To set up a family trust in Australia you have a trust deed prepared, appoint a trustee (often a company), name the appointor and beneficiaries, pay any state stamp duty on the deed, and apply for an ABN and TFN. Done correctly it provides flexible income distribution and asset protection for a family group.

If you run a successful business in Australia and you’re still operating under a structure that puts every dollar of profit directly in your name, you are almost certainly paying more tax than you need to — and leaving your personal assets exposed to unnecessary risk. Setting up a family trust is one of the most powerful and widely used strategies available to Australian business owners, and yet it remains one of the most misunderstood. In this guide, I’ll walk you through exactly what a family trust is, why it matters, and how to set one up the right way — step by step.

Before setting up a family trust, it helps to understand how it compares to other structures available in Australia. Our complete guide to business structures in Australia covers all four main options — sole trader, partnership, company, and trust — so you can be confident a family trust is the right choice for your situation.

What Is a Family Trust?

A family trust — formally known as a discretionary trust — is a legal structure in which a trustee holds and manages assets on behalf of a group of beneficiaries. The defining feature of a discretionary trust is that the trustee has complete discretion over how income and capital are distributed to beneficiaries each year. This flexibility is what makes it such a powerful tax planning tool.

Three parties are involved in every trust arrangement:

• The settlor — the person who establishes the trust by contributing a nominal sum (often $10) and signing the trust deed. The settlor typically plays no ongoing role.
• The trustee — the person or company responsible for managing the trust assets and making annual distribution decisions. This is the active role.
• The beneficiaries — the individuals and entities eligible to receive distributions from the trust each year.

Unlike a company, a trust is not a separate legal entity in the same way. It is a legal relationship — the trustee holds assets on behalf of the beneficiaries, bound by the rules set out in the trust deed.

Watch: Family Trust Benefits Explained

Before diving into the setup steps, Mina walks through the key benefits — and some important caveats — of operating through a family trust in this BusiHealth video:

Why Set Up a Family Trust? The Key Benefits

Tax savings through income splitting. Because the trustee decides each year who receives income and how much, you can direct profits to beneficiaries in lower tax brackets — a spouse, adult children, or even a company. This can legally reduce your overall family tax bill by tens of thousands of dollars each year.

Asset protection. Assets held in a trust are owned by the trustee in their capacity as trustee — not by you personally. In the event of business failure or a lawsuit, your personal creditors generally cannot access trust assets. This makes trusts a valuable shield for accumulated wealth.

Succession planning. A trust doesn’t die when you do. Control of a family trust can be passed to a successor trustee, allowing wealth to be managed across generations without the complexity of probate on trust assets.

Flexibility. Unlike a company (which must pay dividends to all shareholders proportionally) or a partnership (with fixed distributions), a discretionary trust lets you vary the distribution each year. Bad year for one beneficiary? Skip them. Good year for the trust? Maximise the use of low tax brackets across the family group.

To understand how a family trust compares with a company structure, read our company vs trust guide. For an overview of all trust types available to Australian business owners — including unit trusts, bare trusts, and testamentary trusts — see our guide to business structures in Australia.

Step-by-Step: How to Set Up a Family Trust in Australia

Step 1 — Choose a Trustee

The trustee is the most important decision you’ll make. The trustee holds legal title to all trust assets and is personally liable for the trust’s obligations. You have two options:

• Individual trustee — Cheaper to set up, but the trustee is personally exposed to any trust liabilities. If the trustee changes (e.g. death, incapacity), the assets must be transferred to the new trustee.
• Corporate trustee (a company established solely as trustee) — Recommended for most business trusts. Provides cleaner asset protection and makes trustee changes seamless (just change the company’s directors/shareholders rather than re-registering assets). Costs $597 to register with ASIC plus ongoing annual review fees.

For any business trust holding significant assets, a corporate trustee is the professional standard. The ongoing protection it provides outweighs the setup cost. For a full breakdown of the differences and why it matters, see our guide: corporate trustee vs individual trustee for family trusts.

Step 2 — Draft the Trust Deed

The trust deed is the legal document that governs everything: who the trustee is, who the beneficiaries are, how the trust operates, and what happens when it ends. A family trust deed should be prepared by a qualified lawyer or specialist document provider — not sourced from a generic online template.

Key elements of the deed include:

• The name of the trust
• The trustee and settlor details
• The definition of the beneficiary class (as broadly as possible)
• Distribution powers and restrictions
• Investment powers
• The vesting date (Australian trusts must vest within 80 years)

The deed must also be stamped in your state before it takes legal effect. Stamping costs are generally nominal (around $20–$200 depending on the state).

Step 3 — Appoint Beneficiaries

The beneficiary class is defined in the deed. For a discretionary family trust, this typically includes you, your spouse, your children and grandchildren, siblings and their families, and any companies or trusts in which the above hold an interest. Getting this right at the start is critical — adding new beneficiary classes later requires a formal deed variation, which has legal costs and potential stamp duty implications.

Step 4 — Obtain a Tax File Number (TFN) and ABN

Once the trust deed is executed, you need to register the trust with the ATO. This involves:

• Applying for a TFN for the trust via the ATO’s online services
• Applying for an ABN if the trust will be conducting business activities
• Registering for GST if the trust’s annual turnover will exceed $75,000

Step 5 — Open a Trust Bank Account

The trust must have its own bank account — separate from your personal accounts and your trading entity’s accounts. The account must be titled correctly: for example, “John Smith as Trustee for the Smith Family Trust.” Most banks will require a certified copy of the trust deed to open the account.

Step 6 — Transfer Assets Into the Trust

Assets can now be transferred into the trust or acquired by the trust directly. Be aware: transferring existing personal assets into a trust may trigger Capital Gains Tax and stamp duty, depending on the asset type and state. This is why many advisers recommend setting up the trust before acquiring major assets — the trust acquires them directly, avoiding transfer costs.

Costs Involved in Setting Up a Family Trust

Here’s what you can realistically expect to pay:

• Trust deed preparation — $300–$1,500 (depending on complexity and whether a lawyer or specialist provider drafts it)
• Deed stamping — $20–$200 (varies by state)
• Corporate trustee registration — $597 (ASIC registration fee) + $597 annual review fee in subsequent years
• TFN and ABN registration — No government fee (done through ATO online services)
• Bank account setup — Nil to minimal monthly fees
• Accounting and advice — $1,500–$3,000+ for professional setup guidance, including advice on trustee structure, beneficiary class, and tax implications

Total setup cost typically ranges from $2,500–$5,000 for a well-structured family trust with a corporate trustee. Ongoing costs include the annual ASIC fee for the trustee company, accounting and tax return preparation (for both the trust and the trustee company), and any distribution strategy advice.

Common Mistakes to Avoid When Setting Up a Family Trust

• Using a generic trust deed. A poorly drafted deed can limit your ability to add beneficiaries, stream different types of income, or make changes later. Invest in a quality deed from the outset.
• Setting up as an individual trustee. For any business trust, a corporate trustee is almost always worth the extra cost. Individual trustees are personally exposed to trust liabilities and create complexity when the trustee changes.
• Not separating the trust bank account. Running trust funds through personal accounts creates accounting headaches and can create Division 7A issues if the trust distributes to a company beneficiary.
• Waiting too long to set up the structure. Many business owners wait until they’re earning $500,000+ to consider a trust. The reality is that the structure often pays for itself at much lower income levels, especially when income splitting is factored in.
• Forgetting the 30 June distribution deadline. The trustee must document a resolution about how income is distributed before 30 June each year, without exception. See our detailed guide to trust distributions and ATO compliance.

When to Review or Wind Up a Trust

A family trust should be reviewed regularly — at minimum every 3–5 years or when your circumstances change significantly. Key triggers for review include changes in family composition (marriage, divorce, children becoming adults), changes in business structure, significant asset acquisitions, or changes in the tax environment. See the ATO’s trust guidance for current compliance requirements.

Winding up a trust (called “vesting” or “resettling”) involves distributing all trust assets to beneficiaries and closing the structure. This triggers tax consequences — CGT and potentially stamp duty — so it should only be done on professional advice. Most well-structured trusts are designed to run for decades without needing to be wound up.

Advanced Strategy: Family Trust + Bucket Company

Once your trust is generating significant income, the next level of tax planning involves pairing it with a bucket company. By distributing excess income to a company beneficiary at the 25% corporate rate — rather than paying up to 47% at your personal marginal rate — you can generate substantial annual tax savings. The 25% rate applies where the company is a base rate entity, which a bucket company fed by a trading business normally is; where the trust’s income is mainly rent, dividends or capital gains, the company is taxed at 30% instead. We explain this in detail in our family trust and bucket company strategy guide.

Frequently Asked Questions

Can I be the trustee of my own family trust?

Yes — you can act as the individual trustee of your own family trust. However, as noted above, a corporate trustee (a company you control, set up specifically to act as trustee) is the recommended approach for business trusts. It provides cleaner asset protection, easier trustee succession, and clearer separation between your personal affairs and the trust’s activities.

Who can be a beneficiary of a family trust?

The beneficiary class is defined in the trust deed. A typical family trust includes you, your spouse, your children, siblings, and any companies or trusts associated with those individuals. Adult family members in lower tax brackets (low-income spouses, adult children who are studying or are working part-time) are particularly valuable beneficiaries from a tax planning perspective.

Can a family trust own property?

Yes — a family trust can own residential investment property, commercial property, and other real assets. However, owning property in a trust comes with one significant disadvantage: the trust does not qualify for the main residence exemption from Capital Gains Tax. Property is best held in a trust when it is an investment property and when asset protection and income splitting are priorities.

How long does it take to set up a family trust in Australia?

The process typically takes 2–4 weeks from start to finish. Trust deed preparation takes 2–5 business days with a professional provider. Deed stamping can take a few days to a week depending on your state’s revenue office. TFN and ABN registration through the ATO typically takes 5–28 days. Opening a bank account can take 1-5 business days once the deed is available. If you need the trust operational quickly for end-of-financial-year planning, it’s worth engaging a professional who can coordinate all these steps in parallel.

General Advice Warning: The information provided in this article is general in nature and does not constitute personal financial, taxation, or legal advice. It has been prepared without taking into account your personal objectives, financial situation, or needs. Before acting on this information, you should consider its appropriateness having regard to your own circumstances and seek professional advice from a qualified accountant or tax adviser.

Frequently Asked Questions

This article contains general advice only and does not take into account your specific circumstances. Please speak with a qualified accountant or tax adviser before making financial decisions.

• Facebook
• Instagram
• LinkedIn
• YouTube
• TikTok
• X