Who pays tax when a company, trust or fund sells a rental?
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The owner named on the title pays or passes on the tax on a sale, so who owns the rental changes the bill as much as the gain does. A company pays its own tax. A super fund pays its own tax.
A trust usually passes the gain to its beneficiaries, who pay it on their own returns. The same sale can leave very different cash in each case.
What does a company pay?
A company that owns a rental pays 30% of its taxable income when more than 80% of its income is passive, such as rent, and it cannot use the 50% CGT discount, as the ATO says.
The sale's gain is taxed in the company, and the money stays in the company until it is paid out.
What does a super fund pay?
A complying super fund pays 15% of its taxable income. On a gain from an asset held at least 12 months, one third is taken off first. A fund that borrows to buy property now has limits too, set out in the post on SMSF borrowing.
What does a trust pay?
The trust works out the gain and, when the trustee has made the beneficiaries entitled by 30 June, each beneficiary pays tax on their share at their own rates. If no beneficiary is entitled, the trustee can be taxed at 45%.
In our example the trust itself pays $0, and each beneficiary pays on their share.
What do the owners leave on a sale?
These are different houses in our example, each sold today at its value entered, so the table compares who pays, not one house under three owners.
| Company | Super fund | |
|---|---|---|
| Value entered | $745,000 | $602,000 |
| Loan payout | $282,054 | $0 |
| Selling costs | $18,625 | $15,050 |
| Estimated tax | $103,356 | $3,064 |
| Net cash | $340,965 | $583,886 |
A third house is held by a family trust. The trust's tax is $0 and its net cash is $383,478. One beneficiary pays $39,767 of tax on the gain as it reaches them, and the other pays $29,902 and a further $6,148 of study loan repayment.
What changes from 1 July 2027?
From 1 July 2027, an individual's gain is worked on an indexed cost base with a 30% minimum tax. Companies and super funds get no indexation. A trust's gain reaches the minimum tax through each beneficiary who is an individual.
The indexation post shows the working.
What should I check in the records?
- Who the legal owner is on the title, and the share each owner holds.
- Which loan is linked to which property, since the payout depends on it.
- For a trust, the beneficiaries and the resolutions made by 30 June.
PropRetire shows the sale by legal owner, with the tax change, the HELP effect, the net cash and where the cash stays. See the legal owners guide.