How to set up a trust in Australia can seem daunting, but with the right structure and compliance framework, it’s an effective solution for asset protection, family wealth management, or business operations. This guide covers trust types, legal steps to establish a trust, tax registrations, and ongoing responsibilities for trustees.
Understanding Trust Structures
The two most common types in Australia:
- Discretionary (family) trust: Trustees decide how to distribute income or capital among a flexible class of beneficiaries, often family members.
- Unit trust: Beneficiaries hold units representing fixed entitlements—similar to company shares—specifying income and capital distribution.
Choosing the right structure is vital and should align with your goals for asset protection, tax planning, and income flexibility.
Step 1: Choose Trustee(s) and Beneficiaries
- Trustee(s): May be individuals or a corporate trustee. The trustee is legally responsible for managing the trust in beneficiaries’ best interests.
- Beneficiaries: Identify either by name or class. In a discretionary trust, defining a class (e.g., “children of…”) is common for flexibility.
Note: Trusts are not separate legal entities—contracts and ownership are held in the trustee’s name.
Step 2: Decide Trust Name and Type
- Select a meaningful name—e.g., “[Surname] Family Trust.”
- Define the trust’s type (discretionary vs unit) and purpose (investment, business operations).
This alignment influences how you draft distribution clauses and flexibility in the trust deed.
Step 3: Draft and Execute the Trust Deed
- The trust deed establishes the trust and must be drafted by a qualified solicitor or trust deed service.
- It names the trustee, lists beneficiaries, outlines distribution rules, and appoints a settlor (an independent individual who contributes a nominal amount, like $10).
- Ensure proper execution: trustee(s) and settlor sign, and witnesses if required. In some states stamp duty may apply—check your local regulations.
Once executed, the trust legally exists and you can proceed to the next steps.
Step 4: Establish Trust Records and Bank Account
- Set up a minute book to document trustee resolutions, especially around income distributions and investment decisions.
- Store the trust deed securely.
- Open a dedicated trust bank account to keep trust funds separate from personal accounts—a fundamental compliance requirement.
Step 5: Register Your Trust for ABN, TFN, and GST
To lawfully run the trust and lodge tax returns:
- Trust TFN: Trustees must apply to the ATO for a unique TFN for the trust—required even if not conducting business.
- ABN: If the trust carries on an enterprise, it needs an ABN. This is necessary for invoicing, claiming GST credits, and formal dealings. Apply via the Australian Business Register (ABR).
- GST Registration: Mandatory if turnover will exceed AU$75,000. Registration must be completed within 21 days of hitting the threshold.
Step 6: Complete Your Trustee Duties and Ongoing Management
Once the trust is operational, the trustee must:
- Lodge Annual Tax Returns: Declare trust income and distributions. Trustees are responsible, and unallocated income is taxed at the highest marginal rate.
- Maintain Accurate Records: Keep records of all trust transactions, accounts, distribution resolutions, and meeting minutes.
- Administer Trust According to the Deed: Follow its terms and act in the beneficiaries’ best interests.
- Handle PAYG Withholding: If beneficiaries or non-residents receive income, withhold as required business.
Step 7: Consider a Corporate Trustee if Needed
If your trust owns a business or valuable assets, using a corporate trustee is common. While the trust itself doesn’t need an ACN, the corporate trustee does—it must be registered with ASIC.
This structure can simplify administration and liability, but involves additional costs and compliance.
Key Insights and Mistakes to Avoid
- ABN not always required: Needed only if the trust operates a business
- TFN is essential: Every trust must have its own TFN—don’t rely on the trustee’s personal one
- Don’t mix funds: Always use a trust bank account to maintain legal clarity.
- Document distributions: Poor documentation frequently leads to ATO disputes.
- Monitor turnover: Register for GST promptly to avoid penalties.
Why Work With Us?
Trust setup and maintenance can be complex. Working with experts like TTS & Associates ensures your trust is:
- Legally drafted and compliant
- Correctly registered with TFN, ABN, and GST
- Properly administered and documented
- Operated in accordance with trustee duties
Let our professionals manage the paperwork so you can focus on your goals—whether protecting family wealth, growing investments, or running a business.
If you need guidance on how to set up a trust in Australia with confidence and compliance, please contact us.
This guide is for general informational purposes only and does not constitute legal or tax advice. Consult a qualified professional about your specific circumstances.
