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Choosing A Business Structure is one of the most important things to think about before you go ahead with any of your plans. In 2025, it’s even more critical that your business structure is aligned with your long‑term goals and strategies. This is because your structure needs to work well with evolving regulatory frameworks and market conditions. For example, you’d need to ask yourself:
- What is my long term plan?
- How much can I afford to do?
- How do I plan to raise capital?
- Who will be joining me?
- What kind of business am I running?
- How complex are my business activities?
- What is the level of risk involved?
- What are my tax obligations?
When you think of a business structure, you might be thinking of a company or a partnership (you can read about this here). But when might you need a trust?
A trust involves managing a business’ assets and distributing its income for someone else’s benefit. It can get pretty tricky and expensive to set up, however it offers a number of advantages for asset protection and tax planning. If you’re considering a trust business structure, this article covers everything you need to know in 2025.
What Is A Trust?
Generally speaking, a trust is a way of holding property for someone else. This means the trustee (the person managing the property) must deal with it in a way that benefits the beneficiary (the person receiving it).
There are usually three main parties involved in a trust:
- Trustee – this is the person or legal entity (for example, a private company) that is responsible for managing the trust in accordance with the terms set out in the deed.
- Beneficiary – this is the person receiving the benefit of the trust, such as income or other advantages.
- Settlor – this is an unrelated third party who signs the trust deed and establishes the trust by providing the initial settlement sum.
In the context of business structures, a trust allows the trustee to manage the business and its assets for the beneficiary’s benefit. The trustee maintains legal ownership and control of the business’ property until it is distributed to one or more beneficiaries. They also have an obligation to act solely in the best interests of the beneficiary.
You may even consider a trust if you’re planning to distribute shares in your business – we’ve written more about this here.
What Types Of Trusts Are There?
There are two main types of trusts you can choose from:
- Discretionary trusts
- Unit trusts
Discretionary Trusts
A discretionary trust is exactly what it sounds like – the appointed trustee has discretion over who receives distributions from the trust. However, their powers are limited by the terms of the trust deed, which you can discuss with your lawyer when setting up your trust structure.
Discretionary trusts are especially common in family businesses looking for flexible income distribution. But what if this isn’t the type of trust you require?
Unit Trusts
Unlike discretionary trusts, unit trusts distribute income and assets to beneficiaries in proportion to the number of units they hold. Each unit represents a specific portion of the trust’s income or property entitlement.
An easy way to understand this is to think of the distributions as similar to shares in a company. For example, if you start a makeup company called Dazzle & Co Pty Ltd and decide to use a unit trust, you might allot 75 units to one beneficiary and 25 units to another, reflecting their respective shares in the income.
| Example Let’s say you’ve started Dazzle & Co Pty Ltd. You want to distribute benefits to your parents, with your mother receiving 75 units and your father 25 units. These units represent the proportion of the company’s income or assets they are entitled to. |
Like any other business structure, a trust comes with its own set of advantages and disadvantages.
Advantages Of A Trust
- Assets are well protected – legal actions against a beneficiary will not directly compromise the trust’s assets as the trustee remains the legal owner.
- Less formality – an explicit intention to create a trust isn’t always necessary; it can often be established by the relationship and conduct of the parties involved.
- Tax planning utility – as each beneficiary is taxed on their individual distributions, the trustee can allocate distributions in a tax-effective manner.
- Estate management – using a trust can help avoid complications associated with bankruptcy or disputes over an estate.
- More flexibility for investment – there is no limit to the number of investors who can contribute to a trust. However, if you open up your trust to public investment, this will be subject to the requirements of the Corporations Act 2001, which remains a key regulatory framework in 2025.
- Enhanced privacy – trusts are not required to disclose financial information to the public, offering a greater level of confidentiality.
Disadvantages Of A Trust
- Complex setup – establishing a valid trust structure requires navigating a number of legal steps and formalities.
- You must satisfy the three certainties (intention, subject matter, and objects), which can be challenging.
- Modifying an established trust can be difficult once it is in place.
- The trustee’s powers are restricted by the trust deed and regulated by legislation such as the Trustee Act 1925.
- If the trustee is an individual and not a company, they may not benefit from limited liability, thereby incurring personal risk for the trust’s debts.
- Losses cannot be distributed through a trust; therefore, any profits may attract higher tax rates as individual beneficiaries are taxed on their distributions.
How Can I Set Up A Trust For My Business?
Now that we’ve covered how a trust business structure works, let’s go through how you’d actually set up a trust. Although the core process remains similar in 2025, it’s essential to check for any state-specific updates when establishing your trust. The process generally looks something like this:
- Select a trustee – this can be either a person or a private company. If you choose a company, the trustee will benefit from limited liability. You can register the company with ASIC using our company set‑up service.
- Have a lawyer draft a professional deed of trust. For assistance, consider our contract review and redraft services to ensure your deed complies with current laws.
- Have the trust settled by a settlor (an unrelated third party) who contributes the initial settlement sum.
- Pay any relevant stamp duty (if applicable).
- Apply for an Australian Business Number (ABN) and Tax File Number (TFN).
- Open a bank account – be sure to deposit the settlement sum first before initiating any business transactions.
Once you’ve established a trust, it’s important to complete your annual administrative tasks. In 2025, this includes ensuring the proper administration of distributions to beneficiaries each financial year and keeping up to date with any changes in tax laws.
You’d also need to do the following:
- Register for GST if your annual GST turnover exceeds $75,000.
- Determine whether your trust deed requires taxes to be paid on distributions.
- Ensure that superannuation contributions are made for any employees, which might also include the trustee.
If you’re set on establishing a trust for your business, ASIC provides detailed guidance about your obligations here.
What Is In A Trust Deed?
A trust deed should generally include the following:
- The names of the beneficiaries
- The details of the trustee(s)
- The entitlements of the beneficiaries (including specific amounts or percentages)
- The method of distribution or payment
- The object or purpose of the trust
- The signature(s) of the trustee(s)
- An exit clause or provisions for cancelling the trust
It’s important to note that a trust deed must be drafted by a lawyer to ensure it meets all legal requirements specific to your state or territory.
In 2025, as businesses become increasingly digital and asset classes expand, it’s essential to regularly review your trust deed and administrative processes to ensure they remain compliant with the latest laws. Modern considerations such as managing digital assets, cybersecurity, and data protection are now part of best practice in trust management.
Anything Else?
If you’re not sure whether a trust is the right structure for your business, you might also consider these alternatives:
- Sole trader (learn more here)
- Partnership
- Company (find out the differences)
Each structure has its own advantages and disadvantages, so after carefully considering your personal circumstances and unique business goals, it’s a good idea to explore each option in detail.
Otherwise, if you’re set on pursuing a trust business structure, it’d be best to speak to a lawyer about setting one up. This way, you can ensure you comply with the relevant laws and adjust your deed if needed – especially since changes to business and taxation laws can impact trusts as early as 2025.
Sprintlaw has a team of lawyers who can help you navigate these complex legal matters. For a free, no‐obligation chat, contact us at team@sprintlaw.com.au or call 1800 730 617.
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