Stapled securities have long been a unique feature of the Australian investment landscape, offering a blend of assets that can diversify returns and boost yield. But with regulatory shake-ups and shifting market conditions in 2025, it’s crucial for investors to understand exactly what they’re buying—and what new rules mean for their portfolios.
What Are Stapled Securities?
At their core, stapled securities are two (or more) different securities contractually bound together so they can only be bought or sold as a single unit. In Australia, the most common pairing is a share in a company and a unit in a related trust, often found in sectors like real estate, infrastructure, and utilities.
- Example: Lendlease Group (ASX: LLC) issues stapled securities comprising a share in Lendlease Corporation Limited and a unit in Lendlease Trust.
- Why Staple? Stapling lets companies separate income (often distributed via the trust) from capital growth (via the company), with potential tax efficiencies and flexibility for large infrastructure projects.
Unlike regular shares, you can’t buy or sell the components separately—they move as one, which impacts liquidity, voting rights, and the way distributions are taxed.
2025 Regulatory Changes and Market Trends
Stapled securities have faced increased scrutiny from regulators in recent years, particularly over the potential for tax avoidance and complexity for retail investors. In 2025, the Australian Taxation Office (ATO) and the Australian Securities & Investments Commission (ASIC) have rolled out several important changes:
- Tax Treatment: The ATO’s 2025 guidance clarifies that passive income (such as rent) distributed via stapled structures is now subject to the Managed Investment Trust (MIT) withholding tax rules, closing prior loopholes for foreign investors.
- Disclosure Requirements: ASIC has tightened disclosure obligations for stapled securities offered to retail investors, requiring clearer explanations of structure, risks, and tax implications in product disclosure statements.
- Infrastructure Asset Exemptions: Some infrastructure projects can still access concessional tax rates under the revised rules, but only if they meet the new ‘national interest’ criteria as outlined in Treasury’s 2025 review.
For investors, these changes mean greater transparency—but also a need to scrutinise the underlying assets and cashflows more closely than ever before.
Risks and Rewards: Should You Invest in Stapled Securities?
Stapled securities can offer attractive yields and exposure to defensive assets like real estate and utilities, but they also come with unique risks:
- Complexity: The dual nature of stapled securities can make tax reporting and performance tracking tricky, especially if distributions have different tax treatments.
- Liquidity Risk: Stapled securities are often less liquid than regular shares, particularly outside the ASX100, so large investors can move prices sharply.
- Regulatory Uncertainty: As recent policy changes show, government attitudes toward tax treatment and investor protection can shift quickly, impacting returns.
- Concentration Risk: Many stapled securities are concentrated in sectors like commercial property and infrastructure, which can be cyclical or exposed to economic shocks.
On the flip side, the right stapled security can deliver consistent income, diversification, and exposure to long-life assets. For example, Australian REITs (real estate investment trusts) often use stapled structures to pass through rental income to investors while funding property development through the corporate arm.
How to Assess Stapled Securities in 2025
If you’re considering adding stapled securities to your portfolio, focus on:
- Understanding the Structure: Read the Product Disclosure Statement carefully. Know what the trust and the company do, how income is generated, and how capital is managed.
- Tax Implications: Check how distributions will be taxed under the new ATO rules, especially if you’re a foreign investor or SMSF trustee.
- Underlying Assets: Look at the quality, sector, and geographic spread of the assets backing the stapled security. Are they defensive, cyclical, or growth-oriented?
- Management Track Record: Research the issuer’s history of managing stapled structures and delivering returns through market cycles.
- Yield vs. Risk: Don’t be tempted by high yields alone—assess whether the risk profile fits your broader portfolio goals.
Conclusion: Stay Ahead in a Changing Stapled Securities Market
Stapled securities remain a fixture of the Australian market in 2025, but they’re not a set-and-forget investment. With regulatory reforms reshaping the landscape, it’s more important than ever to dig into the details, understand the risks, and ensure these complex instruments fit your financial goals.
