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Setting up a family trust in Australia means appointing a trustee to hold and manage assets for the benefit of your chosen beneficiaries under a legally binding trust deed. It is one of Australia’s most popular structures for asset protection, income splitting, and passing wealth between generations . With the right steps, you can have one in place in a matter of days.
That said, a family trust is one of those things people research for months and then rush through in an afternoon. The legal structure is straightforward. The tax planning that goes with it is where things get complicated . Getting it wrong costs real money. This guide cuts through the noise and tells you what actually matters.
- A family trust is a type of discretionary trust. The trustee decides who gets income each year and how much. There is no fixed split between beneficiaries.
- Setup costs range from roughly $900 to $3,000+, depending on complexity. A template deed with assisted setup typically runs $900–$1,500. Adding a corporate trustee company adds another $500–$700.
- A trust is not automatically a “family trust” for tax purposes. You must make a formal Family Trust Election (FTE) with the ATO to access certain tax concessions . This is a separate step from setting up the trust deed.
- Trustee distribution resolutions must be completed by 30 June each year. Failing to document who is entitled to trust income before this deadline can result in the ATO taxing the trustee at 45%.
- The 2026–27 Federal Budget announced a 30% minimum tax on discretionary trust income from 1 July 2028. If you are setting up a trust now primarily for income splitting, get current tax advice before proceeding.
What is a family trust?
A family trust is a discretionary trust established to hold assets or run a business for the benefit of family members. The trustee holds the legal title to the trust’s assets, but the beneficiaries have the beneficial interest. The key word is “discretionary”: the trustee decides each year how to allocate income and capital among the beneficiaries, and that flexibility is the main reason Australian families use this structure.
A family trust is not a separate legal entity like a company. It is a legal relationship: an arrangement created by a deed and managed by whoever the deed appoints as trustee. That distinction matters for tax and liability purposes.
Why do Australian families use discretionary trusts?
The three main reasons are asset protection, tax flexibility, and estate planning. Here is how each one works in practice.
Asset protection. Assets held in a trust are not owned by you personally. If you are sued, go through a business failure, or face personal creditors, trust assets are generally beyond their reach, provided the trust was set up before the liability arose, not after. Transferring assets into a trust after problems start is unlikely to work and may be challenged.
Tax flexibility. Because the trustee decides each year who receives trust income, you can distribute more income to beneficiaries on lower marginal tax rates. A family with different income earners can use this to reduce the overall tax bill across the group. For example, distributing rental income from an investment property to a lower-income spouse or adult child can be significantly more tax-efficient than holding the property personally.
Estate planning. Assets in a trust do not form part of your estate when you die, which means they are not subject to a will challenge and do not automatically trigger capital gains tax on death. The trust continues, and the appointor clause in the deed controls who becomes the next trustee. This makes intergenerational wealth transfer cleaner, but it also means the trust deed needs to be drafted with succession in mind from day one.
Should you use a corporate trustee or an individual trustee?
This is the decision most people gloss over, and it matters more than they expect. The trustee is the person (or company) that legally owns the trust assets and makes distribution decisions. You can use an individual or a company as trustee, and the right choice depends on your situation.
| Individual trustee | Corporate trustee | |
|---|---|---|
| Setup cost | Minimal (no extra registration) | $500–$700 to register the company |
| Asset protection | Weaker: if the trustee is sued personally, trust assets can be exposed in some circumstances | Stronger: the company’s liability is limited and trust assets sit at one remove from personal exposure |
| Change of trustee | Requires updating title of every trust asset when a trustee retires or dies | Simply change directors or shareholders of the trustee company , with no asset transfer required |
| Ongoing cost | Lower: no ASIC annual review fee | ASIC annual review fee applies (currently $310 for a small proprietary company) |
| Preferred for | Simple structures, short time horizons, low-value assets | Most business trusts, investment trusts, or any trust expected to last more than 10 years |
In practice, a corporate trustee is the better choice for most business or investment trusts. The cost difference over 10 or 20 years is small compared with the administrative headache of updating land titles, bank accounts, and ASIC registers every time a trustee changes. If you are setting up a family trust to hold a business or investment property, use a corporate trustee.
Save time with Lawpath's assisted Trust Set Up service.
How to set up a family trust in Australia: the 8 steps
Step 1: Decide on the trust structure and roles
Before drafting anything, you need to know who will fill each of the four key roles: the trustee, the appointor, the settlor, and the beneficiaries. Getting these roles right upfront saves amendment costs later.
Trustee. The legal owner of the trust assets. They make distribution decisions and are responsible for the trust’s compliance obligations. As discussed above, a corporate trustee is usually the better choice for business or long-term trusts.
Appointor. This role is often overlooked, but it is actually the most powerful position in a discretionary trust. The appointor can remove and replace the trustee. In practice, whoever controls the appointor role controls the trust. The deed should clearly document what happens to the appointor role when the current appointor dies or loses capacity.
Settlor. The person who creates the trust by signing the deed and paying the initial settlement sum (typically $10). The settlor should be unrelated to the trust and should not be a beneficiary of the trust (more on why that matters in Step 2).
Beneficiaries. The people (or entities) who may receive income or capital from the trust. In a family trust, beneficiaries are typically defined as a class rather than named individuals: “the trustee’s spouse, children, grandchildren, and entities they control” is a common formulation. Broad beneficiary classes give the trustee maximum flexibility.
Step 2: Choose your settlor carefully
The settlor creates the trust by paying the initial settlement sum (usually $10) to the trustee. This step sounds trivial, but there is a tax trap: the settlor should not be a beneficiary of the trust and should not be closely related to the main beneficiaries.
Why? If the settlor is also a beneficiary (or the spouse of a beneficiary), it can trigger resettlement issues and, in some circumstances, create a deemed disposal for capital gains tax purposes. The ATO also scrutinises arrangements that look circular. A common choice for settlor is a trusted friend, accountant, or solicitor who has no ongoing role in the trust after signing the deed.
Step 3: Draft the discretionary trust deed
The trust deed is the operating manual for your trust. It defines the trustee’s powers, the class of beneficiaries, how income and capital can be distributed, the vesting period (typically 80 years, the maximum allowed under most state trust laws), and what happens when the trust ends.
A well-drafted deed should cover:
- How and when the trust is established
- The full class of beneficiaries who may receive distributions
- The trustee’s powers over income and capital
- The appointor’s power to remove and replace the trustee
- Record-keeping and financial reporting obligations
- The vesting date (when the trust must end and assets must be distributed)
- The process for winding up the trust
Lawpath’s discretionary trust deed template is used to establish trusts in all Australian states and territories. If your situation involves business assets, investment properties, or multiple beneficiaries, consider using Lawpath’s assisted trust setup service to have a specialist check the deed before signing.
Step 4: Execute the deed
The trust deed must be signed correctly or the trust does not legally exist. The settlor signs first, paying the $10 settlement sum to the trustee. The trustee (or directors of the corporate trustee) then accept the appointment by signing the deed and holding a meeting to formally record their acceptance.
The trust is created on the date the deed is signed and the settlement sum is paid. You cannot backdate a trust to an earlier date to suggest it owned assets before it was actually established. This is a surprisingly common misconception, and a costly one. Any assets you want the trust to hold must be formally transferred into the trust after the deed is signed.
Execution can happen in person or electronically. If using an audiovisual link, ensure you comply with the relevant state’s requirements for remote witnessing.
Step 5: Pay stamp duty on the deed
Some Australian states require you to formally stamp the trust deed. The rates and process vary significantly by state. The table below applies to trusts over non-land assets (stamp duty on land transferred into a trust is a separate, much larger calculation).
| State/Territory | Stamp duty on trust deed | Deadline to stamp |
|---|---|---|
| New South Wales | $750 (plus $10 per additional stamped copy). Must be lodged by a registered OSR lodger. | Within 3 months of execution |
| Victoria | $200 (no charge for additional copies). Must be lodged via a registered Duties Online Agent. | Within 3 months of execution |
| Australian Capital Territory | Not payable or required | No time limit |
| Queensland | Not payable or required | No time limit |
| South Australia | Not payable. Deed may still be stamped “exempt” if desired | No time limit |
| Western Australia | Not payable or required | No time limit |
| Northern Territory | $20 (plus $5 per additional copy) | Check with Territory Revenue Office |
| Tasmania | $50 | Within 3 months of execution |
If your trust will hold real property, land transfer duty applies separately in most states and can be substantial. Get advice before transferring any property into the trust.
Step 6: Register for an ABN and TFN
Once the trust is established, apply for a Tax File Number and Australian Business Number (ABN) for the trust. These are separate registrations from your personal TFN and ABN. The trust applies in its own name: for example, “Smith Family Trust”.
If the trust will run a business or earn income, register for GST if turnover will exceed $75,000 per year. If the trust will have employees, register for PAYG withholding too.
Step 7: Open a separate trust bank account
Open a bank account in the trustee’s name “as trustee for [trust name]”. The first deposit should be the $10 settlement sum. All trust income and expenses must flow through this account. Mixing trust funds with personal or business funds will undermine the asset protection the structure is meant to provide.
Step 8: Consider whether to make a Family Trust Election
A trust is not automatically a “family trust” for tax purposes just because you call it one. To access certain ATO concessions (including loss recoupment rules, franking credit access, and simplified trust beneficiary reporting), the trustee must lodge a formal Family Trust Election (FTE) with the ATO.
The FTE names a “test individual” and restricts all distributions to that person’s family group. Once made, the election is irrevocable except in very limited circumstances. If the trust later distributes income outside the defined family group, the ATO imposes Family Trust Distribution Tax (FTDT) at 47%, on top of any regular tax. This is not a theoretical risk. The ATO is actively auditing FTE compliance and the consequences of getting it wrong are severe.
Not every family trust needs an FTE. Whether to make one is a tax planning question best addressed with your accountant before you lodge anything with the ATO.
Save time with Lawpath's assisted Trust Set Up service.
What does it cost to set up a family trust in Australia?
The cost of setting up a family trust varies depending on how complex your situation is and whether you use a corporate trustee. Here is a realistic breakdown.
| Cost item | Typical range | Notes |
|---|---|---|
| Trust deed (template + assisted setup) | $900–$1,500 | Lawpath’s assisted trust setup starts from $900 |
| Corporate trustee company registration | $500–$700 | Optional but recommended for most business trusts |
| Stamp duty on deed (NSW) | $750 | Not payable in QLD, WA, SA, ACT |
| ABN/TFN registration | Free (ATO) | Applied online via the ABR |
| Ongoing: accountant (annual tax return, distribution resolution) | $1,000–$2,500+ per year | Required annually; varies by complexity |
| Ongoing: ASIC annual review fee (if corporate trustee) | $310 per year | Current ASIC fee for small proprietary company |
Total first-year cost for a trust with a corporate trustee in NSW: roughly $3,500–$5,000 including stamp duty and first-year accounting. In states with no stamp duty on trust deeds, that range drops to $2,500–$4,000.
What Lawpath advisors see in family trust consultations
Across hundreds of trust consultations every year, Lawpath lawyers and accountants see a consistent set of mistakes. Most of them are avoidable if you know what to look for.
People often delay the distribution resolution. The trustee must formally document who is entitled to trust income before 30 June each year. Miss that deadline and the ATO taxes the trustee at the top marginal rate, currently 45%. This is not a grey area. The 2025 Administrative Review Tribunal decision in Trustee for Goldenville Family Trust v Commissioner of Taxation confirmed the ATO will reject resolutions that appear to be made retrospectively. Get it done before 30 June, not on 1 July.
The appointor role is frequently overlooked at setup. Clients focus on the trustee and beneficiaries but do not think carefully about the appointor. Because the appointor can remove the trustee, they effectively control the trust. We regularly see structures where the deed is silent on what happens when the appointor dies, which creates significant governance and succession risk. The deed should name a successor appointor or set out a process for appointing one.
People try to set up trusts after problems start. Asset protection only works if the trust was established before a liability arises. A trust created after a business dispute is underway, after a relationship breaks down, or after a debt is incurred is unlikely to protect those assets. Courts treat late-stage asset transfers with significant suspicion. If protection is your goal, set up the structure before you need it.
The 2026–27 Federal Budget announced a 30% minimum tax on discretionary trust income from 1 July 2028. This is a material change for anyone considering a trust primarily for income splitting purposes. Beneficiaries with income below the 30% marginal tax rate threshold will not benefit the way they might have previously. If your main reason for setting up a trust is tax minimisation, get current advice before committing to the structure. The maths has changed.
What are your ongoing obligations once the trust is running?
Setting up the trust is a one-off task. Running it correctly is ongoing. Here is what a trustee must do each year.
- Annual distribution resolution (by 30 June): The trustee formally resolves who is entitled to income for the financial year and in what proportions. This must happen before 30 June. Not the day after.
- Lodge a trust tax return: The trust lodges its own annual tax return with the ATO. The trust itself does not usually pay tax (income is distributed to beneficiaries who pay it at their marginal rates), but the return must still be lodged.
- Beneficiary tax statements: Each beneficiary who receives a distribution receives a statement from the trustee showing their share of trust income for the year.
- Record-keeping: Keep minutes of trustee meetings and decisions, financial accounts, and records of all distributions. ATO audits of trusts have increased significantly since 2023.
- ASIC annual review (if corporate trustee): The trustee company lodges an annual review with ASIC and pays the annual fee.
A family trust is not a set-and-forget structure. Trusts that are not properly administered lose their asset protection and tax benefits. Budget for accounting support from day one.
Is a family trust the right structure for you?
A family trust works well if: you have significant assets you want to protect, you have family members on lower incomes who can receive distributions, you are running a family business and want income flexibility, or you want to pass wealth to the next generation efficiently.
It is probably the wrong structure if: you are a sole operator with no real assets to protect, your family members are all on similar income levels, you want simplicity above everything else, or your primary goal is tax minimisation and you haven’t accounted for the 2028 minimum tax changes.
Not sure which structure is right? Read Lawpath’s guide to choosing your business structure, or compare a trust against a company directly in company versus trust.
Frequently asked questions
How long does it take to set up a family trust in Australia?
Most trusts can be established within 1–5 business days once you have made the key decisions (trustee, beneficiaries, structure). Drafting and executing the deed is the main step. Registering for an ABN and TFN with the ATO usually takes 1–3 business days online. Stamp duty lodgement in NSW and Victoria adds a few days or weeks depending on the lodger’s processing times.
Can a single person set up a family trust?
Yes. A single person can be the trustee and the primary beneficiary of a family trust. You cannot be the only beneficiary (the trust must have at least one other eligible beneficiary), but you can be both the trustee and a beneficiary. Many individuals set up family trusts as a sole director/shareholder of the corporate trustee.
Does a family trust have to pay tax?
A discretionary trust generally does not pay income tax itself. Income is distributed to beneficiaries each year, who pay tax at their own marginal rate. However, if no valid distribution is made before 30 June, the ATO taxes the trustee at 45%. From 1 July 2028, a minimum 30% trustee-level tax will apply to undistributed income under changes announced in the 2026–27 Federal Budget.
What is a Family Trust Election and do I need one?
A Family Trust Election (FTE) is a formal lodgement with the ATO that designates your trust as a “family trust” for tax purposes. It enables access to certain concessions including loss recoupment and simplified beneficiary reporting. Once made, the FTE is irrevocable. Not every trust needs one. Whether to make an FTE depends on your specific tax planning goals. Discuss with your accountant before lodging.
Can a trust own shares in a company?
Yes. A discretionary trust can hold shares in a company. This is one of the most common structures used by Australian small businesses: a family trust holds shares in a trading company, and the trust distributes dividends to family members each year. The trust and the company are separate legal entities with separate tax obligations.
What happens to a family trust when the trustee dies?
If the trustee is an individual and they die, the trust does not automatically end. But action is required. A new trustee must be appointed (usually by the appointor, as named in the deed), and the title to trust assets needs to be transferred. This is one reason a corporate trustee is worth the extra cost: changing directors of a company is far simpler than retitling every trust asset.
How long can a family trust last?
Most Australian states set the maximum trust duration at 80 years from the date the trust is established. This is the vesting period, and it should be set in the deed at establishment. When the trust vests, the assets must be distributed to the beneficiaries. Some states have updated their laws to allow longer periods. Confirm the rule in your state with your lawyer.
What other types of trusts are available in Australia?
Beyond the family (discretionary) trust, the most common types are: a fixed unit trust (where each beneficiary holds a fixed number of units, similar to company shares), a unit trust deed, a bare trust (holding assets for a single beneficiary with no discretion), and superannuation trusts. The right type depends on whether you want discretion or certainty in how assets are allocated.
Is it worth setting up a family trust in 2026?
It depends on your goals. For asset protection and estate planning, a family trust remains one of the most effective structures available to Australian families. For pure income splitting and tax minimisation, the 2026–27 Budget changes to trust taxation from 1 July 2028 mean the maths is worth recalculating with your accountant before you proceed.
Ready to set up your family trust?
Getting the structure right from the start means you won’t pay to fix it later. A properly drafted deed, the right trustee structure, and a clear picture of your distribution strategy will serve your family for decades. There is nothing complicated here once you know what decisions to make.
Lawpath can have your discretionary trust deed drafted and ready for execution within days. Our lawyers handle the deed, the setup, and can advise on whether a corporate trustee is right for your situation. Start your discretionary trust deed today.
