Top 5 Tax Structuring Mistakes Property Developers Make (and How to Avoid Them)
Property development in Australia can be incredibly rewarding, but it’s also a magnet for complex tax rules, entity choices, and ATO scrutiny.
At m+h Private, we’ve seen countless developers build great projects only to lose a chunk of their profits to poor structuring or tax decisions. Most of these mistakes aren’t about intent, they’re about timing. Developers are busy finding sites, negotiating finance, and managing trades, so tax planning gets pushed to “later.”
Unfortunately, by the time you’re laying slabs and drawing down on loans, “later” is often too late.
If you’re planning or running property projects in 2025 or the future, here are the five most common structuring mistakes we see, and how to avoid them.
1. Using the Wrong Entity (or None at All)
It’s amazing how many developers start projects in their own name or under a company they already use for something else.
It feels simple - less paperwork, faster setup, no new bank accounts. But here’s the catch: that convenience can come with big tax costs and zero protection.
Why it matters
Each entity type has different implications for:
Tax rates (individual vs company vs trust)
Asset protection (what happens if a project goes wrong)
Finance approvals (some lenders prefer companies or trusts)
Profit distribution (how income flows to you or your partners)
Example:
A first-time developer in Brisbane ran a two-townhouse project in their personal name. The project made $500,000 in profit - great result, right?
But because it was in their personal name, they were taxed at marginal rates (up to 45%), paid over $225,000 in tax, and had no protection if something went wrong onsite.
Had they used a trust, they could have capped tax at 25% (or better yet 0%....!) and isolated project risk from personal assets.
How to avoid it:
Get advice before you buy the site - not after.
The right structure depends on your goals:
Company: best for ongoing operational business activity
Trust: typically preferred for development activity, useful for flexibility and distributing profits
Joint venture (JV): ideal for multiple parties bringing capital and expertise
Unit trust or hybrid structure: can balance flexibility and lender confidence
Once you’ve bought the property, restructuring gets costly and complicated — so do it right the first time.
2. Mixing Investment and Development Activities
This one catches many experienced investors as they step up into development.
The ATO draws a hard line between investors and developers:
Investors hold property to generate rental income and long-term capital growth.
Developers build to sell for profit - which means they’re selling trading stock, which is taxed differently to investment.
The issue? Inexperienced Developers often use their existing investment trust or company for new projects, thinking it’s all “property.”
What goes wrong:
When you mix investment and development:
You can lose capital gains tax (CGT) discounts.
The ATO may treat all assets in that entity as trading stock - even those you meant to hold.
You risk messy GST and BAS reporting.
Your records become harder to defend if audited.
Real-world impact:
We worked with a client who developed one site through their investment trust. When they later sold an investment property within that trust, the ATO classified the gain as ordinary income, not a capital gain - resulting in $250,000+ extra tax.
How to avoid it:
Keep development and investment separate. A simple rule of thumb:
If it’s to sell, separate it.
Use one entity for buy-and-hold investments and another for development projects. It keeps your books clean, your tax treatment clear, and your accountant much happier.
3. Forgetting About GST and the Margin Scheme
GST is the quiet killer in many development budgets.
Developers either ignore it until it’s too late, or assume it’s “just 10%,” without realising how complex the margin scheme or input credits can be.
Why GST planning matters:
You may need to register for GST if you’re selling new residential property.
You can claim GST credits on costs - but only if you’re registered and compliant.
The margin scheme can drastically reduce GST payable on sales (but only if contracts are drafted correctly).
Example:
A developer bought a site for $1.2 million (no GST applicable) and sold townhouses for $3 million.
Under standard GST rules, 1/11th of the sale price ($272,727) would be payable to the ATO.
Applying the margin scheme, GST was calculated on the margin between purchase and sale prices - reducing payable GST to ~$163,000.
That’s a $109,000 saving, just by applying the right method.
Common mistakes:
Not registering for GST before incurring costs (can’t claim credits later).
Using standard contracts when the margin scheme was eligible.
Not retaining valid tax invoices for input credits.
Forgetting to account for GST withheld at settlement.
How to avoid it:
Discuss GST before contracts are signed.
Make sure your solicitor and accountant are aligned.
Keep all invoices and development costs organised.
Understand whether the margin scheme applies - it’s not automatic.
A quick GST check before you buy can save six figures later.
4. Tax Planning and settlement timing
Cash flow kills more projects than bad design ever will.
We’ve seen developers run profitable projects - on paper - but run out of cash before completion because they didn’t plan for BAS, GST, or income tax.
The problem:
Development profits are lumpy - you might not get paid until the end, but expenses, tax obligations pile up along the way.
Without proper forecasting, developers often spend their “profit” on the next site before paying the tax bill for the last one. Timing settlement of the development is absolutely crucial. It can be the difference between paying millions in tax vs none at all.
Example:
A developer made $20M profit from a project. They rolled all profits into the next site.
The ATO bill came - $5M in income tax was due - they didn’t have the funds. They had to refinance mid-project just to pay tax, costing months and thousands in interest. Had they considered another vehicle, i.e. trust, the tax could have been deferred.
How to avoid it:
Structuring – appropriate structuring could significantly reduce cash leakage at the completion of the project.
Forecast cash flow for every project - include GST, PAYG, and income tax.
Model scenarios: What if sales are delayed into next financial year?
Review forecasts monthly with your accountant or CFO.
Having a CFO or advisor keep an eye on your numbers means fewer surprises - and far fewer sleepless nights.
5. Waiting Too Long to Get Advice
This is the one that ties all the others together.
Most of the mistakes above happen because some developers wait until year-end to talk to their accountant. By then, it’s too late to restructure, apply the margin scheme, or plan tax timing.
Why this happens:
You’re focused on deals and deadlines.
The project feels “too small” for advisory input.
You assume tax planning comes after the build.
The reality:
Structuring, GST planning, and cash flow management need to happen before the shovel hits the dirt.
That’s when you still have flexibility - when you can choose the right entity, apply the right GST strategy, and design your funding model with tax in mind.
How to avoid it:
Book a pre-acquisition review before your next site.
Bring your accountant, broker, and solicitor into the same conversation.
Revisit your structure annually as your portfolio grows.
A 30-minute chat now is cheaper (and less painful) than an ATO review later.
The Bottom Line
The right tax structure won’t just keep the ATO happy - it’ll protect your assets, improve your cash flow, and maximise your returns.
The wrong structure, on the other hand, can trigger unnecessary tax, limit financing options, and expose you to personal risk.
Getting this right from day one is one of the simplest ways to ensure your development profits actually end up in your pocket - not the ATO’s.
At m+h Private, we specialise in helping Brisbane property developers get the tax, structure, and CFO side of their projects right - from feasibility through to final sale.
If you’re about to start a new project (or already knee-deep in one), now’s the perfect time for a quick structure check.
Next Steps
1. Download our free guide:
The 2025 Developer Tax & Structuring Checklist — a practical, one-page tool to review your entity setup, GST position, and tax planning before your next project.
2. Book a 30-minute Property Tax Review:
We’ll review your current structure, highlight any risk areas, and map out smarter tax strategies for 2025 and beyond.