Buying Property and Tax: Why Structure Matters More Than Most People Think
Buying property is exciting. It can also be one of the fastest ways to make an expensive mistake if you get the structure wrong, miss a tax rule, or keep messy records.
In this episode of The Property Frontline, I sat down with Alicia Massoud from TaxApp Accountants. Alicia is one of those rare accountants who understands property, understands investors, and can explain the rules without making your eyes glaze over.
We covered the decisions buyers need to think about before they buy, how different ownership structures work, what is and is not deductible, and the tax traps that catch people out when they sell.
Who is Alicia and what is TaxApp?
Alicia is a partner at TaxApp Accountants. They look after businesses and investors across Australia, with offices in Five Dock and Lane Cove in Sydney, and clients nationwide.
TaxApp was born out of a very real problem. People were turning up with shoeboxes of receipts, messy spreadsheets, and missing documents. The TaxApp platform gives clients an easier way to upload receipts, track expenses, and manage multiple properties, especially useful for owners who self-manage and do not receive the clean end-of-year summaries you get from property managers.
Why ownership structure needs to be decided before you buy
Alicia said this is one of her favourite topics, mainly because she sees it done wrong so often.
People buy first, then later realise they should have used a different ownership structure. They come back and ask, “Can we fix it?”
Sometimes the answer is yes. The problem is the cost.
If you change ownership structure after the property has increased in value, you can trigger capital gains tax. On top of that, you can end up paying stamp duty again because the government treats a change in ownership as a new transaction.
In plain English, you can pay big money twice, just to end up where you should have started.
The simplest structures: individual and joint ownership
Buying in your personal name
This is the most straightforward option. You buy, you sign, done.
Buying with a partner: tenants in common or joint tenants
This is where buyers can get caught out because these are not the same thing.
Tenants in common allows you to split ownership in different proportions, for example 30/70 or 50/50. Your share of income and expenses follows your ownership share, which can be useful for tax planning. If one owner passes away, their share does not automatically transfer to the other. It follows their will and estate process.Joint tenants means the property automatically transfers to the surviving owner if one person passes away. This can suit couples buying a home, but it can be a poor fit for more complex family arrangements.
How income influences the best setup
Structure is not just about control. It can be about deductions and cash flow too.
Alicia shared a common scenario where one partner is on the highest tax bracket, so the investment property is held in that person’s name to maximise deductions at a higher marginal rate.
This is not about one-size-fits-all. It is about running the numbers and matching structure to household income, goals, and future plans.
Trusts: widely used, often misunderstood
Trusts are talked about constantly, but many buyers do not understand what they are signing.
Alicia described a trust as a vehicle. It does not “own” assets the way people expect. It controls them.
- The trustee controls the asset
- The beneficiaries benefit from it
- A corporate trustee can provide stronger asset protection than an individual trustee, although it usually costs more to set up and run
The upside of a trust
Trusts can provide flexibility because income can be distributed to different beneficiaries over time. That matters because most people hold property for years, and life changes. Income changes. Family dynamics change. Trusts can help you adapt without having to restructure ownership.
The trade-offs buyers must understand
Trusts also come with limitations and costs, including:
- negative gearing benefits can be trapped inside the trust rather than offsetting personal income
- land tax treatment can be less favourable in some states, especially for new trusts
Alicia described trusts as a more mature structure. They can be powerful, but they are not automatically the best choice for a first purchase.
Buying property in a company: why Alicia is cautious
Alicia was blunt here. She generally does not recommend buying long-term investment property in a company.
The key reason is tax.
Companies do not get the 50 percent capital gains tax discount, even if you hold the property for more than 12 months. Individuals and trusts generally can.
A company can provide strong asset protection, but you are typically trading away a major tax benefit, which makes it less appealing for standard long-term property investing.
Where SMSF property fits into the structure discussion
SMSF property sits in a different category.
Alicia explained that an SMSF itself is a trust structure, and when you buy property inside an SMSF, you often need an additional bare trust structure for borrowing purposes.
It is more complex and more regulated, and you cannot treat SMSF funds like personal cash. Everything is for retirement and must be handled at arm’s length.
How to choose the right structure for you
Alicia’s answer came back to the end goal.
- If you are buying your first property as a single person, personal ownership may be appropriate
- If you have several properties and want flexibility over time, a trust may make sense
- If you have kids approaching adulthood and want future distribution flexibility, a trust may be worth considering
The point is not to chase the “best structure.” The point is to choose the structure that matches what you are actually trying to achieve.
What is deductible and when: three buckets of costs
Alicia broke this into a simple framework that is very useful for investors.
Costs that help later, not immediately
Stamp duty, conveyancing fees, and buyers agent fees are commonly tax deductible, but not as an immediate deduction. They usually form part of the cost base and reduce the taxable gain when you sell.
Costs you can generally deduct as you go
These are the day-to-day costs such as:
- interest
- property management fees
- insurances
- rates and other running costs
Costs written off over time
Some borrowing and setup costs are written off over several years, and depreciation also fits here. These deductions can be valuable, but they need to be understood properly, not used as a marketing hook.
Depreciation: useful, but not a cash flow strategy
Depreciation can be legitimate and helpful. The problem is when buyers assume it makes a property “cash flow positive” in the real world.
Alicia pointed out that if your income drops, or you take time off work, you may not get the same benefit from negative gearing even if depreciation still exists on paper.
Depreciation is a tool, not a strategy by itself.
The repairs versus improvements trap
This is where established property buyers get caught.
A simple repair, like fixing broken tiles, is usually treated differently to replacing an entire floor. If you significantly upgrade the property, you often cannot claim it immediately. It may be depreciated or added to the cost base, depending on what was done.
This becomes even more relevant when work is done before a tenant moves in. Some items may be deductible. Others may not. It depends on the exact nature of the work.
If you are about to spend money on a property, a quick call to your accountant first can save you a nasty surprise at tax time.
Operating costs versus cash flow: don’t confuse them
Operating expenses are the regular monthly and annual costs such as:
- interest
- rates
- land tax
- insurance
- property management fees
Cash flow is what happens when a big unexpected cost lands, such as a hot water system failure or a major repair.
Even a well-performing investment needs a buffer, because property has lumpy costs. Planning for those is part of owning property properly.
Selling traps: the two dates that matter most
The 12 month rule is not just 365 days
To access the 50 percent CGT discount, you need to hold the property for more than 12 months, which is 365 days plus one day.
Capital gains timing is based on contract date
CGT is generally assessed based on the date contracts are exchanged, not settlement. Many sellers assume the gain falls into the year of settlement. That is often wrong, and it can create a nasty tax surprise.
The six-year rule for your home
If you move out of your home and rent it, the six-year rule can allow you to treat it as your main residence for up to six years and potentially avoid CGT.
The catch is that you can only claim the main residence exemption on one property at a time. If you buy another home to live in, you may need to choose which property gets the exemption. Alicia also raised a strong practical tip. If you are turning your home into an investment, get a proper valuation from a qualified valuer at the time you move out. Not an agent price opinion. A valuation. It can save serious money later.
Alicia’s best practical tips
Keep records. Save everything. Use cloud storage and keep it organised, because ten years later you will not remember what you paid in stamp duty or what costs should be in the cost base.
Think about the end goal before you buy. Is this a five-year plan, a ten-year plan, or part of a longer portfolio strategy?
And do not rely on second-hand advice. Structure and tax decisions are too expensive to guess.
Author: Debra Beck-Mewing
Debra Beck-Mewing is the Editor of Property Portfolio Magazine and CEO of The Property Frontline. With over 20 years of experience buying property across Australia, Debra is a skilled property strategist and buyers agent known for uncovering tailored opportunities — from family homes to multi-use investments.
She has deep expertise in advanced strategies including renovations, granny flats, sub-division, and development. A Qualified Property Investment Advisor (QPIA®), licensed real estate agent, and holder of a Bachelor of Commerce and Master of Business, Debra combines strategic insight with hands-on experience.
Debra is the creator of the Property Smart Track System™ – a professional property buying system that enables buyers to select, assess and buy property independently in today’s market. She also leads Buy Like A Genius™, a premium end-to-end buyers’ agency service for busy professionals seeking expert property acquisition without the stress.
As a passionate advocate for greater transparency in the property and wealth industries, Debra is a sought-after speaker, author, podcast host, and participates on numerous committees including the Property Owners’ Association.
