Can A Trustee Also Be A Beneficiary Of A Discretionary Trust?

If you run a small business (or you’re about to), there’s a good chance you’ve come across the discretionary trust as a way to hold business assets, operate a trading business, or manage profits in a flexible way.

One practical question that often comes up early is whether a trustee can also be a beneficiary of a discretionary trust.

It’s a sensible question. In a typical discretionary trust structure, the trustee controls the trust and makes the decisions, and beneficiaries receive distributions. So it can feel like a “conflict” if the same person sits on both sides of the arrangement.

The short answer is: often yes, a trustee can also be a beneficiary - but whether it’s allowed (and how safely it can be done) depends heavily on the trust deed and on the trustee’s duties under Australian trust law.

Below, we’ll walk you through how this works in a business context, the risks to watch for, and what you should check before you rely on a structure where the trustee is also within the beneficiary class.

What Is A Discretionary Trust (And Who Does What)?

Before we tackle the overlap issue, it helps to quickly map the key roles in a discretionary trust.

The Trustee

The trustee is the legal controller of the trust property and makes decisions about the trust (including who gets paid). The trustee can be:

• an individual (a “personal trustee”), or
• a company (a “corporate trustee”).

In a business setting, many owners prefer a corporate trustee because it can make administration cleaner and can help manage liability risk (though the right structure depends on your circumstances).

The Beneficiaries

Beneficiaries are the people or entities who are eligible to receive trust distributions. In a discretionary trust, beneficiaries usually fall into one or more “classes”, such as:

• family members and their related entities
• companies related to the family group
• sometimes charities (depending on the deed)

The key point is that beneficiaries are not automatically “entitled” to trust income or capital each year. Instead, the trustee has discretion to decide.

The Trust Deed

The trust deed is the core document that sets out the rules of the trust: who the beneficiaries are, what powers the trustee has, and how decisions (like distributions) must be made.

In other words, the deed is the starting point when you’re asking whether the trustee can also be a beneficiary.

In practice, your trust structure may also tie into other business setup decisions (ABN, TFN, business name, company details). If you’re still working out the basics, you may find it helpful to clarify the overall trust requirements that apply when a trust is used to operate a business.

So, Can A Trustee Be A Beneficiary Of A Discretionary Trust In Australia?

In many cases, yes - a trustee can be a beneficiary of a discretionary trust.

However, there are two big “filters” you need to apply before you treat it as safe or straightforward:

• What the trust deed allows (and how it defines the beneficiary class), and
• What trust law requires (especially the trustee’s duties and conflict rules).

1) The Trust Deed Must Allow It

Some discretionary trust deeds expressly include the trustee (or the trustee company) as an eligible beneficiary. Others don’t.

For example:

• If the trustee is a company, the deed might say “the trustee and any company related to the settlor” is included as a beneficiary.
• If the trustee is an individual, the deed might define beneficiaries as “the primary beneficiary and their spouse, children, relatives, and related entities” - which might or might not capture the trustee depending on who the trustee is.

This is why two trusts that look “the same” from the outside can operate very differently once you read the deed.

2) The Trustee Must Still Act Properly (Even If They’re In The Beneficiary Class)

Even where the trust deed allows the trustee to also be a beneficiary, the trustee doesn’t get a free pass.

Trustees generally have duties to:

• act honestly and in good faith
• act in accordance with the trust deed
• manage conflicts between personal interest and trustee duties (unless properly authorised)
• exercise powers for a proper purpose
• keep proper records and accounts

So, while the trustee can sometimes be an eligible beneficiary, how the trustee makes distribution decisions becomes especially important.

Why This Can Be Tricky: Conflicts Of Interest And The Risk Of Improper Distributions

When small business owners ask whether a trustee can be a beneficiary of a discretionary trust, they’re often really asking: can I control the trust and also receive money from it?

This is where the main risk sits - not because it’s automatically prohibited, but because it increases the chance of a conflict of interest and scrutiny over whether the trustee properly exercised their discretion.

Trustee Duties Don’t Disappear Just Because It’s “Your Trust”

It’s common for business owners to be closely connected to a family trust, but legally, a trustee must still comply with the trust deed and apply trustee powers properly.

If a trustee decides to distribute income to themselves (or to a company they control), that decision can be challenged if:

• the deed doesn’t authorise it
• the trustee didn’t follow the deed’s procedures (for example, distribution resolution requirements and timing)
• the trustee acted for an improper purpose
• the trustee failed to consider relevant matters (or took into account irrelevant matters) when exercising their discretion

Disputes Can Become Personal (And Expensive)

In a family business context, trust disputes often flare up during major events like:

• relationship breakdowns
• succession planning and leadership transitions
• sale of a business
• serious illness or death of a key decision-maker

If the trustee is also a beneficiary, the optics (and legal arguments) around “bias” can become a major issue - particularly if other beneficiaries believe they have been unfairly treated.

Corporate Trustee vs Individual Trustee: Does It Change The Answer?

Sometimes using a corporate trustee can reduce practical risk because decisions are made through directors’ resolutions and a clearer paper trail.

But the underlying question remains: the trustee (whether a person or company) must act within the powers in the deed and comply with trustee duties.

If you’re considering a corporate trustee, it’s also worth aligning the trust structure with your broader company governance documents, such as a Company Constitution, especially where multiple people are involved in managing the trustee company.

How Australian Businesses Can Set This Up Safely (A Practical Checklist)

If you want a structure where the trustee can also be a beneficiary, the goal is to set it up in a way that is legally robust and practically workable - especially once your business grows or relationships change.

1) Check The Trust Deed (Don’t Assume)

The deed should be checked for:

• Who is included in the beneficiary class (does it include the trustee by name, category, or implication?)
• Restrictions on distributions to the trustee (some deeds limit or exclude this)
• How trustee decisions must be made (for example, written resolutions by a certain date)
• Any conflict authorisation clauses (some deeds expressly allow the trustee to benefit, subject to conditions)

If the deed is unclear, that’s usually a sign you should get advice before making distributions that could later be challenged.

2) Be Clear On Who Really Controls The Trustee

If the trustee is a company, control usually sits with the directors and shareholders of that company.

In a small business with multiple founders or family members involved, it’s a good idea to document decision-making clearly so trust management doesn’t become a “who controls the controller” problem.

Depending on your structure, a Shareholders Agreement can help set the rules for how the trustee company is run (for example, who can appoint/remove directors, voting thresholds, deadlock processes, and exit arrangements).

3) Keep Clean Records Of Decisions And Distributions

From a risk-management perspective, paperwork matters. Good record-keeping can help demonstrate the trustee acted within power and followed proper process.

In practice, that means:

• trustee resolutions are prepared correctly and on time
• financial records match what was resolved
• minutes/records show how decisions were made (especially where conflicts could be alleged)

This isn’t just about “administration” - it can be crucial evidence if a decision is later questioned.

4) Be Careful With Distributions To Companies (And Get Tax Advice Early)

It’s common for discretionary trusts to distribute income to a company beneficiary as part of a broader business and tax strategy.

However, the right approach (and the paperwork you need) will depend on your circumstances and the tax rules that apply. This article is general information only and isn’t tax advice - it’s a good idea to speak with your accountant or a qualified tax adviser before you implement a distribution strategy.

If money then moves out of the company to individuals, you’ll also want to document that properly (for example, whether it’s salary, a dividend, a loan, or something else).

For instance, if the company is advancing money to a director or shareholder, you’ll often want to understand how that is treated and documented as a Director Loan arrangement.

5) Make Sure Your Business Contracts Match Your Trust Structure

One common issue we see is a mismatch between:

• who is “really” operating the business (for example, a trustee for a trust), and
• what your customer contracts, supplier contracts, leases, and online terms say.

If the trustee is the legal entity running the business, contracts should generally be in the trustee’s name “as trustee for” the trust, so liability and enforcement sit where you expect them to.

This is also why it helps to understand what makes a contract legally binding, particularly when your business has multiple entities and you want to avoid signing documents in the wrong capacity.

6) Don’t Forget The Business-Owner Practicalities (Not Just The Legal Theory)

Even if a structure is legally possible, the “right” approach depends on what you’re trying to achieve.

Ask yourself:

• Do you want flexibility year to year for distributions?
• Will you bring on business partners or investors later?
• Are you planning to sell the business, transfer assets, or hand it over to family?
• Do you need clearer separation between controllers and beneficiaries to reduce dispute risk?

For many business owners, the best outcome is not simply “yes, it’s allowed” - it’s having the structure and documents in place so it stays workable as the business grows.

What Legal Documents Should You Consider If A Trust Is Running Your Business?

A discretionary trust is often just one part of your overall business “legal stack”. If the trustee is also a beneficiary (or closely related to the beneficiary group), it’s even more important to reduce ambiguity and prevent misunderstandings early.

Depending on how your business operates, you may want to consider:

• Trust deed review/amendment documentation: so the beneficiary class, trustee powers, and decision-making procedures are clear and fit your business reality.
• Company governance documents: if you use a corporate trustee, documents like a Company Constitution can help define internal governance.
• Shareholder arrangements: if more than one person owns or controls the trustee company, a Shareholders Agreement can reduce the risk of deadlocks and disputes.
• Customer terms or service agreements: to make sure the correct contracting party is used (the trustee “as trustee for” the trust), and to reduce customer disputes.
• Employment agreements and contractor agreements: to ensure staff are engaged by the correct legal entity and your obligations are clear.
• Privacy documentation: if your trust-run business collects personal information through a website, bookings, or marketing, a Privacy Policy is commonly part of the compliance baseline.

Not every business will need every document above, but having the right core documents in place can make a significant difference when you’re dealing with growth, new stakeholders, or a future business sale.

Key Takeaways

• Yes, in many cases a trustee can also be a beneficiary - the key is whether the trust deed allows it and whether the trustee’s duties are being properly managed.
• Your trust deed is the starting point; you should never assume the trustee is included as a beneficiary without checking how beneficiaries are defined.
• Conflicts of interest are the main risk when the trustee is also a beneficiary, particularly if other beneficiaries may later challenge decisions.
• Good governance and records matter, especially written trustee resolutions and consistent documentation of distributions and transactions.
• Corporate trustee structures can help with clearer decision-making and administration, but they still must operate within the trust deed and trustee duties.
• Your trust structure should align with your business contracts so the correct entity is contracting, holding assets, and taking on liabilities.

If you’d like help setting up or reviewing a discretionary trust structure for your business (including whether the trustee can be a beneficiary under your deed), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.