Qualified Personal Residence Trusts (QPRTs) in Australia: 2025 Guide

Could a Qualified Personal Residence Trust (QPRT) be the secret weapon in your estate planning toolkit? While traditionally a US-centric strategy, QPRTs are increasingly appearing in Australian financial circles, especially among those seeking savvy ways to manage intergenerational wealth and property tax exposure. With shifting tax policies and heightened focus on asset protection in 2025, it’s worth understanding how QPRTs work—and whether they’re relevant for Australian homeowners.

What Is a Qualified Personal Residence Trust (QPRT)?

A QPRT is a legal trust arrangement where a homeowner transfers their primary residence (or, in some cases, a holiday home) into a trust for a set number of years. During this term, the owner retains the right to live in the property rent-free. When the trust period ends, ownership passes to the named beneficiaries—often children or family members—at a value that may be significantly reduced for estate tax purposes.

While QPRTs have been a fixture in American estate planning, especially to reduce exposure to the US federal estate tax, their structure is catching the eye of Australian high-net-worth families. This interest is growing as the ATO and state governments signal tougher stances on property tax minimisation and asset transfers in 2025.

How Do QPRTs Work in Practice?

Let’s break down the mechanics of a QPRT using a hypothetical example:

• Setup: Jane, a homeowner in Sydney, establishes a QPRT for her $3 million principal residence. She chooses a 10-year trust term.
• Trust Period: Jane continues living in the home, as per the trust terms, with full use and enjoyment.
• End of Term: After 10 years, the house is transferred to her children. If Jane wants to stay, she must pay fair market rent to the beneficiaries.

The primary attraction? The property’s value for potential gift or estate tax purposes is calculated based on its current worth minus the value of Jane’s retained right to live there. This can result in substantial tax savings if the property appreciates. While Australia doesn’t have a formal estate tax like the US, state-based duties and the spectre of future inheritance taxes are fuelling interest in strategies like QPRTs.

2025 Policy Landscape: Are QPRTs Relevant for Australians?

There’s no direct Australian equivalent to the US QPRT framework, but local trusts and life interest arrangements share similar features. The 2025 Federal Budget signalled renewed attention to intergenerational wealth transfers, and several states have tightened rules on landholder duty exemptions and trust property transfers. Notably:

• ATO Scrutiny: The Australian Taxation Office has flagged property transfers to trusts as a compliance focus, especially where market value substitution rules might apply.
• NSW and Victoria: Both states updated land tax and stamp duty provisions in 2025, increasing costs for discretionary trust property holdings and closing loopholes for ‘bare trusts’.
• CGT Implications: Transferring a main residence into a trust may trigger capital gains tax (CGT) unless managed carefully, as the main residence exemption doesn’t always apply post-transfer.

Despite these hurdles, lawyers and accountants report a rise in interest from clients with multimillion-dollar properties, particularly those eyeing the possibility of future estate taxes or seeking to ‘lock in’ current property values for beneficiaries.

Should You Consider a QPRT-Style Strategy?

QPRTs aren’t for everyone. They suit those who:

• Own high-value homes and expect significant appreciation
• Are comfortable with the risk of outliving the trust term (as dying during the term may unwind the tax benefits)
• Have a clear succession plan and trust their beneficiaries
• Are prepared for complex legal and tax compliance, including possible CGT, land tax, and duty implications

For most Australians, the traditional family trust or testamentary trust remains the primary vehicle for property succession. However, QPRT-style structures are gaining traction among the ultra-wealthy and those with cross-border family or US tax exposure.

Key Takeaways for 2025

• QPRTs offer a way to transfer residential property while potentially reducing tax liabilities—but the Australian context is more complex than in the US.
• Recent policy changes make it critical to review trust structures, especially for high-value or multi-property households.
• Professional advice is essential: improper setup can lead to unexpected CGT, stamp duty, or even land tax surcharges.