• 25 April, 2026

What Is a Family Trust?

A family trust (also known as a discretionary trust) is a legal structure where a trustee holds and manages assets for the benefit of family members.

Think of it as a protective structure that separates ownership of assets from personal names, while allowing flexibility in how income and wealth are distributed.

This structure is widely used in Australia for:

• Asset protection
• Tax planning
• Family wealth management
• Business structuring

How Does a Family Trust Work?

A family trust operates under a legal document called a trust deed, which outlines the rules and responsibilities.

Each year:

• The trust earns income (from business, investments, etc.)
• The trustee decides how to distribute income among beneficiaries
• Beneficiaries pay tax on the income they receive

👉 The key advantage is flexibility — income can be distributed based on tax efficiency and family needs.

Key Roles in a Family Trust

Understanding the structure is essential:

1. Settlor

The person who sets up the trust with a small initial contribution.
They typically have no ongoing role.

2. Trustee

The decision-maker who:

• Manages assets
• Controls distributions
• Ensures compliance

👉 Many Australian families use a corporate trustee (Pty Ltd) for better protection.

3. Beneficiaries

Family members who can receive income or capital:

• Spouse
• Children
• Grandchildren
• Related entities

4. Appointor

The person with ultimate control, able to:

• Appoint or remove trustees

Why Use a Family Trust?

✔️ Asset Protection

Assets are generally not owned personally, which helps protect them from:

• Legal claims
• Business risks
• Creditors

✔️ Tax Planning Flexibility

Income can be distributed to family members in lower tax brackets, potentially reducing overall tax.

✔️ Succession Planning

Family trusts allow:

• Controlled wealth transfer
• Long-term family asset management

✔️ Business Structuring

Many Australian businesses operate through trusts to:

• Distribute profits efficiently
• Manage ownership structures

What Can a Family Trust Hold?

A family trust can hold:

• Business income and trading profits
• Investment properties
• Shares and dividends
• Cash and term deposits
• Intellectual property

⚠️ Important:

Your main residence is usually not placed in a trust, as it can impact capital gains tax exemptions.

Family Trust Tax Considerations (Australia 2026)

Family trusts are governed by strict Australian Taxation Office (ATO) rules:

• Trust income must generally be distributed each year
• Undistributed income may be taxed at the highest marginal rate
• Beneficiaries pay tax on distributions received
• Compliance with ATO reporting and record-keeping is essential

👉 Proper structuring is critical to avoid unexpected tax outcomes.

Costs of Setting Up a Family Trust

Initial Setup Costs:

• Trust deed preparation: $1,500 – $3,000+
• ASIC fees (if using corporate trustee)
• Professional advice

Ongoing Costs:

• Annual tax return preparation
• Accounting & compliance
• ASIC annual fees (if company trustee)

Is a Family Trust Right for You?

Suitable If:

✔️ You run a family business
✔️ You have growing investment income
✔️ You want asset protection
✔️ You are planning long-term wealth transfer

Not Ideal If:

❌ You have minimal income or assets
❌ Your structure is simple
❌ Costs outweigh benefits

Common Mistakes to Avoid

🚫 Setting up a trust without proper advice
🚫 Choosing the wrong trustee structure
🚫 Poor record-keeping
🚫 Not reviewing distributions annually
🚫 Ignoring ATO compliance obligations

The Reality: Trusts Require Ongoing Management

A family trust is not a “set and forget” structure.

It requires:

• Annual compliance
• Financial reporting
• Strategic tax planning
• Legal and accounting support

Final Thoughts

A family trust can be a powerful tool for protecting assets, managing tax, and building long-term family wealth — but only when structured and managed correctly.

The right setup depends on your:

• Income level
• Business structure
• Family situation
• Long-term goals

How Workpaper Can Help

At Workpaper Solutions, we help Australian individuals and business owners:

✔️ Set up family trust structures correctly
✔️ Advise on trustee selection (individual vs corporate)
✔️ Ensure ATO compliance and reporting
✔️ Provide ongoing tax planning and support

📞 Contact Workpaper

🌐 Website: https://workpaper.com.au

📍 Address: 7 Bridge St, Werribee, Victoria 3030, Australia
📞 Phone: 0485 825 915
📧 Email: info@workpaper.com.au