Trust vs Personal Ownership: Side-by-Side Cashflow & Holding Cost Analysis

Land tax is often treated as a rounding error, yet it can completely change the way a property behaves in the early years. To prove it, we modelled the same Victorian townhouse inside PropMax under two structures—personal name and discretionary trust—using the latest Victorian trust land tax schedule. Every other input stays identical: rent, loan, deposit, depreciation, and maintenance.

The numbers below come directly from the PropMax.

Property Snapshot

Year 0–5 Cashflow Comparison

Three takeaways

1. Immediate land tax drag: The trust pays the higher SRO rate from day one, so its ownership cost sits north of $248/wk while the personal scenario lands closer to $83/wk.
2. Negative gearing only helps personally: PAYG refunds of $8.6k → $4.9k flow straight back to the individual, shrinking the weekly pain. The trust records the same deduction but the benefit stays trapped as a carried-forward loss, only unlocking when the trust later earns assessable income or when you sell and offset capital gains tax with those accumulated losses.
3. Cash buffer requirements triple: Personal ownership needs roughly $18k to survive the negative years. The trust needs ~$65k by Year 5 because every shortfall must be funded out of pocket.

Long-Term Metrics

Equity growth is identical—the property still compounds from $630k to ~$978k in ten years—but the trust’s heavier land tax and lack of immediate deductions dilute returns on invested cash.

Why the Trust Suffers

1. Higher fixed outgoings
   The updated trust schedule means land tax is payable once the aggregated site value exceeds $25k. That extra expense shows up in PropMax as a higher annual “ownership cost,” so every weekly breakeven target moves higher.

2. Losses are stuck inside the trust
   Without salary or other trust income, negative gearing benefits sit on the balance sheet as carried-forward losses. You only access them when the trust earns positive income or you sell the property.

3. Opportunity cost
   Over the first decade the trust soaks up roughly $73k more cash than personal ownership. That’s another deposit, a renovation budget, or a chunk of ETFs that never gets invested elsewhere.

Making a Trust Work (If You Need One)

1. Feed other income into the trust so the land tax and interest deductions can offset revenue each year.
2. Refinance once LVR drops below 70% (~Year 3) to shave the rate and free $50–$70 per week.
3. Accelerate rent growth with value-add upgrades or furnished leases so the loss closes faster.
4. Stage equity injections (fund initial holding costs personally, then reimburse later) to avoid starving the trust in the early years.

Action Checklist

1. Duplicate every property in PropMax and toggle the ownership structure to see the live land tax tables for each state.
2. Stress-test weekly cashflow using your real salary or trust income so you know exactly how much buffer is required.
3. Hold cash reserves that match the structure (>$60k for a trust on these numbers, ~$20k for personal).
4. Document the strategic reason for using a trust—asset protection, succession, or income splitting—and weigh it against the additional holding cost you’ve just quantified.

Bottom line: With the current Victorian trust land tax rates, the same townhouse requires three times more cash and takes five extra years to turn positive when held in a discretionary trust. Structure isn’t just a legal decision; it’s a cashflow decision. Model it before you buy.