Stapled Securities in Australia 2026: What Investors Need to Know

Stapled securities are investment products where two or more different securities are contractually bound together and can only be bought or sold as a single unit. In Australia, the most common arrangement is a share in a company stapled to a unit in a related trust. This structure is especially prevalent in sectors such as real estate, infrastructure, and utilities.

How Stapling Works:

• Example: An investor might purchase a stapled security that includes a share in a property development company and a unit in a trust that owns income-producing real estate.
• Purpose: Stapling allows companies to separate income (often distributed via the trust) from capital growth (via the company). This can provide flexibility for funding large projects and managing distributions.

Unlike regular shares or trust units, the components of a stapled security cannot be traded separately. This impacts how investors receive income, exercise voting rights, and manage tax obligations.

Stapled structures are often used to:

• Facilitate large-scale projects: By separating ownership of assets from operational activities, companies can attract different types of investors.
• Distribute income efficiently: Trusts can pass through rental or other income directly to investors, while the company arm can focus on growth or development.
• Offer potential tax advantages: While the tax landscape has changed, stapled structures have historically allowed for some flexibility in how income and capital gains are taxed.

In recent years, stapled securities have come under increased scrutiny from Australian regulators. The focus has been on ensuring transparency, protecting retail investors, and addressing concerns about tax treatment.

Key regulatory developments in 2026 include:

Taxation of Stapled Securities

The Australian Taxation Office (ATO) has clarified how income from stapled structures is taxed. Passive income, such as rent distributed via trusts, is now generally subject to the Managed Investment Trust (MIT) withholding tax rules. This change aims to ensure consistent tax treatment and reduce opportunities for tax minimisation, particularly for foreign investors.

Enhanced Disclosure Requirements

The Australian Securities & Investments Commission (ASIC) has introduced stricter disclosure obligations for issuers of stapled securities. Product disclosure statements must now provide clearer explanations of the structure, associated risks, and potential tax implications. This is intended to help retail investors make more informed decisions.

Infrastructure Asset Exemptions

Some infrastructure projects may still access concessional tax rates, but only if they meet updated criteria set out in recent government reviews. These exemptions are now more narrowly defined and subject to additional oversight.

Stapled securities can offer attractive features, but they also come with unique risks that investors should carefully consider.

Potential Benefits

• Income and Growth: Investors may receive regular distributions from the trust component and benefit from capital growth through the company.
• Diversification: Exposure to sectors like real estate and infrastructure can provide diversification within a portfolio.
• Access to Large Assets: Stapled structures are often used for large, long-life assets that may be difficult for individual investors to access directly.

Key Risks

• Complexity: The dual nature of stapled securities can make it challenging to understand how income is generated, how it is taxed, and how performance should be measured.
• Liquidity: Stapled securities may be less liquid than ordinary shares, especially if they are not part of major market indices. This can make it harder to buy or sell large quantities without affecting the price.
• Regulatory Uncertainty: Changes in tax rules or disclosure requirements can impact returns and the attractiveness of these investments.
• Sector Concentration: Many stapled securities are concentrated in specific sectors, such as commercial property or infrastructure, which can be sensitive to economic cycles.

If you are considering investing in stapled securities, it is important to take a systematic approach to due diligence. Here are some key factors to review:

1. Understand the Structure

Read the Product Disclosure Statement carefully. Make sure you know what each component of the stapled security represents, how income is generated, and how capital is managed. Understanding the relationship between the company and the trust is essential. For more on understanding financial products, see our finance section.

2. Consider Tax Implications

Tax treatment can be complex and may have changed in recent years. Check how distributions will be taxed under current ATO rules, especially if you are a foreign investor or manage a self-managed super fund (SMSF).

3. Review the Underlying Assets

Assess the quality and diversity of the assets backing the stapled security. Are they primarily defensive, such as established real estate, or are they exposed to more cyclical sectors? Consider the geographic spread and the nature of the income streams.

4. Evaluate Management and Track Record

Research the issuer’s experience with managing stapled structures. A strong track record of delivering returns and navigating market cycles can be a positive indicator.

5. Balance Yield and Risk

High yields can be attractive, but they often come with higher risk. Make sure the risk profile of the stapled security fits with your broader investment goals and risk tolerance.

Australian real estate investment trusts (REITs) often use stapled structures. For example, a REIT might own a portfolio of commercial properties through a trust, while the company arm manages property development and operations. Investors receive rental income from the trust and may benefit from growth in the value of the company’s development activities. However, the performance of each component can vary, and changes in property markets or development pipelines can affect returns.

Stapled securities continue to be a fixture of the Australian investment market in 2026, but they require careful analysis. Regulatory reforms have increased transparency and investor protection, but they have also added complexity. It is important to stay informed about changes in tax rules, disclosure requirements, and the underlying assets of any stapled security you are considering.

Before investing, take the time to understand the structure, assess the risks, and ensure that stapled securities align with your financial objectives. If you are unsure, consider seeking professional advice or consulting resources such as our finance section for further guidance.