Usufruct Explained: The 2026 Australian Perspective

At its core, usufruct is the right to use and enjoy the benefits of a property owned by someone else, without altering its substance or value. The word comes from the Latin usus (use) and fructus (fruit, or profit). In practical terms, a usufructuary can live in, rent out, or harvest income from a property, while the underlying ownership—known as the bare title—remains with another party, often an heir or trust.

• Example: A widowed spouse receives the right to live in the family home (the usufruct) after their partner's death, but the children inherit the property itself (the bare title) and gain full ownership after the spouse passes away or relinquishes their right.

• Duration: Usufruct can be set for a lifetime, a fixed period, or until a specific event occurs.

Although Australia’s legal system is based on common law, certain states (notably South Australia and Western Australia) and various estate planners increasingly use usufruct-style arrangements, especially in complex family or farming succession plans.

With property and farmland prices at historic highs in 2026, families are looking for ways to balance the needs of surviving spouses and future generations. Usufruct offers a flexible solution:

• Protects vulnerable family members: For example, a will might grant a surviving partner the right to live in the home until death or remarriage, ensuring stability without blocking inheritance for children.

• Enables tax efficiency: While Australia does not have a formal inheritance tax, capital gains tax (CGT) can be triggered by property transfers. Usufruct arrangements can delay or soften CGT events, depending on how and when the bare title passes.

• Manages family farms: Farming families often use usufruct to let a retiring parent remain on the land while passing operational control and eventual ownership to the next generation, smoothing succession and reducing disputes.

In 2026, estate planning lawyers are seeing increased demand for bespoke property rights, as blended families and same-sex couples seek tailored solutions. The flexibility of usufruct allows assets to be split between use and ultimate ownership, which can be critical for managing superannuation balances, trusts, and even SMSFs (Self-Managed Super Funds).

While usufruct has clear advantages, it also comes with risks and complexities. Recent policy updates and market trends have sharpened the focus on these issues:

• CGT and Stamp Duty: The ATO updated guidance in late 2024 regarding the tax treatment of life interests and usufructs, clarifying when CGT events occur and the valuation methods for partial interests. In some states, stamp duty may also apply if the arrangement is formalised in writing.

• Maintenance and Insurance: Usufructuaries are generally responsible for maintaining the property, paying rates, and insuring against damage. Failure to do so can lead to legal disputes with the bare title holder.

• Superannuation and Pensions: With the federal government’s review of superannuation estate planning rules in 2026, there is heightened scrutiny on how property rights are structured in wills and trusts. Usufruct arrangements must be carefully drafted to comply with both superannuation and family law.

• Dispute Resolution: As property values rise and family structures become more complex, courts are seeing more challenges to wills that include usufruct clauses. Clear documentation and transparent communication are essential.

Recent examples include a 2026 NSW Supreme Court case where children challenged the scope of a surviving spouse’s usufruct, underscoring the importance of precise legal drafting and regular review of estate plans.

Usufruct isn’t a one-size-fits-all solution, but it’s an increasingly relevant tool in the Australian financial landscape. If you own property, are involved in a family business, or want to provide for loved ones while preserving assets for future generations, it’s worth exploring with a qualified estate planner or legal advisor.

Key Takeaways:

• Usufruct splits property rights into ‘use’ and ‘ownership’, offering flexibility in estate planning.

• Recent tax and legal updates make precise drafting and regular review essential.

• It’s especially useful for blended families, farming succession, and complex property holdings.