Business Structure: Chapter 6 - Family Trusts
- Future Accounting
- 6 minutes ago
- 7 min read
Written by: Melissa Cunliffe (CA)
One of Australia's most misunderstood business structures
"A trust isn't a magic tax structure. It's a legal relationship designed to hold and manage assets for the benefit of others."
Few business structures create more confusion than the family trust.
Some people believe everyone should have one.
Others believe they're only useful for wealthy families.
I've even heard people say:
"My mate told me I need a trust."
Whenever I hear that, my first question is always the same.
"Why?"
More often than not, the answer is silence.
That's because many people establish trusts without first understanding what job the trust is supposed to perform.
Like every structure we've discussed, a trust is simply a tool.
The important question isn't whether you have one.
The important question is whether it's performing the role it was designed to perform.
What is a family trust?
Let's keep this simple.
A family trust is not a company.
It doesn't have shareholders.
It doesn't belong to one person.
Instead, a trust is a legal relationship.
The trustee holds and manages assets for the benefit of the beneficiaries in accordance with the trust deed.
The trust deed is the rule book.
It determines how the trust operates.
Who has control.
Who may benefit.
How decisions are made.
Every trust should operate according to that document.
That is why reviewing the trust deed from time to time is so important.
Understanding the key players
Many people find trusts confusing because several different people can be involved.
Let's simplify the roles.
The Trustee
Think of the trustee as the manager.
The trustee is responsible for administering the trust and making decisions in accordance with the trust deed.
The trustee may be an individual or, more commonly, a company acting as a corporate trustee.
The Beneficiaries
The beneficiaries are the people or entities that may benefit from the trust.
Depending on the trust deed, this may include family members, companies or other entities.
Importantly, being a beneficiary does not necessarily mean someone is automatically entitled to receive income each year.
The Appointor
Many family trusts also have an appointor.
Without becoming overly technical, the appointor generally has significant powers relating to the appointment or removal of the trustee.
In many respects, this can be one of the most important roles within the trust structure.
It should never be overlooked.
Future Prosperity Insight
Many people think the trustee owns the trust assets. They don't. The trustee controls and manages the assets in accordance with the trust deed.
Why are family trusts so popular?
Family trusts have remained popular for decades because they offer a unique combination of flexibility and long-term planning opportunities.
When used appropriately, they can support:
family wealth creation
succession planning
investment ownership
asset protection strategies
long-term flexibility.
Notice something.
Only one of those relates directly to tax.
That isn't accidental.
One of the biggest mistakes business owners make is believing trusts exist primarily to save tax.
In reality, their long-term value often lies elsewhere.
Flexibility
One of the greatest strengths of a discretionary family trust is flexibility.
Subject to the trust deed and the law, trustees generally have discretion regarding how trust income is distributed among eligible beneficiaries.
That flexibility has historically made trusts attractive for many family groups.
However, flexibility should never be confused with certainty.
Trustees must always exercise their responsibilities properly and in accordance with the trust deed and current legislation.
Long-term asset ownership
One of the conversations I have regularly with clients is this:
"Who should own the next asset?"
Notice I didn't ask:
"What should we buy?"
Ownership matters.
Sometimes considerably more than people realise.
Many families use trusts to hold long-term assets such as:
commercial property
investment properties
share portfolios
family investments.
The reason isn't simply taxation.
It's about creating a structure that can continue supporting the family for many years to come.
From Melissa's Desk
One of the most valuable questions you can ask before buying any major asset is simply:
"Who should own this?"
That conversation often creates opportunities that can never be recreated after settlement.
I've seen clients spend years trying to unwind ownership decisions that could have been avoided with a one-hour conversation before signing the contract.
Trusts and business operations
Historically, many businesses have been operated directly through discretionary family trusts.
For many families, that structure has worked exceptionally well.
However, as businesses mature, it is worth asking whether the trust is still performing the role it was originally established to perform.
Sometimes the answer is yes.
Sometimes the answer is no.
Sometimes the trust continues owning assets while a company becomes the trading entity.
Every situation is different.
That's why reviews matter.
The proposed trust taxation reforms
One of the biggest reasons I believe Business Structure Reviews are becoming increasingly important is the proposed changes to the taxation of discretionary trusts.
At the time of writing, the Government has announced significant reforms that may fundamentally change the way many family groups think about their structures.
While the final legislation and practical application may continue to evolve, the proposals reinforce one very important principle.
Business structures should never be reviewed only when something goes wrong.
They should also be reviewed when the law changes.
What could this mean?
For many years, discretionary trusts have often been used as trading entities.
Depending on how the proposed reforms ultimately operate, some business owners may consider whether:
the trust should continue operating the business;
the trust should instead own shares in a trading company;
investment assets should remain within the trust;
the overall business group should be restructured.
Importantly, this doesn't mean trusts have become "bad" structures.
Far from it.
It simply means their role may evolve.
That's exactly what good planning is about.
Future Prosperity Insight
Legislation changes. Good planning adapts.
Trusts are not for everyone
One of the biggest myths I hear is:
"Every business should have a trust."
I don't agree.
Trusts can be incredibly effective.
They can also introduce additional administration and complexity.
If the trust doesn't have a clear purpose, then it's worth asking why it exists.
Every entity within a business group should have a job.
If it isn't performing one, it may be time to review the structure.
A practical example
Let's meet Emily and Tom.
Ten years ago, they established a family trust to operate their growing business.
At the time, the trust suited their objectives perfectly.
Today, their circumstances have changed.
The business has expanded significantly.
They own commercial property.
Their children are beginning to show an interest in joining the business.
The proposed trust taxation reforms have also prompted them to ask new questions.
Instead of assuming the existing structure is still appropriate, they arrange a Business Structure Review.
Following the review, they decide to retain the trust as the family's long-term investment vehicle while considering whether the trading business should operate through a company owned by the trust.
Nothing changed because the original structure was wrong.
Everything changed because the business had evolved.
Corporate trustees
Throughout this guide you've probably noticed I've mentioned corporate trustees several times.
That's because they are commonly used with discretionary family trusts.
Rather than individuals acting as trustee, a company performs that role.
Without becoming overly technical, corporate trustees can offer practical advantages, including:
continuity when individuals change;
simpler administration over time;
clearer separation between personal and trust affairs;
greater flexibility for succession planning.
Again, this isn't the right solution for every trust.
But it's certainly a conversation worth having.
Preserve • Protect • Prosper
Preserve
Review your trust deed regularly.
Legislation changes.
Families change.
Your trust should continue supporting both.
Protect
Ensure your trust is performing the role it was established to perform.
Protect long-term family wealth by reviewing ownership before major investments are made.
Prosper
Trusts remain one of the most flexible long-term planning structures available—but only when they're regularly reviewed and used for the right purpose.
Key Takeaways
A trust is a legal relationship, not a separate legal entity like a company.
The trust deed is one of the most important documents governing how the trust operates.
Trusts are about much more than taxation—they support flexibility, succession and long-term wealth planning.
Proposed legislative changes reinforce the importance of regular Business Structure Reviews.
Every trust should have a clearly defined purpose.
Ask Yourself
Why was my trust originally established?
Is it still performing that role today?
Have I reviewed my trust deed or overall structure since the proposed legislative changes were announced?
Common Mistake
Creating a trust because someone said you should have one—without understanding what role it is supposed to perform.
Every structure should exist for a reason.
If you can't clearly explain that reason, it's probably time for a review.
Planning Opportunity
If you operate your business through a discretionary family trust, now is an excellent time to schedule a Business Structure Review.
Not because every trust needs changing.
But because every trust deserves to be reviewed in light of your current circumstances, your long-term goals and the evolving legislative landscape.
3 P's Action Step
Locate your trust deed.
If you don't know where it is, or you haven't looked at it in years, make a note to discuss it with your adviser.
One of the simplest ways to protect your family's future is to understand the document that governs one of your most important structures.
Ready for a Trust Review?
If you operate through a family trust, now is the perfect time to review whether it's still supporting your business, wealth and family goals.
Book a Business Structure Review with Future Prosperity Accounting and gain clarity on whether your current structure remains fit for purpose.
Disclaimer
This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.
Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder
Liability limited by a scheme approved under professional standards legislation.
