Land in a Trust? What You Need to Know About Land Tax in Australia

So you currently have land in a trust for one (or more) of these reasons: You’re building a property portfolio, you want to protect family wealth, you plan to distribute income to multiple people/entities, and/or you’re doing multi-generational estate planning. 

This is all great foresight and can pay off beautifully, but there’s a huge factor to consider — land tax.

Putting land in a trust can cause you to pay surcharges and/or higher land tax, depending on where in Australia you live. 

Let’s get into the in’s and out’s of land tax on trusts so you can make the most financially-abundant decision for you, your family, your estate, and/or your business.

What’s land tax? 

Land tax is an annual state-based tax on the unimproved value of land (or, the value of the land itself only). 

It applies to investment properties, vacant land, holiday homes, and commercial properties. 

Your main residence is usually exempt, but it’s important to note that each state and territory sets its own thresholds, rates, and rules.

How are trusts taxed differently?

Simply put, it depends on the type of trust your land is held in.

Across the board, trusts often face higher land tax or surcharge rates than individuals. States assume trusts can be used to reduce tax or obscure ownership, so they are often denied tax-free thresholds and must declare the beneficial ownership structure to qualify for standard rates.

Discretionary trusts (family trusts) are one of the most common types in Australia. Here, the trustee decides each year who receives income or capital among a pool of beneficiaries, usually family or related entities. Most states treat them as special trusts, meaning they don’t benefit from a tax-free threshold and land tax applies from the first dollar of unimproved value. They can also be hit with surcharge rates if foreign beneficiaries are not irrevocably excluded in the deed. Discretionary trusts are great for asset protection and income splitting but can be costly for land tax.

Unit trusts give beneficiaries fixed “units,” similar to shares in a company, with distributions matching unit holdings. They can sometimes access standard land tax thresholds if beneficiaries are clearly identifiable. If units are widely held or include foreign beneficiaries, surcharges may apply. States often require registration of unit holders with the revenue office. This structure is more favourable than discretionary trusts for land tax but less flexible, as income can’t be strategically allocated.

Hybrid trusts combine elements of discretionary and unit trusts, allowing both fixed entitlements and discretionary distributions. For land tax, they are usually treated like discretionary trusts, which means no threshold, higher rates, and possible foreign surcharges. While flexible in theory, tax offices often apply harsher treatment in practice.

Bare trusts (custodian trusts) hold property for a single beneficiary, essentially giving the trustee legal title only. They are often used for SMSF or main residence property purchases and are generally considered a fixed trust for land tax purposes if set out correctly, the land tax thresholds can apply and it may be assessed as though the beneficial owner owns it directly.

Testamentary trusts, created via a will, pass assets (including land) to beneficiaries in a controlled way after someone dies. They are usually assessed as special trusts, so no threshold applies, though some states may offer concessions if the land is part of a deceased estate being wound up. They’re excellent for estate planning but may result in higher land tax if the property is retained long-term.

Of the trusts listed above, Unit Trusts and Bare Trusts are the most favourable for minimising land tax.

How does it differ by each state and territory? 

Northern Territory

The Northern Territory is the outlier, all forms of land tax, including on trust-held land, have been abolished.

Western Australia

In WA, if you hold land in a trust, you’re generally liable for land tax as if the land were your own.

Where land is held for different beneficiaries, each trust is assessed separately. 

If you also own other property, each holding is taxed on its own, though in some cases they may be assessed together. 

A trustee’s home isn’t exempt in WA unless the property is held for a disabled beneficiary who lives there. 

If your WA land tax assessment includes trust property, you’ll need to advise RevenueWA in writing and provide supporting documents (such as the Offer and Acceptance and the Deed of Trust). 

Exemptions may apply if the land is part of a deceased estate and lived in by a beneficiary under the will, or if the land is held for a disabled beneficiary who occupies it as their main residence.

Australian Capital Territory (ACT)

In the ACT, land tax applies to residential properties that are not your principal place of residence, including those held in a trust. 

Land tax is assessed quarterly and made up of a fixed charge (which increases each year) plus a variable charge based on the property’s average unimproved value. 

Trusts don’t receive the main residence exemption, even if the property is lived in by a beneficiary, and if the trustee is considered a foreign person the foreign ownership surcharge also applies. 

An exemption may be available under the Affordable Community Housing Land Tax Exemption Scheme, which now covers up to 1,000 properties leased through registered community housing providers at below-market rent.

Tasmania

In Tasmania, land tax applies each year on 1 July to all taxable land, including land held in a trust. 

While there isn’t a separate trust surcharge, the main residence exemption is designed for individuals, so trustees generally can’t access it unless they can show the beneficial owner meets the criteria. 

Exemptions also apply to primary production land and certain disability trusts, but most trust-owned residential land will be taxable.

New South Wales

In NSW, land owned by a trust is usually taxed at the trust rate, which doesn’t benefit from the general land tax threshold unless the trust qualifies as a fixed trust and has nominated beneficiaries with Revenue NSW. 

Discretionary and family trusts generally don’t qualify, meaning land tax starts from the first dollar of value. 

A trust-owned home doesn’t receive the principal place of residence exemption, and trustees considered foreign persons must also pay the foreign owner surcharge land tax, which sits at 5% in 2025.

Victoria

In Victoria, trusts are taxed at surcharge rates once their taxable land exceeds $25,000, with higher rates than individuals until land values reach $3 million. 

Some trusts may reduce their liability by nominating beneficiaries or disclosing absolute entitlements, allowing assessment at general rates. 

An absentee owner surcharge of 4% also applies to absentee trustees.

Queensland

In Queensland, trusts are taxed on the company/trust rate schedule, and multiple trusts may be grouped together if they have the same beneficiaries with matching interests. 

A home exemption is available only in narrow circumstances. For example, this applies where all beneficiaries use the property as their principal place of residence, and the trustee isn’t an absentee. 

Foreign trusts can also be liable for a surcharge on residential land.

South Australia

In South Australia, trust-held land is usually taxed at the trust rates, which have a lower threshold than general rates. 

Trustees of discretionary trusts had the option to nominate a designated beneficiary, but those deadlines have passed, meaning many trusts remain locked into trust rates. 

Principal place of residence exemptions apply only to natural persons, with limited exceptions for certain special-purpose trusts.

Our tips for holding land in trusts within Australia?

One, understand your trust type. Different trusts (discretionary, fixed/unit, bare, or special disability trusts) are treated differently for land tax. For example, discretionary trusts often don’t get the general land tax threshold, while fixed trusts may. Choosing the right structure at the outset saves money long term.

Two, check each state’s rules. Land tax is state-based, and the rules for trusts vary widely. NSW, Victoria, and South Australia have strict rules and surcharges, while Tasmania and WA have exemptions in specific cases. Always check the jurisdiction before transferring property into a trust.

Three, nominate beneficiaries early. In some states (like NSW and SA), nominating a “principal beneficiary” or “designated beneficiary” is critical to access lower rates or exemptions. Missing the nomination window can lock the trust into higher land tax rates permanently.

Four, check if you qualify for a principal residence exemption. Trusts rarely qualify for the principal place of residence exemption. But if the land is intended to be lived in by beneficiaries, check whether exemptions apply (e.g. disabled beneficiary trusts in WA, Tas, and ACT).

Five, watch out for foreign surcharges. If any potential beneficiary is a foreign person, the trust may be treated as “foreign” and attract hefty foreign owner surcharges (especially in NSW, Vic, and ACT). Many family trusts now include a “foreign person exclusion clause” to avoid this.

Six, consider aggregation rules. Land held in trust is usually taxed separately from personally owned land, but some states aggregate across trusts if the beneficiaries are the same. This can unexpectedly push you into higher brackets.

Seven, record keeping is crucial. Keep the trust deed, any amendments, and nomination forms safe and updated. State revenue offices often require certified copies of the deed and purchase contracts when assessing land tax.

Eight, think beyond taxes. While considering tax is important, don’t forget trusts can also protect assets from creditors, allow succession planning, and create flexibility in distributing income. Always balance tax efficiency with your long-term goals.

Nine, when in doubt, talk to your financial advisor. We’re here to weigh up your options and help you choose the best set-up for your situation.

Understanding land tax for trusts across Australia can feel tricky, but the right planning makes all the difference. Knowing your obligations, using exemptions wisely, and structuring your assets effectively is how you build real financial freedom. At FRE.DM Wealth, we’re here to guide you every step of the way — helping you grow your wealth, protect your assets, and create lasting abundance. If you’re seeking clarity on your trust or want to make your land work smarter for you, reach out today.