Joint Ventures vs Trusts vs Companies: The Best Structure for Property Development with Unrelated Parties in 2025

From our experience working with developers, we are seeing a clear trend—more and more experienced property investors are stepping into property development. These “small developers,” often working on projects ranging from $4 million to $20 million, quickly realise that the structure they choose can make or break their business outcomes. The risks are even greater when the development involves unrelated parties pooling resources to buy and develop land together. Without a trusted advisor guiding them on tax planning, GST obligations, land tax exposure, asset protection, and exit strategies, developers risk losing hard-earned profits to tax leakage or facing disputes with their partners. At Investax, we often see clients treating their first joint project as a learning curve. But when millions of dollars are on the line, the right ownership and business structure is not just an administrative step—it’s the foundation for long-term success.

This article is designed to be an initial research tool for developers who are considering a project with unrelated parties and need to weigh up whether to use a Joint Venture Agreement, a Trust, or a Company structure for their next property development.

Joint Venture Agreements for Property Development

A Joint Venture (JV) Agreement is one of the most talked about structures when two unrelated parties come together to undertake a property development. Under a JV, each party retains ownership of their share of the property or project while agreeing on responsibilities, costs, and profit distribution. For tax purposes, a JV is generally not treated as a separate legal entity but rather as a “tax partnership” between the participants. This means that income and expenses flow directly into each party’s tax return, based on their agreed percentage split.

Pros of Joint Ventures

The main advantage of a JV is flexibility. Each party can use their own existing business structure—such as a company, trust, or even as individuals—to participate. This allows developers to set up the venture without having to create a new entity from scratch. JVs also avoid double taxation, since profits are taxed only in the hands of each participant at their entity’s tax rate, not at the JV level itself. From a commercial perspective, a JV can be relatively straightforward to set up compared to a formal trust or company structure, provided the parties are aligned on their goals. For unrelated parties, this flexibility can be appealing as it lets each partner maintain control over their own tax and accounting affairs while sharing in the project.

Cons of Joint Ventures

Despite their appeal, JVs come with significant pitfalls if not structured properly. The most pressing issue is asset protection—if one party is sued or becomes insolvent, the other may be exposed to risk unless the agreement is drafted carefully. Disputes can also arise if the agreement is not watertight, particularly around cost overruns, funding responsibilities, or exit strategies. From a tax planning perspective, problems can occur if the JV parties are locked into rigid structures without flexibility, which may limit their ability to optimise tax outcomes. GST compliance can also be burdensome—if the development exceeds the GST threshold, each party must be registered, which adds administrative complexity. Finally, cost is a factor: while setting up a JV may sound simple, once lawyers get involved to draft a comprehensive agreement, the setup can become expensive.

Trust Structures for Property Development

A Unit Trust is one of the most common structure used when unrelated parties undertake property development together. Unlike discretionary trusts, a unit trust gives each investor a fixed entitlement to income and capital in proportion to the number of units they hold. This makes it particularly attractive where multiple parties are contributing funds and want certainty over ownership, distributions, and exit outcomes.

Pros of Unit Trusts

One of the biggest advantages of a unit trust is the clarity and certainty it provides to unrelated parties. Each unit holder knows exactly what percentage of income, capital gains, and voting rights they are entitled to. This avoids disputes over profit allocation and ensures a fair, transparent arrangement. From an asset protection perspective, the trust can provide a level of separation between personal wealth and the risks of a development project. Income distributed through the trust flows directly to unit holders, allowing each investor to manage tax outcomes through their own structures—for example, receiving distributions via a company or family trust. A further tax advantage is access to the 50% capital gains tax discount where the unit holders are eligible entities, such as individuals or trusts. This can be particularly valuable if, after completing a development, you and your partner decide to retain one or two properties as long-term investments and later sell them—the resulting capital gain may qualify for the 50% discount, significantly reducing the tax burden. Finally, unit trusts create a straightforward mechanism for admitting or removing investors by transferring or issuing units, making them a flexible structure for joint projects.

Cons of Unit Trusts

On the downside, unit trusts are not tax-efficient for retaining profits. Any undistributed income is generally taxed at the top marginal tax rate (47%), which makes rolling profits into future projects unattractive compared to a company. Land tax is another significant drawback—in states like NSW, unit trusts typically do not receive the land tax threshold, meaning higher annual land tax bills. Rules in Victoria, Queensland, and other jurisdictions vary, but thresholds are often limited or unavailable. Financing can also be more complex: banks are sometimes reluctant to lend to trusts, especially if the unit holders are individuals without strong balance sheets. Finally, unlike discretionary trusts, unit trusts lack flexibility for tax planning, since distributions must follow unit holdings and cannot be streamed to beneficiaries on lower tax rates.

Overall, unit trusts are a solid option for unrelated parties seeking certainty and transparency, but they can create tax inefficiencies if not structured correctly, and state-based land tax rules add further complexity that must be carefully considered before proceeding.

Companies for Property Development

Setting up a company for property development provides a straightforward and business-like structure. A company is a separate legal entity, meaning it can hold property, enter contracts, and borrow funds in its own name. This makes it a familiar and commercially acceptable vehicle for joint ventures with unrelated parties.

Pros of Companies

The biggest advantage of using a company is tax efficiency. Profits are taxed at a flat corporate rate—currently 25% for base rate entities and 30% otherwise—significantly lower than the top individual marginal rate of 47%. This allows developers to reinvest earnings into new projects without the immediate burden of personal income tax. Companies also generally benefit from land tax thresholds in most states, which can lead to substantial savings compared to trust structures. From a risk perspective, companies offer limited liability, providing strong asset protection for shareholders. Another key benefit for unrelated parties is the fixed entitlement through shareholdings—each shareholder’s rights to profits, capital, and voting are clearly defined in proportion to their shares. This creates transparency and certainty, reducing the potential for disputes. On the commercial front, companies are often preferred by financiers and joint venture partners because they provide clarity, are easy to administer, and carry an established reputation as the “default” business structure.

Cons of Companies

The downsides come mainly in the areas of flexibility, regulation, and taxation of distributions. Profits must be distributed as dividends in proportion to shareholding, with no ability to stream income selectively like a discretionary trust. While franking credits help offset double taxation, shareholders can still face additional personal tax on dividends. Companies are also strictly regulated—unlike a trust, you cannot simply withdraw funds without a valid basis such as wages, dividends, or a formal loan. Any other withdrawal is generally treated as a Division 7A loan, which can trigger compliance issues and unintended tax consequences. Another limitation arises if you decide to hold onto a property after development—for instance, renting it out in a soft market—because companies do not qualify for the 50% capital gains tax discount that individuals and trusts may access. 

Overall, companies are highly effective for developers who value asset protection, tax efficiency, and reinvestment opportunities, but they can be less effective for tax planning if the shareholding entities are not structured correctly.

What’s Next

Choosing the right structure for a property development project—especially when unrelated parties are involved—is not just about tax efficiency. It impacts asset protection, financing, compliance, and ultimately how much profit you get to keep. A Joint Venture Agreement, a Unit Trust, or a Company each comes with unique advantages and drawbacks, and the wrong choice can create unnecessary costs, disputes, or tax leakage down the track.

That’s why getting advice early is critical. At Investax, we work with property developers ranging from small joint projects to multi-million-dollar ventures, helping them establish the right structure from the beginning. Our role is to simplify the complex, explain your options, and put strategies in place that protect your investment and maximise your return.

We offer a 15-minute free consultation to discuss your tax, property investment and business needs. Book your complimentary consultation now.

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