Setting Up a Trust Fund in Australia: A Comprehensive Guide

Why Set Up a Trust Fund?

Before you set up a trust fund, it is important to be clear about your reasons. Are you:

• Looking to protect family assets?

• Providing for children or grandchildren?

• Holding business assets?

• Managing investments?

  
  

Trusts are versatile and can be tailored to suit your specific needs. For instance, many families use discretionary trusts (often called family trusts) to flexibly distribute income among beneficiaries. On the other hand, investors might prefer unit trusts to share profits according to fixed ownership units.

Understanding your goals will help you select the right type of trust and structure it effectively.

Choosing the Right Type of Trust in Australia

Different trusts serve different purposes and have unique tax implications. Here are the main types:

• Discretionary Trusts: These are the most common in Australia. Trustees have the flexibility to decide how income and capital are shared. This option is ideal for families and small businesses wanting control over distributions.

  
  

• Unit Trusts: Beneficiaries (unit holders) own fixed portions (units) of the trust. Income and capital are distributed according to these shares. This structure is suitable for business partnerships and investors.

  
  

• Hybrid Trusts: These trusts combine features of discretionary and unit trusts. Some income is distributed at trustee discretion, while other income follows fixed unit shares.

  
  

• Testamentary Trusts: These are created through a will after someone passes away and are often used to provide for children or vulnerable beneficiaries.

  
  

• Special Disability Trusts: Designed to support individuals with disabilities, these trusts protect assets while ensuring ongoing care and financial assistance.

  
  

Your choice should align with your family or business goals and tax planning needs.

Roles and Responsibilities of Trustees

The trustee manages the trust fund and its assets. Choosing the right trustee is crucial, as trustees have legal responsibilities to:

• Act honestly and in good faith.

• Manage the trust according to the trust deed.

• Protect beneficiaries’ interests.

  
  

The trustee can be an individual, a group of people, or a corporate entity. In Australia, trustees must keep clear records, avoid conflicts of interest, and follow the terms set out in the trust deed. Failure to meet these duties can lead to removal or legal action.

How to Draft a Trust Deed: DIY or Professional Help?

You can create a trust deed by using a DIY template or by hiring a professional. While DIY templates may seem cheaper upfront, they often miss important details needed for legal compliance and flexibility. Mistakes or unclear wording can lead to tax issues or disputes among beneficiaries later on.

On the other hand, professional help ensures your trust deed is tailored to your specific needs and fully complies with Australian laws. At HelloLedger, we provide expert trust deed drafting services designed to suit your situation and give you peace of mind.

Cost of Setting Up a Trust Deed

The cost of setting up a trust deed varies depending on the method you choose. DIY templates generally cost between $50 and $150, which makes them attractive for simple trusts. However, professional services typically range from $300 to $1,500, depending on the trust’s complexity. Although more expensive, professional setup helps avoid costly legal or tax problems later on.

Settle the Trust Fund

After the trust deed is drafted and signed, the trust must be formally settled. This involves the settlor — usually someone who is not a trustee or beneficiary — making the initial contribution to the trust, typically a small amount like $10. This step officially establishes the trust. Once settled, the trustee gains full control to manage and invest the trust’s assets in line with the terms set out in the trust deed.

Register the Trust for Tax Purposes

After setting up the trust, it is essential to register it with the Australian Taxation Office (ATO). You will need to apply for a Tax File Number (TFN) for the trust. If applicable, also register for GST (Goods and Services Tax). Understanding the tax obligations of your trust is vital because trusts typically don’t pay tax. Instead, the income is passed through to beneficiaries, who include it in their tax returns.

Trustees must also make annual trust resolutions to decide how income is distributed. Failing to comply with these tax rules can result in penalties or higher tax rates.

Open a Bank Account for the Trust

To keep the trust’s finances separate from personal or business accounts, it is important to open a dedicated bank account in the trust’s name. You will need your trust deed, TFN, and identification documents to set this up. Having a separate account ensures clear tracking of income and expenses, which is essential for good trust management and compliance.

Manage Your Trust Properly

Running a trust is not just about setting it up; ongoing management is essential. Trustees should maintain accurate records of all transactions and decisions. Each year, trustees need to pass a trust resolution that outlines how income will be distributed to beneficiaries. This protects the trust’s tax status and prevents the ATO from taxing undistributed income at the highest rate.

Additionally, it is important to regularly review your trust deed and update it if your family or business circumstances change, provided your deed allows amendments.

Professional Help for Setting Up Your Trust Fund

It is crucial to proceed cautiously when establishing a trust fund in Australia. While using DIY trust deed templates may seem straightforward and inexpensive, they frequently overlook key details that can result in difficulties later on.

At HelloLedger, we offer complete trust setup and management services that combine legal expertise with tax advice. Our team ensures your trust deed fits your needs, adheres to Australian laws, and is set up in the best way for tax efficiency. We also assist with managing your trust over time, including important decisions and tax reporting. This way, you can avoid fines and maximize the benefits from your trust.

Trusts are an excellent choice for protecting your assets, managing investments, and planning for your family’s future, but only when done correctly. With HelloLedger, you can be confident that everything is handled clearly and professionally.

Ready to get started? Book your free discovery call today and let us help you set up a trust fund that works for you now and in the years ahead.