Entity Setup
Structural Shifts: Choosing Entities Amid Australia’s Proposed Negative Gearing Reforms
With the 2026 Budget proposing major changes to negative gearing and property investment incentives, the entity you use—individual, trust or company—could make a big difference.
By NomadicTax Research Team • 5-8 min read • June 11, 2026
## Background: What’s in the Budget?
The 2026-27 Budget proposes to **reform negative gearing** and **capital gains tax** for investment properties. Key proposals include:
- Negative gearing will largely be restricted to **new builds**, not existing properties. Substantial renovations or knock-down rebuilds may qualify in certain cases. ([community.ato.gov.au](https://community.ato.gov.au/s/question/a0JMo0000055zcf/p00420142?utm_source=openai))
- Existing investment properties may lose eligibility unless they meet criteria. Properties acquired before budget-night are likely to be “grandfathered” for some aspects, but proposed law is not yet passed. ([community.ato.gov.au](https://community.ato.gov.au/s/question/a0JMo0000055zcf/p00420142?utm_source=openai))
## Entity types: Pros and Cons Under Proposed Rules
| Entity | Potential Benefits | Possible Downsides |
|---|---|---|
| **Individual** | Direct access to CGT discount (pre-changes), full negative gearing benefit if eligible | Higher marginal tax rates; under new rules limited negative gearing for existing property; minimum tax rate on post-2027 gains |
| **Company** | Flat 25% base rate might seem advantageous for rental income; profits retained at corporate tax | No access to individual CGT discounts; dividends taxed when distributed; losses may be harder to offset other income |
| **Trust (Discretionary or Unit)** | Flexibility to distribute income among beneficiaries; useful for splitting income and optimizing bracket thresholds | More administrative, must comply with trust-specific rules; new reporting requirements (beneficiary TFN, etc.) from 1 July 2026 for closely held trusts. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/MTAS220260121?utm_source=openai))
## How proposals affect structuring decisions now
- If you plan to acquire **new property builds**, a company may help lock in the 25% rate for passive income more efficiently. But consider CGT, dividend tax, and transferability.
- If you hold or plan to hold property in a trust, ensure you’re ready for upcoming reporting changes. Closely held trusts from **1 July 2026** will need to report beneficiary TFNs in the annual trust return. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/MTAS220260121?utm_source=openai))
- For individuals, front loading investment into eligible “new builds” before a law change, if passed, might maintain full negative gearing and discounts.
## Examples to clarify
- **Alice** is considering buying a duplex as a “new build” in 2026 with rental expected for next 5 years. Structure via a discretionary trust to distribute rental income to beneficiaries in lower tax brackets could be tax efficient, provided trust rules and documentation are strong. If property qualifies under “new build” rules, it remains negatively geared under proposals.
- **Bob** already owns several existing rental properties. Under new rules, most will not be eligible for negative gearing. He considers moving new investments under a corporate entity so that rental income is taxed separately at corporate rate, while older properties retain grandfathered status.
## Practical Steps Before Legislation Finalizes
- **Monitor exposure drafts and law texts** to understand definitions: what counts as “new build”, “substantial renovation”, how CGT discount applies.
- **Secure financing and ownership earlier** if investing, so acquisition date and property classification are clearly documented.
- **Get legal advice on transfer/rollover possibilities**, if you switch structure later. Beware CGT and stamp duty upon transfers unless specific reliefs are legislated.
## Summary
Proposed changes to negative gearing and CGT make entity choice more critical. Individual, trust, and company structures each have trade-offs depending on the type of investment, timing, and income profiles. Being proactive now before laws pass gives you flexibility.
**Action checklist:**
- Identify eligible new build opportunities.
- Map out current property holdings against proposals.
- Engage a tax advisor to build projections under several structures.