How To Set Up A Trust In Australia

Many Australian small businesses use a trust as part of their structure to protect assets, manage tax efficiently and plan for growth.

If you’re weighing up whether a trust is right for your venture, the good news is you can set one up with a clear plan and the right documents - and it doesn’t have to be overwhelming.

In this guide, we’ll walk you through what a trust is, the main types used by small businesses, a step‑by‑step setup process, and the key legal documents and ongoing compliance you’ll need to have in place.

What Is A Trust (And Why Do Small Businesses Use One)?

A trust is a legal relationship where one party (the trustee) holds and manages property or income for the benefit of others (the beneficiaries), according to a written instrument called a trust deed.

For small businesses, trusts are commonly used to separate valuable assets from trading risk, provide flexibility in distributing profits to family members or investors, and support succession planning.

Unlike a company, a trust isn’t a separate legal entity by default - it’s the trustee (often an individual or a company) that enters into contracts and is legally responsible for the trust’s obligations. The trust deed sets the rules: who benefits, how decisions are made, what the trustee can and can’t do, and how income/capital can be distributed.

Which Trust Structure Is Right For My Business?

Choosing the right trust starts with your goals. Here are the most common trust types for Australian small businesses:

• Discretionary (Family) Trust: The trustee has discretion over who among a defined class of beneficiaries receives income or capital and in what proportions. Popular for family-owned businesses due to distribution flexibility.
• Unit Trust: Beneficiaries hold fixed “units,” similar to shares. Income and capital are typically distributed in proportion to unit holdings. Common where unrelated investors pool funds or where a fixed split is required. If you go down this path, consider a Unitholders Agreement to set clear rules among unit holders outside the trust deed.
• Hybrid Trust: Combines features of discretionary and unit trusts. May be suitable for specific investment or commercial scenarios, but the deed must be carefully drafted to avoid tax or control issues.

In many cases, businesses use a corporate trustee (a company) to act as trustee instead of an individual. We explain why that matters below.

Step-By-Step: How To Set Up A Trust In Australia

1) Clarify Your Commercial and Tax Objectives

Before you draft anything, define why you’re establishing a trust. Are you looking for asset protection, profit distribution flexibility, investor participation, or succession planning? Your goals determine whether a discretionary, unit or hybrid trust makes sense - and what your deed should say.

2) Choose Your Trustee (Individual vs Corporate)

The trustee runs the trust, so choose carefully. An individual trustee can be simpler to start with, but it can expose personal assets to risk. Many founders appoint a company as trustee because it creates administrative separation and clearer succession - and if you’re appointing a company, you’ll need to set it up and meet the Australian resident director requirements.

If you don’t already have one, you can arrange a dedicated trustee entity through a Company Set Up service, ensuring the trustee company has an appropriate constitution and is separate from any trading company.

3) Appoint the Settlor and Define Key Roles

A trust is “settled” when a third party (the settlor) makes a nominal gift to the trustee and signs the deed. The settlor should be an independent person, not a beneficiary or the intended trustee. Understanding the practical and legal considerations of this role can help you avoid downstream issues - see more about the role of a settlor.

Confirm who the beneficiaries are (for a discretionary trust, this may be a class of family members or related entities; for a unit trust, specific unit holders). If your deed allows, you may also specify an appointor (or principal) who can remove and appoint the trustee - a powerful control lever that should be planned carefully.

4) Draft a Tailored Trust Deed

The trust deed is the backbone of your structure. It should set out the trustee’s powers and duties, who can benefit and how distributions work, and rules for adding/removing beneficiaries, issuing units (for unit trusts), decision-making, and winding up the trust.

Because the deed is a formal instrument, it’s executed as a deed rather than a simple contract. If you’re new to deeds, it helps to understand what a deed is and how execution works, including witnessing and dating. Getting this right at the start prevents complications down the track.

5) Settle the Trust (Execute and Fund)

Once the deed is finalised, the settlor pays the settlement sum to the trustee, and all required parties sign and date the deed properly. Check whether your state or territory requires the deed to be stamped or lodged with the revenue office - duty requirements differ across jurisdictions and may change over time.

6) Apply For TFN, ABN And (If Required) GST

If the trust will run a business or hold investments, it usually needs its own tax file number (TFN) and may need an Australian Business Number (ABN). If your turnover will meet the threshold, you’ll also need to register for GST. For a practical overview of identifiers and when they’re needed, see trust requirements in Australia regarding TFN, ABN and related registrations.

7) Open a Dedicated Trust Bank Account

Open a bank account in the name of the trustee “as trustee for” the trust. Keep trust funds and records separate. This is essential for showing that the trustee is acting for the trust, not personally.

8) Put Your Commercial Contracts And Policies In Place

If the trust is operating a business, you’ll need the same foundational contracts and policies as any trading entity: customer terms, supplier agreements, privacy compliance and employment documentation. We set out the most common documents below.

9) Keep Proper Trust Records And Annual Resolutions

Trusts are document-driven. Keep minutes of trustee decisions, maintain a register of units (for unit trusts), and ensure annual distribution resolutions are made on time (typically before the end of the financial year) to avoid default tax outcomes.

Should I Use A Corporate Trustee?

Many small businesses opt for a corporate trustee (a company) to act as trustee of the trust. Here’s why:

• Administrative separation: The company, not you personally, is on contracts as trustee. This helps keep records and risk separate from your personal affairs.
• Succession: Ownership and control can transition via director/shareholder changes in the trustee company without changing the trust itself.
• Perception and clarity: Third parties often find it clearer to contract with a corporate trustee, especially where there’s more than one individual involved.

You’ll need at least one Australian resident director for the trustee company - plan for continuity and compliance with the resident director requirements. If you’re combining a trust with a separate trading company (discussed below), you’ll be dealing with two companies and a trust - each with distinct roles and documents.

What Legal Documents Will I Need?

The trust deed is just the start. If your trust will run a business (or hold shares in a trading company), you’ll typically want to have the following documents in place:

• Trust Deed: Sets the rules for the trust, trustee powers, beneficiaries, distributions, appointor role and winding up.
• Unitholders Agreement (for unit trusts): Complements the trust deed by setting out decision-making, transfers, exit events and dispute resolution between unit holders - a Unitholders Agreement helps prevent disagreements from turning into stalemates.
• Customer Terms and Conditions: If the trust is selling goods or services, clear customer terms manage payment, delivery, refunds and liability.
• Supplier or Contractor Agreements: Keep supply chains reliable and allocate risk appropriately, especially if you’re relying on key suppliers.
• Privacy Policy: If you collect personal information (almost every business does), publish a compliant Privacy Policy and follow the Privacy Act in your practices.
• Employment Contracts and Policies: If you’re hiring staff, use a compliant Employment Contract and key workplace policies from day one.
• IP Protection: Protect your brand name and logo with a registered trade mark, and document ownership of any intellectual property created for the business.
• Deed of Variation: If you need to update trust rules later (and the deed allows it), do so via a properly executed Deed of Variation to keep the trust compliant with its own terms.

Not every trust‑run business will need every document on day one, but most will need several of these. It’s best to prioritise the documents that address your immediate risks: trading terms, privacy, employment, and IP.

How Do Trusts Work With Companies (Trust + Company Structures)?

Two common configurations for small business are:

• Trading trust with corporate trustee: The trust carries on the business. A company acts as the trustee and signs contracts “as trustee for” the trust. Profits are distributed to beneficiaries in line with the deed.
• Holding trust + operating company: The trust holds shares in an operating company, which runs the day-to-day business. This can ring‑fence trading risk in the company while the trust provides distribution flexibility at the shareholder level.

If your trust owns shares in a company, make sure you’ve planned the ownership and control arrangements clearly. It’s common to use a trust to beneficially hold shares, but you’ll still need to manage the company side properly - including constitutions and, where there are multiple founders, a Shareholders Agreement in the company.

If you haven’t incorporated yet, you can get your operating entity sorted with a Company Set Up and then document how the trust and company interact (dividends, funding, IP ownership, intercompany arrangements and distributions).

What Ongoing Compliance Should I Plan For?

Trusts aren’t a set‑and‑forget structure. Plan for these ongoing requirements:

• Tax and registrations: File returns and activity statements on time, maintain your TFN/ABN details, and register for GST if required.
• Trustee decisions and minutes: Keep clear records of trustee resolutions, including annual distribution resolutions before year‑end.
• Unit registers and transfers (unit trusts): Maintain unit registers, observe pre-emption or transfer rules in your trust deed/Unitholders Agreement, and document transfers properly.
• Contract housekeeping: Review key contracts annually (customer terms, suppliers, employment). Update policies like your Privacy Policy as laws change.
• Deed updates: If your trust deed allows amendments, document changes with a Deed of Variation. Always check your deed’s amendment power before making changes.
• Corporate trustee compliance: If using a company as trustee, maintain ASIC filings, director records and any required registers.

Good record‑keeping and timely resolutions are essential to preserve the trust’s integrity and the intended tax outcomes.

Common Questions About Setting Up A Trust

Is a “living trust” used in Australia?

In Australia, when people say “living trust” they’re usually referring to an inter vivos trust (created during your lifetime), which is how most discretionary and unit trusts are set up. Testamentary trusts, by contrast, arise under a will after death. For small businesses, discretionary and unit trusts are the typical “living” trust options.

Can a trust run a business directly?

Yes. A trust can operate a business in its own right (usually through a corporate trustee), or it can hold shares in a trading company. Which option suits you depends on risk, funding, investor needs and how you want profits distributed.

Do I need a business name?

If the trustee is trading under a name other than its own legal name, you’ll need to register a business name. For example, if “ABC Pty Ltd as trustee for The Blue Trust” is trading as “Blue Studio”, the business name “Blue Studio” should be registered.

What about stamp duty on the trust deed?

Duty rules vary by state/territory and can change. Some jurisdictions require stamping of trust deeds or charge duty in specific circumstances. Always check the current position with your state or territory revenue office when you execute the deed.

Can I change the deed later?

Often yes, if the deed includes an amendment power. Changes must be made via the method set out in the deed (typically by deed), and in some cases, duty or tax consequences can arise. A properly drafted Deed of Variation and careful planning help avoid missteps.

Key Takeaways

• Setting up a trust in Australia is a legal process built around a clear, well‑drafted trust deed and careful choice of trustee and beneficiaries.
• Discretionary trusts suit many family businesses for distribution flexibility; unit trusts work well when investors are unrelated or fixed proportions are required.
• A corporate trustee is common for asset protection, clarity and succession - make sure you meet the resident director requirements and keep ASIC records up to date.
• Get the fundamentals right: execute the deed properly as a deed, settle the trust, arrange TFN/ABN (and GST if needed), and open a dedicated bank account. See the overview of trust requirements for identifiers.
• If you’re trading, put core documents in place early - customer terms, supplier contracts, a compliant Privacy Policy, employment agreements and trade mark protection.
• Maintain good governance: annual distribution resolutions, trust minutes, contract reviews and, if needed, updates via a Deed of Variation.

If you’d like a consultation on setting up a trust for your small business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.