If you want to structure a property syndicate in Perth, the tax profile, governance and control of the syndicate is critical to getting your investors onboard, happy, and with you on the journey.
This blog covers the range of tax issues your Perth tax accountant will normally discuss with you when you look at getting the property syndicate off the ground.
Of course, a syndicate’s tax structure and governance documents are often the first thing an investor reads when looking at your project, so good advice is critical in advance.
1 | Why “Size” Drives Your Structuring Options
If you start approaching people with an investment idea, you might quickly encounter a range of complexity and regulator hot water, depending on how you approach it.
Investor count v fund size
Australian securities law distinguishes between who you invite and how much you raise:
| Variable | Why it matters | Key statutory touchpoints |
| Number of offerees | The small-scale offering exemption under s 708(1)–(4) of the Corporations Act lets you avoid a prospectus if you limit yourself to ≤ 20 investors in any 12-month period and raise ≤ $2 million. | Corporations Act 2001 (Cth) |
| Status of offerees | Offers to wholesale investors (incl. sophisticated investors, professional investors and > $500k bids) are prospectus-free (s 708(8)–(12)). | Corporations Act s 708(8) |
| Amount raised | Crossing $2 million in 12 months voids the small-scale exemption even if you stay below 20 investors. | ASIC RG 141 |
The practical Westcourt takeaway
A developer who wants tight control often prefers < 20 wholesale investors—minimal disclosure, quicker capital raise, and no public marketing rules.
If you must court retail investors, factor in the time and cost of an Information Memorandum that satisfies ASIC Policy Statement 159, even if a full prospectus is not strictly required.
2 | Clarifying Purpose: Trading Profit v Capital Growth
The syndicate’s purpose drives the tax structure of the syndicate:
| Objective | Optimal entity | Rationale |
| Develop-and-flip (sell on completion) | Unit trust or partnership assessed on revenue account | Gains are taxed as ordinary income; no 50 % CGT discount anyway, so corporate tax-rate arbitrage is less valuable. |
| Buy-develop-hold (≥ 12 months) | Fixed/unit trust | Allows flows of net capital gains to unitholders, who (if individuals, SMSFs, or trusts) can access the 50 % CGT discount. |
| Passive “buy & hold” (debt-pay-down focus) | Private company | Company rate (25 %) shelters rental income; surplus cash can retire debt faster without forcing distributions. Franked dividends later deliver 30/25 % credits. |
Westcourt Developer insight
If your exit horizon is > 12 months and your investors value the CGT concession, a trust is almost always superior to a company. A discretionary trust is unsuitable where each investor wants a discrete, tradeable stake—hence the popularity of the unit trust.
3 | Choosing the Vehicle: Unit Trust v Company v Partnership
| Feature | Unit trust | Company | Partnership (rare) |
| Discrete ownership | Yes — units | Yes — shares | Yes — interests, but joint & several liability |
| 50 % CGT discount | Pass-through | Not available | Pass-through |
| Negative gearing | Locked in the unit trust | Trapped until company profits | Flows through |
| Stamp duty on transfers | Duty on unit transfers in most states (0–5.5 %) | Ditto shares (but NSW & Qld exempt unless land-rich) | Varies |
| Asset-protection | Good (corporate trustee) | Excellent | Weak |
| Governance | Trust Deed and Corporations Act for trustee | Corporations Act | Partnership Act |
4 | Time Horizon and CGT Discount
| Hold period | Trust outcome | Company outcome |
| Under 12 months | Gains taxed at marginal rates (no discount) | Gains taxed at 25 %/30 %; distribution of profits triggers franking credits |
| Over 12 months | 50 % discount passes to individuals, 33 1/3 % to complying SMSFs | Still no discount; eventual dividend taxed but offset by franking |
Westcourt crucial structuring call
If the syndicate may flip sooner than 12 months, you might favour a company so profit is locked in at 25 % and franking credits soften the tax when paid out. For longer-term capital growth, trusts prevail as you can enjoy the 50% capital gains tax discount.
5 | Gearing: How Debt Levels Tilt the Tax Equation
| Gearing profile | Tax consequence | Structuring twist |
| High LVR (≥ 70 %) – negative gearing | Interest deductions can exceed rental income, creating tax losses in the vehicle. | • Partnership: tax losses flow to partners • Company or Trust: losses trapped; carry-forward rules restrict use after the majority underlying ownership changes. |
| Moderate LVR (40-70 %) | Balanced cash-flow; potential for partial interest deductibility. | Unit trust still favoured if capital gains expected. |
| No or low debt | Strong net rental income, higher tax bill annually. | Company potentially becomes attractive—retained earnings taxed at 25 % to 30%, enabling reinvestment or faster debt retirement if new borrowings arise. |
Westcourt Developer tip
If you envisage early heavy debt then fast amortisation, a hybrid structure (trust owns project, but a company promotes and develops the project) can deliver the best of both worlds.
6 | Resident Investors v Non-Resident Investors
If you engage with a non-resident investor you must navigate:
- Withholding tax on fund payments (MIT regime) or on interest if the unit trust pays interest or dividends to foreign investors.
- Dividend franking — non-residents cannot use credits; over-franking wastes tax capacity.
- Thin capitalisation rules if the trust is classified as an inward investment vehicle.
- Transfer duty surcharge A non-resident buying property can potentially incur a higher transfer duty surcharge in Western Australia.
Solution: quarantine foreign investors in a parallel Australian vehicle or craft a sub-trust that satisfies Managed Investment Trust (MIT) eligibility (this might need further advice and work-around concepts).
7 | Mapping Investor Tax Profiles
| Investor type | Key tax nuances |
| Individual (top rate 47 %) | Seeks 50 % CGT discount; values negative gearing; wants franking credits. |
| SMSF (15 % / 0 % in pension phase) | Loves capital gains (effectively 10 % concessional rate after discount); less excited by franking if already in pension phase. Franking credits can be refunded. |
| Discretionary trust | Passes gains/losses to beneficiaries; affords income streaming; but may trigger surcharge rates if minors receive income. |
| Corporate investor | No CGT discount; prefers stable franked yield; can trap profits for reinvestment. |
A “one-size” vehicle rarely optimises for all profiles. Where diversity is high, issue different unit classes (e.g. income v growth) and craft a unitholder agreement that lets each class veto changes that disadvantage its tax position.
A hybrid unit trust can work well, and it can also confuse investors.
8 | Governance Framework: Keeping Control While Inviting Passive Capital
If you are creating a structure to simplify investors’ lives, you must also ensure you can keep investors at arm’s length from the day-to-day operations. Some passive investors are bored and want to be involved in day-to-day details. If your passive investors are actively involved in the operations, you can sometimes end up with the worst of both worlds.
- Operator
- Developer establishes a corporate trustee (e.g. XYZ Pty Ltd) to act for the unit trust.
- Management agreement grants day-to-day authority—budget approval thresholds, leasing, debt drawdowns.
- Fees (establishment, ongoing, promote/carried interest) must be arm’s-length to satisfy Part IVA.
- Trust Deed
- Sets distribution waterfall — cash yield, return of capital, then capital gains.
- Locks permitted gearing range, related-party transactions and property acquisition criteria.
- Requires 75 % special resolution for major decisions (sale > 50 % of assets, refinance > 80 % LVR, change of trustee).unit
- Unit Certificates & Registry
- Issue numbered certificates to the legal owner (watch bare trustee/custodian scenarios).
- Maintain ASIC-compliant register; obtain TFN and ABN to avoid withholding on income payments.
- Unitholder Agreement
- Sits beside the deed (contractual “rules of engagement”).
- Covers drag/tag rights, pre-emptive rights, compulsory transfer on death, divorce or insolvency.
- Dispute-resolution protocol—expert determination before litigation.
9 | Funding Mechanics: Investor Loans v Equity
A unit trust is popular as it can:
- Issue units for cash (equity)
- Forms cost base; disposal later crystallises CGT.
- Borrow from unitholders (debt)
- Interest deductible to trust (if arm’s-length rate).
- Repayments do not constitute distributions, preserving cash flow.
- Watch Division 7A if any lender is a private company.
Many developers blend the two: 70 % senior bank debt, 20 % subordinated unitholder loans, and 10 % equity. The loan piece prioritises the downside while the equity portion preserves the CGT upside.
Look-through tax considerations
- Building depreciation & capital works (Div 43) flow through a unit trust to offset rental income at investor level. The excess income is tax free to the investor but ultimately erodes their cost vase
- Plant & equipment depreciation also passes, but expect balancing adjustments on sale.
- A company, by contrast, can use the same deductions—but the tax benefit sits inside the company; franking credits only emerge when profits are distributed.
11 | Step-by-Step Setup Checklist
- Choose vehicle: fixed unit trust (CGT focus) or company (income focus).
- Possibly form a company; adopt a constitution aligned with the trust deed.
- Possibly draft trust deed: classes of units, distribution waterfall, borrowing limits.
- Prepare the offer document, which relies on s 708 exemptions or the information memorandum.
- Raise equity: collect application forms, IDs (AML/CTF), TFNs, and funds.
- Register unit transfers; issue certificates; update ASIC.
- Execute debt facilities: bank and/or unitholder loans.
- Acquire property; ensure contract names are properly and carefully documented trustee “as trustee for XYZ Unit Trust”.
- Implement reporting: quarterly investor reports, annual tax statement (AMMA if MIT).
- Plan exit: deed should pre-define sale process and waterfall.
12 | When a Company Beats a Trust
| Strategy | Long-term rental with surplus cash reinvested for for debt amortisation |
| Investor profile | Corporate or tax-exempt investors who cannot use CGT discount |
| Gearing path | Rapid deleveraging — profits can stay taxed at 25 % and recycle into principal repayments |
| Franking capacity | High — rents + depreciation clawbacks produce franked dividend pool for future cashouts. |
13 | Common Developer Pitfalls and How to Avoid Them
- Blowing the small-scale exemption — keep a live spreadsheet of offers and funds to stay under 20/ $2 m.
- Using a discretionary trust for passive investors — units give certainty; discretionary entitlements do not.
- Ignoring Division 7A — unitholder loans from company lenders must be 7-year principal & interest or attract deemed dividend tax.
- Not controlling reporting — investor communication is poor and create a myriad of questions and opposing tax views from different investors.
- Unit transfers without trust-deed consent — exposes you to landholder duty and foreign surcharge duty where the acquirer is non-resident.
14 | Final Thoughts
A well-structured property syndicate lets a developer retain operational control while giving passive investors a transparent, tax-efficient slice of the upside. The unit trust with a corporate trustee remains the go-to vehicle where:
- capital gains are a core objective,
- investors want the 50 % CGT discount, and
- negative gearing benefits should flow straight through.
Conversely, a company can outperform when its game plan is to harvest rent, retire debt, and distribute fully franked dividends later on.
In some instances, a stapled trust of a company and unit trust combined can help where a developer/manager and an owner operate together.
Hybrid trusts or companies with special share classes can work for innovative developments.
Either way, the golden rule is alignment: match the vehicle to your investment horizon, gearing strategy, and investor tax mix. Get the governance documents watertight, monitor your Corporations Act exemptions, and engage tax advisers early. Undoing a poor structure mid-life is expensive and often impossible.
Need tailored advice?
Westcourt Family Business Accountants works with property developers and passive investors across Australia to structure tax-efficient, ASIC-compliant syndicates. Contact our specialist team for a confidential discussion on your next project.
