{"id":19920,"date":"2026-10-22T18:11:11","date_gmt":"2026-10-22T07:11:11","guid":{"rendered":"https:\/\/chuatan.com.au\/?p=19920"},"modified":"2026-10-22T22:00:53","modified_gmt":"2026-10-22T11:00:53","slug":"rent-free-trust-property-family-tax-australia","status":"publish","type":"post","link":"https:\/\/chuatan.com.au\/en\/rent-free-trust-property-family-tax-australia\/","title":{"rendered":"Living Rent-Free in a Family Trust’s Property: The Tax and Legal Risks"},"content":{"rendered":"
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It is a common arrangement. A family trust \u2014 sometimes Australian, often established offshore \u2014 buys an apartment or house in Melbourne, Sydney or Brisbane. A child studying in Australia lives there rent-free, or parents stay there when they visit or retire. The family sees it simply as \u201cour home\u201d.<\/p>\n

Legally and for tax purposes, it is not that simple. The property belongs to the trustee, not to the person living in it, and the trustee holds it for all of the beneficiaries. Rent-free or discounted use can raise trustee, tax, land tax, foreign investment, family law and creditor issues. None of these are reasons to avoid the arrangement altogether, but each needs to be managed.<\/p>\n\n

Is rent-free use authorised by the trust deed?<\/h2>\n

A trustee may only use trust assets as the trust deed allows. Many family trust deeds permit the trustee to let a beneficiary occupy trust property on terms the trustee decides, but not all do, and the wording matters. Even where it is allowed, the trustee must actually consider the question and make a decision, rather than simply letting the family move in.<\/p>\n

Trustees also owe duties to all beneficiaries. Allowing one child to live rent-free for years may be a benefit to that child at the expense of others. In a harmonious family that may never matter. If relationships later break down \u2014 or after a parent dies \u2014 other beneficiaries may challenge whether the trustee acted properly.<\/p>\n\n

Income tax: no rent, no deductions<\/h2>\n

If no rent is charged, the trust generally has no rental income from the property. The other side is that the trust generally cannot claim deductions for interest, rates, repairs or depreciation on the property, because it is not earning assessable income from it. Charging a nominal or below-market rent does not usually change this in the family\u2019s favour, and may limit deductions to the rent received.<\/p>\n\n

Capital gains tax: no main residence exemption<\/h2>\n

An individual who owns and lives in their home can generally claim the capital gains tax main residence exemption when they sell. A family trust generally cannot claim that exemption, even if a beneficiary lives in the property as their home. When the trust eventually sells, any capital gain will generally be taxable in the trust (with the treatment depending on how the gain is distributed and whether the trust is resident or foreign). Capital gains tax reforms that start on 1 July 2027 replace the 50% CGT discount with inflation indexation for Australian residents and introduce a minimum 30% tax on capital gains, so the timing of any sale, and a valuation at 1 July 2027, may matter.<\/p>\n\n

Land tax and stamp duty: rules differ by state<\/h2>\n

Land tax and stamp duty are state and territory taxes, and the rules differ between Victoria, New South Wales, Queensland and other jurisdictions. In general terms:<\/p>\n