice depends on the project, the parties, the lender, the tax position and whether anyone involved is overseas, and needs advice before land is acquired.
Can a parent’s guarantee for a family development be set aside?
In some circumstances, depending on the facts. Courts look at matters such as whether the guarantor understood the transaction and received any benefit.
Does a family trust pay more land tax in Victoria?
Land held on trust is generally assessed at surcharge rates unless an exception applies. The outcome depends on the type of trust and any notifications made.
Every family’s situation is different, and the answer often turns on details. Book a consultation so we can review your documents and circumstances before you act.
How Chua Tan Associates can help
Chua Tan Associates has practised in Melbourne since 1990 and advises property developers and family property groups on structures, joint venture and unitholders’ agreements, family guarantees, foreign investment questions and succession. Justin Chua trained in accounting (Bachelor of Commerce, accounting major), is an affiliate member of STEP (the Society of Trust and Estate Practitioners), and advises on the legal and tax structure of family wealth together. He is a Nationally Accredited Mediator and Family Dispute Resolution Practitioner, and an Accredited Family Business Advisor. We work with your accountant and with lawyers in Asia, our notary public prepares documents for use overseas, and we advise in English, Mandarin and Cantonese.
Important: This article is general information only and must not be relied on. It is not legal, tax or financial advice, does not take your circumstances into account, and may not reflect changes in the law after publication. Laws of other countries may also apply. Do not act or refrain from acting on the basis of this article. Reading it or contacting us does not create a lawyer–client relationship. Please book a consultation for advice on your situation.
Related reading
Chua Tan Associates acts for families, executors, trustees and their professional advisers in estate planning, estate administration and estate disputes in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice.
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