Buying Commercial Property Through a Unit Trust

Buying commercial property through a unit trust is common among investors who want to pool capital with other unitholders, hold the asset separately from their personal name, and distribute income in a flexible way. It is a different exercise from a straightforward purchase in an individual's or a company's name, because the trustee, not the unitholders, is the legal buyer, and the conveyancing process needs to reflect that from the first contract review through to settlement.

What a Unit Trust Is and Why Investors Use One

A unit trust divides beneficial ownership of an asset into units, similar in concept to shares in a company, which are held by unitholders. A trustee, either an individual or more commonly a corporate trustee set up specifically for the purpose, holds legal title to the property and deals with it on behalf of the unitholders according to the trust deed. Investors often choose this structure for commercial property because it allows several parties to co-invest in proportion to their contribution, makes it easier to bring in or buy out an investor later by transferring units rather than the property itself, and can separate the asset from other business or personal liabilities.

How the Contract of Sale Is Structured

When a unit trust is buying, the purchaser named on the contract of sale is the trustee, described as trustee for the named trust, rather than the trust itself, since a trust is not a separate legal entity capable of holding property. Your conveyancer needs to confirm the trustee has been properly appointed and has the power under the trust deed to acquire this type of asset before contracts are signed. Getting this wording wrong on the contract can create problems later when the property needs to be sold, refinanced or transferred, so it is worth having the structure confirmed before, not after, the offer is accepted.

The Trustee's Role and Personal Exposure

A trustee carries legal responsibility for the property and for meeting the trust's obligations under the contract, including settlement. Where an individual acts as trustee, this can expose personal assets if something goes wrong, which is one reason many unit trusts use a corporate trustee instead, limiting exposure to the assets held by that company. Your conveyancer will usually ask to see the trust deed and any deed of appointment to confirm who the current trustee is and that they are acting within their authority, particularly if the trust has changed trustees since it was established.

Title Registration and the Trust Deed

The property title is registered in the trustee's name, generally with a notation that it is held as trustee for the named unit trust, though the exact wording depends on the state land registry. The trust deed itself is not usually lodged with the title, but your conveyancer will still review it closely to check borrowing powers, restrictions on the type of property the trust can hold, and any requirement for unitholder consent above a certain transaction size. A property transfer into or out of a unit trust structure later on, such as when units change hands or the trust is restructured, may also trigger its own duty and title considerations that are worth understanding at the outset.

Duty, Land Tax and Foreign Purchaser Considerations

Most states treat a unit trust purchase in a similar way to a standard commercial acquisition for transfer duty purposes, though land tax treatment can differ, since some jurisdictions look through the trust to the unitholders when assessing land tax thresholds. Where one or more unitholders is a foreign person, a foreign purchaser duty or land tax surcharge may also apply, and the rules for what counts as a foreign person in a trust context are more involved than for an individual buyer. This varies between states such as New South Wales and Victoria, so it needs to be checked against the specific jurisdiction the property sits in rather than assumed. This is general information rather than tax advice, and unitholders should speak with their accountant about how these rules apply to their particular trust and their own residency status.

GST and the Margin Scheme

Commercial property sales commonly attract GST, and whether the margin scheme applies, whether the sale qualifies as a supply of a going concern, and how GST is apportioned if the trust is also registered for GST on other activities all need to be worked through before settlement figures are finalised. These questions sit at the intersection of conveyancing and tax advice, and your conveyancer will typically coordinate with the trust's accountant to make sure the contract terms and the settlement adjustment reflect whatever GST treatment has been agreed, since correcting this after settlement is far harder than getting it right in the contract.

Finance, Settlement and Working With a Conveyancer

Lenders assess a unit trust purchase differently to a personal purchase, often requiring personal guarantees from unitholders or directors of the corporate trustee, along with a review of the trust deed to confirm the trustee's borrowing powers. This can add time to finance approval, so it pays to raise the trust structure with your lender or broker early rather than after a contract has already been signed. If the purchase is being funded partly through refinancing an existing asset held by the trust, that process should be coordinated alongside the new purchase so settlement dates and loan drawdowns line up. Because a unit trust is a distinct investment vehicle, any future sale of the property will also carry its own tax consequences for the trust and its unitholders, and the ATO's guidance on property and capital gains tax explains in general terms how these rules can apply to investment property held this way.

A commercial purchase through a unit trust involves more moving parts than a standard transaction, from confirming the trustee's authority to coordinating duty, land tax and GST outcomes with the trust's accountant. Engaging a conveyancer who has handled trust purchases before, and doing so early enough to review the trust deed alongside the contract, is the most reliable way to avoid delays once contracts are exchanged.