Major Australian Lenders Are Shutting the Door on Trust Lending

There have been some significant announcements in the finance and lending space over the past month, with the Australian lending markets witnessing a striking shift.

This time, Trust lending is in the spotlight with two major lenders—Macquarie Bank and the Commonwealth Bank of Australia (CBA)—having tightened or outright ceased new lending to trusts and companies. But don’t be surprised- these moves are not coincidental but instead reflect a deliberate, targeted response by lenders under the watchful eye of the prudential regulator. The broader context is a deepening concern about systemic risk, particularly in higher-risk pockets of housing finance. For investors, it’s important to gain a deeper understanding of what’s driving the change, why trusts have previously been so popular, and the implications for the future of leveraged property investing.

With two of the ‘big four’ lenders already bending over to pressure from the regulator and tightening their lending restrictions, it will come to no surprise if we hear similar announcements from other lenders in the coming months.

The Regulatory Backdrop: APRA’s Warnings and Macroprudential Risk

The Australian Prudential Regulation Authority (APRA) has made no secret of its growing unease about vulnerabilities in the housing market, in particular towards some forms of ‘higher risk lending’ particularly when it comes to investor lending. APRA is closely monitoring high household indebtedness and although overall lending standards appear to remain “sound,” the regulator has warned that it has witnessed accelerating investor credit growth, combined with signs of ever more aggressive strategies to maximise leverage, could amplify financial stability risks. APRA is giving an underlying warning to lenders- that they need to clamp down on lending structures that are designed to boost borrowing capacity or evade stress-testing protections.

What Changes Did Macquarie and CBA Announce and Why?

Two of Australia’s most significant mortgage lenders have recently made sharply different but aligned decisions aiming to curb the use of trust lending for significant assets:

1. Macquarie Bank
   • Pause new home loan applications– In late October 2025, Macquarie announced it would pause all new home loan applications where the borrower is a trust or a company.
   • Concerns around social media spruiking the use trust lending. The increasing number of social media investing platforms spruiking about the use of trusts for investors, which can lead to misuse of trust structures. Macquarie cited the rise of “strategies on social media aimed at maximising lending through trusts and companies” as one of its key concerns.
   • The bank also referenced upcoming anti-money laundering (AML) regulations, noting that these would make trust and company lending more complex and burdensome.
   • Only for new applications. Importantly, existing trust or company loans with Macquarie are not being wound back — this is purely a freeze on new applications.
2. Commonwealth Bank (CBA)
   • Restrictions on applications– From 22 November 2025, CBA introduced a restriction for broker-introduced applications: non-individual borrowers (trusts or companies) must now have an existing lending facility with CBA — such as a home loan, business loan, personal loan, or credit card — that’s been active for at least six months.
   • Prudent lending standards- CBA’s general manager of third-party banking, Baber Zaka, explained this policy tweak as part of a broader risk-appetite recalibration, intended to simplify origination and reinforce prudent lending standards.
   • Policy applies to brokers. Crucially, the policy change currently applies only to broker-introduced applications. Internal (or direct) applications by existing customers are treated differently.

The major shift in this lending environment is a move towards restricting broker introduced applications, which is going to impact the wider lending environment. Broker channels have been a primary gateway for trust-based lending, particularly for investors looking to scale their portfolios. By limiting that conduit, CBA and Macquarie are not just tightening policy — they’re reshaping the behaviour of the lending environment.

Why are they targeting Trust Lending?

To understand what’s going on, we need to dig into how trust lending has functioned and why regulators and banks now view it as problematic.

The Loophole: Stress Testing and the 3% Buffer

• Under Australia’s standard mortgage underwriting rules, a 3% assessment buffer is applied to all new mortgage debts. This means that when you want to borrow, you will be considered whether you have the ability to repay the loan at a rate 3 percentage points higher, should interest rates rise. This buffer is a protection for the lenders to prevent loan defaults and this method has become a core part of how lenders and regulators build resilience against future rate rises.
• Debt is treated differently when it is held inside certain trust structures which is how savvy investors have found ways around the 3% safety net. When you set up a new trust, banks may check only whether the current repayments on that trust’s existing debt are being met, ignoring completing a full stress test on total debt (including debts outside of the trust).
• The problem here is, a borrower who has exhausted the borrowing capacity in one trust may simply form a new trust, take out another loan under that structure, and avoid being subject to the full 3% buffer on previous debt. Foregoing adequate stress-testing, means that default risk will accumulate, and it is likely investors could be over-leveraging without fully bearing the future rate risk.

Behavioural Risks – Social Media’s impact
Lenders have been closely observing the impact that social media has had on unsolicited financial and lending advice. The concern is that some investors (or their advisors) are being encouraged to use these types of finance structures not for their genuine purpose- which is business or asset-protection purposes, but rather to take advantage of the structure which allows an aggressive borrowing strategy.
When clients are following the “influencer” circles of investors, who spruik about the use of trusts for financial strategy, they are not telling the full story about long term financial risk.

Lastly, we can’t forget the upcoming rules for Anti-Money Laundering (AML) tranch-2 with plays a role in this type of regulation. These AML regulations will impose stricter verification for company and trust lending, increasing compliance costs and friction for banks.

Why Do Investors Use Trusts?

To evaluate the impact of these policy shifts, it’s helpful to revisit why property investors have historically used trusts in the first place.

Why People Set Up Property Trusts

1. Tax Efficiency & Income Distribution
   Trusts (such as discretionary or family trusts) offer flexibility in how rental income and capital gains can be distributed to beneficiaries. This lets investors manage their tax liabilities more strategically, especially if beneficiaries are in different tax brackets.
2. Asset Protection
   By holding property in a trust, investors can separate those assets from their personal liabilities. This means that if something goes wrong in their personal or business life, the properties may be protected.
3. Estate Planning & Succession
   Trusts can simplify passing assets to future generations: rather than transferring individual properties, trustees can manage and transfer beneficial interests.
4. Scaling Portfolios
   For active property investors, trusts have been a common way to hold multiple properties under a single structure, especially when combined with company trustees, giving them flexibility and leveraged borrowing capacity.

Tax Implications & Risks

• Rental income from the property held in a trust is typically taxed in the hands of the trust beneficiaries (depending on the trust deed), which can help optimise tax through lower-bracket beneficiaries.
• Capital gains on property sold within a trust may incur capital gains tax (CGT), but if structured correctly, distributions and trust elections can affect how CGT is ultimately paid.
• However, trusts do not always enjoy the same concessions as individuals. For example, land-tax thresholds (state-dependent) might not apply to trusts, leading to higher land tax liabilities. As some investors have noted, the “land tax bill” can be a downside of holding residential property in a trust.
• Trusts cannot always claim negative gearing benefits in the same way as individuals: while rental losses may be distributed, the tax outcome depends on the trust structure and distribution strategy.

How these Policy Changes Impact the Property Market

1. Reduced Leverage for High-Growth Investors

Investors who relied on rapidly expanding their portfolio by creating new trusts may find their strategy undercut. With Macquarie off the table and CBA restricting access, the ability to “rinse and repeat” loans via trust structures is now far more constrained. It is also in the foreseeable future that other lenders won’t be too far behind, leaving investors with a limited choice of lenders, or none at all.

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2. Risk Evaluation and Stronger Underwriting

Lenders are recalibrating how they evaluate risk. This tightening of lending is a signal that lenders are no longer willing to accept lightly structured (and risky) trust arrangements where borrowers are using them solely to avoid wider stress testing. As a result, we expect to see stricter documentation requirements, stronger scrutiny of trust income and cashflows, conservative loan to value ratios (LVR).

3. Changes to Broker Lending Strategies

Mortgage brokers, who have long steered sophisticated investors into trust structures, will need to adapt to these changes. In order to gain market share, Brokers will keep a keen eye on the smaller lenders who may try to pick up the business from Macquarie and CBA and have their own (easier) restrictions on trust lending.

4. Regulatory Momentum

These lender-driven changes dovetail APRA’s agenda for more prudent lending. Lenders have selectively targeting the riskiest borrower cohorts alongside the regulator engaging in a tightening of credit. Rather than imposing industry-wide caps, they are zeroing in on structures that may bypass stress protections. However, ultimately the change made by the lenders are going to protect the lenders, avoiding making risking loans with a high chance for default.

Risks and Challenges for Investors

For property investors who used (or planned to use) trust lending as a growth lever, the new environment presents several challenges:

• Finding Financing: Some may struggle to secure future funding, especially if they don’t already have a relationship with CBA or another lender.
• Refinancing Risk: Existing trust loans may become difficult to refinance, especially with tightening credit standards or higher underwriting scrutiny.
• Reassessment of Strategy: Investors may need to reassess whether holding in a trust is still the optimal finance structure in light of reduced leverage and increased regulatory risk.
• Tax & Succession Trade-offs: If borrowing options are limited, the cost-benefit of a trust (for tax or estate planning) may no longer outweigh the disadvantages.

What’s the Future of Lending?

The recent moves by Macquarie and CBA to restrict or halt trust-based lending are a striking example of the financial system recalibrating its risk tolerance. These are not knee-jerk decisions, but rather necessary interventions — targeted towards a specific group of borrowers who were already taking advantage of the lax stress testing for trust structures.

For investors and brokers, the implications are profound. Strategies that once seemed watertight must now be rethought. Relationships, documentation, and prudent lending practices will matter more than ever. In a market where credit risk is under renewed scrutiny, the winners will be those who adapt — not just to the new rules, but to a fundamentally more cautious lending landscape.

With two of the four big lenders tightening their policies for trust lending, it will be no surprise to see the other two announce a similar approach.
Rather than regulatory led, these changes have been led by the companies themselves showing a forward leaning approach to financing in the future. It is a demonstration that the lenders are trying to take a forefoot in the clean-up of the industry, rather than waiting for the regulatory body to make the move, which is a positive step forward for the loan environment as a whole.

Disclosure: This article is for informational and educational purposes only. It does not constitute financial, tax or legal advice. Investors should consult their own professional advisers before making structural or financing decisions.

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