Trusts for asset protection and estate planning

Who it is for

• Families looking at a discretionary (family) trust to hold investments or run a business
• Business partners or investors who want fixed entitlements through a unit trust
• People planning their estate who want to understand testamentary trusts created through a will
• Existing trustees who need help with the trust deed, year-end resolutions and the annual trust tax return
• SMSF trustees, since a self-managed super fund is itself a type of trust

Finding the right trust for you

Trusts are not separate legal entities, and each type works differently. Whether you are considering asset protection or estate planning, Ross Accounting provides the financial advice, and through our in-house solicitor the legal advice, to work out which trust is most suitable for you.

According to business.gov.au, trusts can be expensive and complex to establish and run. They need a formal trust deed, the trustee has formal administrative tasks every year, and a trust can be hard to change or dissolve once it is in place. That is why the choice of trust type, trustee and beneficiaries is worth getting right at the start. Our guide to choosing a business structure compares trusts with sole traders, partnerships and companies.

How a trust works for tax

The ATO explains that, in legal terms, a trust is a relationship rather than a legal entity. For tax administration, though, a trust is treated as a taxpayer entity, and the trustee manages its tax affairs: registering the trust, lodging its tax returns and paying some of its tax liabilities.

• Trustee: one or more people, or a company (a corporate trustee). Under trust law the trustee is personally liable for the trust's debts, with a right to be indemnified from trust property for liabilities properly incurred, unless there has been a breach of trust.
• Beneficiaries: a person, a company or the trustee of another trust. The trustee can also be a beneficiary, but not the only beneficiary unless there is more than one trustee.
• Who pays the tax: generally, beneficiaries are taxed on their share of the trust's net income, whether or not the money is actually paid to them.
• The deed: where a trust is set up by deed (for a deceased estate, the will), the trustee must deal with trust property as the deed sets out, as well as follow state or territory trust law and tax law.

Our guide to how trusts work walks through these roles in more detail.

How the ATO describes common trust types

Each trust tax return identifies the type of trust. The ATO's instructions for the Trust tax return 2026 (the 2025–26 income year) describe the main types in tax terms:

A trust that is also a charity is flagged separately on the return. The ATO also describes a self-managed super fund as a kind of trust whose only purpose is to provide retirement benefits for its members; see our SMSF service. Which type suits a particular family, business or estate depends on the circumstances, so it is worth discussing before anything is drafted.

Setting up and registering a trust

A trust generally starts with a trust deed that sets out who the trustee and beneficiaries are and how the trust operates. Once it exists, the ATO says the trust should have its own tax file number (TFN), which the trustee uses when lodging the trust's returns. If the trust carries on an enterprise, it is also entitled to an Australian business number (ABN).

The trustee registers for the TFN and ABN in their capacity as trustee, separately from any registrations they hold personally or for other roles. When the ABN is registered, the trust's name automatically has "The Trustee for" added in front of it. Trusts can register through the government's Business Registration Service.

If the trust employs staff, the trustee also takes on employer obligations, including PAYG withholding, super for eligible employees, and fringe benefits tax reporting and payment. Our company formation service can set up a company to act as corporate trustee, and our legal service covers the documents.

Trustee resolutions by 30 June

For a trust where the trustee decides who receives income, the year-end resolution is one of the most important tasks. According to the ATO, a resolution making beneficiaries entitled to trust income for a year only counts for tax if it is made by the end of that income year, 30 June, or by an earlier date if the trust deed requires one.

• Appointing capital gains out of trust capital to make beneficiaries specifically entitled must be done within 2 months after year end, by 31 August.
• Streaming franked dividends or capital gains needs a written record in the trust's records: by 30 June for franked dividends and by 31 August for capital gains.
• There is no standard ATO format, because deeds differ, but the ATO notes a written record is better evidence and avoids later disputes.
• Before resolving, the ATO suggests checking the complete deed and any amendments, that the intended beneficiaries are within the eligible class, that the trust has not vested, and whether a family trust election is in force.

If a resolution is not effective, default beneficiaries or the trustee may be assessed instead, and a trustee may be taxed at the top rate. Our trustee resolutions guide explains the checklist step by step.

For the 2026–27 income year, distribution resolutions generally need to be made by 30 June 2027, or earlier if the trust deed says so.

The annual trust tax return and closely held trusts

The ATO requires the trustee to lodge a trust tax return each year, regardless of how much net income the trust has, unless the ATO advises that a return is not needed. Beneficiaries then include their share of the trust's net income in their own returns. Trusts themselves do not pay PAYG instalments, but beneficiaries may need to pay instalments on their share of the trust's instalment income.

Closely held trusts, which include family trusts, have extra rules. The trustee must withhold tax from payments to beneficiaries who have not quoted their TFN to the trust. A change that is now law also applies from 1 July 2026: trustees of closely held trusts no longer lodge quarterly beneficiary TFN reports, and instead report beneficiary TFNs in the statement of distribution in the trust tax return, starting with the 2027 return. The last quarterly report, for April to June 2026, was due by 31 July 2026.

Under the ATO's registered agent lodgment program, 2025–26 trust returns lodged through a registered tax agent that are not required to be lodged earlier are due by 15 May 2027, with a concession to 5 June 2027 provided any payment required is also made by then. Some trusts have earlier dates, such as 31 October 2026 where one or more prior year returns were outstanding at 30 June 2026, or 31 March 2027 where the latest return resulted in a tax liability of $20,000 or more. Due dates for 2026–27 returns have not yet been published. Our trust tax return service covers the full timetable.

Family trust elections

A trust is not a "family trust" for tax purposes just because the name says so. The ATO explains that the trustee has to make a family trust election, which can give access to concessions such as more favourable trust loss rules and the ability to meet the holding period rules for franking credits.

The trade-off is family trust distribution tax. Once an election is in force, distributions or entitlements given to people outside the family group of the individual named in the election attract this tax, which the ATO's Trust tax return 2026 instructions set at 47% for 2025–26. A trust can only make one family trust election, and it can be revoked or varied only in limited cases, so it is a decision to make with advice.

Announced, not yet law: minimum tax on discretionary trusts

In the 2026–27 Federal Budget on 12 May 2026, the Government announced a 30% minimum tax on discretionary trusts from 1 July 2028. The ATO states that this measure is not yet law.

As announced, the minimum tax would apply at the trustee level, and non-corporate beneficiaries presently entitled to a share of the trust's net income could claim a non-refundable credit for the tax paid by the trustee. The Government also announced a time-limited (3-year) restructure rollover, proposed to be available from 1 July 2027, to help transfer assets out of discretionary trusts to entities that are not discretionary trusts. Exposure draft legislation was open for consultation from 3 to 18 September 2026.

Details may change before any law is passed. If you have a discretionary trust, we can review where it fits once the final rules are known; see our tax advice and planning service.

How it works

1. 1
   Talk it through

   We discuss what you want the trust to achieve, such as asset protection, investment or estate planning, and whether a trust is the right structure at all.

2. 2
   Choose the structure

   We work through the trust type, trustee (individual or company) and beneficiaries, with legal input from our in-house solicitor.

3. 3
   Set it up

   The trust deed is put in place, a corporate trustee formed if needed, and the TFN, ABN and any GST registrations arranged.

4. 4
   Run it each year

   We help with year-end resolutions, financial statements and the annual trust tax return, plus the beneficiaries' own returns.

What to bring

• A complete copy of the trust deed, including every amendment
• Details of the trustee (or the trustee company) and the beneficiaries, including their TFNs
• Any family trust or interposed entity election already made
• Prior year trustee resolutions, financial statements and trust tax returns
• Bank statements and records of the trust's income, expenses and assets