Last reviewed October 2026
General information only. It isn’t personal advice. Consider speaking with a licensed adviser and registered tax agent about your situation.
To set up a family trust in Australia, you need a trust deed drawn up by a lawyer or accountant, a trustee to run it (usually a company set up for the job), a small amount of money to start it, and a tax file number from the ATO. It typically costs around $2,000 to set up and at least $2,000 a year to run, and it can cost more. Once it’s running, the trustee decides each year which family members receive the income, and they pay the tax at their own rates.
In 2026, though, how to set up a family trust is the second question. The first is whether you should. The 50% capital gains tax discount a trust used to pass to the family is being replaced for growth after 1 July 2027 by inflation indexation and a 30% minimum rate. And a 30% minimum tax on discretionary trusts is proposed from 1 July 2028, in draft law released on 3 September 2026. That’s not law yet, but my view is that I wouldn’t be rushing into a new family trust today unless it’s for a business or asset protection.
What is a family trust?
A family trust (a discretionary trust) is an arrangement where one person or company, the trustee, holds investments or a business for a group of people, the beneficiaries. The trust itself isn’t a separate taxpayer in the usual way. Each year the trustee decides how the income and gains are split among the beneficiaries, and each of them pays tax on their share at their own rate.
That flexibility is why trusts became the most popular wealth building structure in the country. In a year when one partner earned less, more of the income could go to them. And any income the family couldn’t use at low rates could go to a company set up as a beneficiary (a bucket company), where it was taxed at 30% rather than at the 47% top rate (including the 2% Medicare levy).
What gets confused with a family trust?
A few other structures share the name, and they work differently. A unit trust has fixed shares (units), like a company has shares, so the income is split by how many units each person holds rather than by a trustee’s decision. It’s often used when unrelated people buy property together.
A testamentary trust can only be created through a will, so you can’t set one up for yourself while you’re alive. It has its own tax treatment, including for children, and it’s carved out of the proposed 2028 changes. Our estate planning checklist covers how to build one into a will.
A “trust fund” for a child usually isn’t a trust at all. It’s typically a savings account or investment held in a parent’s name for the child. And a family trust election is something different again. It’s a form lodged with the ATO that fixes the family group for some tax rules, like using franking credits (tax credits for company tax already paid) and trust losses, and your accountant will tell you whether you need one.
Who controls a family trust?
The deed sets out four roles, and getting them right matters more than anything else in the set-up.
- The settlor starts the trust by giving it a small amount, often $10, and then has no further role
- The trustee owns the assets on paper, signs everything and makes the yearly decision about who receives the income
- The appointor can remove and replace the trustee, which makes the appointor the person with real control
- The beneficiaries are the people and entities who can receive income, usually defined widely to include family members and companies they own
Most people now use a company as trustee (a corporate trustee) rather than themselves as individuals. It costs more, but it keeps the trust’s assets separate from your own, and when someone leaves or passes away you change a director rather than the name on every asset. The appointor and a successor appointor should be named in the deed, so control passes cleanly if something happens to you.
What are the rules once a family trust is running?
A trust comes with ongoing rules, and missing them is where the tax benefit tends to leak out.
- The trustee has to decide who receives the income before 30 June each year, in writing. Miss it and the trustee can be taxed on the income at 47%, or the deed’s default beneficiaries are taxed on it
- The trust needs its own bank and investment accounts, with no personal spending through them
- Income paid to children under 18 is taxed at penalty rates once it’s above $416 a year, and at the top rate on the whole amount once it’s above $1,307, so streaming to kids rarely works outside a testamentary trust
- Income given to a bucket company but left unpaid in the trust brings in the Division 7A rules, which the ATO’s private company guidance explains, and these often mean a formal loan with yearly repayments
- The trust lodges its own tax return each year, on top of each beneficiary’s
None of this is hard once a routine is in place. But it’s real work every year, and it’s why the running cost matters as much as the set-up cost.
How much does a family trust cost?
Setting up a family trust typically costs around $2,000, covering the deed and registering the trustee company. Running it costs at least $2,000 a year for the trust’s tax return, the company’s return and the yearly ASIC fee, and it can cost more once there’s a bucket company, a property or more beneficiaries involved. If the trust buys property, land tax and stamp duty can be different from owning it personally, which needs checking state by state before anything goes in.
Those costs only make sense when the tax a trust saves is comfortably bigger. I’ve said for a long time that you don’t get a trust when you want to get rich, you get a trust when you are rich, because a trust set up too early costs more to run than it saves. Greg and Fiona, a couple we worked with, had set up a trust on their accountant’s suggestion a few years before the 2026 Budget, ready to receive an inheritance of about $450,000 from Fiona’s mum. Greg earned about $150,000 and Fiona about $60,000 part time.
When we mapped out their plan, Fiona’s rate was modest and wasn’t expected to rise much. Investing a good part of the money in her name, weighted to Australian shares with franked dividends, meant the franking credits covered almost all of the tax, and on their numbers the tax on that portfolio came out at about $500 a year. The trust would have cost them about $2,500 a year to save close to nothing. Over twenty years that’s $50,000 of fees, and invested instead at a 9% gross return, that money would have grown to around $139,000 before tax. The money hadn’t gone into the trust yet, so they decided to wind it up and invest in a simpler way.
What’s changing for family trusts in 2027 and 2028?
Two changes from the 2026-27 Federal Budget hit family trusts, and only one of them is law. The first is law. For growth after 1 July 2027, the 50% capital gains tax discount is replaced by indexation, where the cost base is lifted by inflation and only the real gain is taxed, with a 30% minimum rate. That applies to individuals and trusts alike, so the discount a trust used to pass to the family on long-term investments is going. Our post on the CGT discount changes covers how the transition works.
The second is proposed. Under draft law released for Treasury consultation on 3 September 2026, discretionary trusts would pay a minimum of 30% tax on their income from 1 July 2028. Individual beneficiaries would get a credit for that tax, which is non-refundable, so it only fully helps beneficiaries whose own rate is 30% or more. A company beneficiary would get no credit at all.
That last part is what breaks the bucket company route. On $100 of trust income sent to a bucket company under the draft, the trust pays $30, the company pays another $30 with no credit, and when the remaining $40 is paid out to a shareholder on the top rate, there’s about $9.71 of top-up tax. That’s $69.71 of tax on $100. Under the current rules, the same $100 paid through the company to the same shareholder carries $47 of tax in total, and $30 while it stays in the company. Our post on whether the bucket company is dead works through what that means for business owners.
The draft has three other parts.
- A trustee can elect to fix the beneficiaries and their shares permanently, which takes the trust outside the minimum tax, and that election can only be made in 2028-29
- Testamentary trusts set up under a will to pass on an estate are excluded
- The government has announced rollover relief for three years from 1 July 2027, so a trust can move its assets into another structure without triggering capital gains tax. The draft sets that window as 1 July 2027 to 30 June 2030, but it isn’t legislated yet
Any of this could still change before it passes. Our post on the 2028 family trust changes covers the detail for existing trusts.
What if you already have a family trust?
Plenty of families already have a trust, and the choices for them are different from someone starting fresh. Under the draft law there are broadly three paths, and none of them needs to be taken before the rules are settled.
The first is to keep the trust as it is and accept the 30% minimum tax from 1 July 2028, which can still work where most of the income goes to adult family members on rates above 30% anyway. The second is to make the one-off election in 2028-29, which fixes who gets what share forever, and takes away the flexibility that was the point of the trust. The third is to move the assets out into a company or into your own names during the rollover window the government has announced, which would let you restructure without triggering capital gains tax.
Moving assets outside that window is a sale for tax purposes, so capital gains tax can apply. And the rollover only covers capital gains tax, so stamp duty on property can apply inside the window as well as outside it. That’s why the timing matters, and why it’s worth having your accountant model all three paths before 1 July 2027 so you know your options before the window opens. Our guide to saving tax with investment structures compares where the assets could end up.
When is a family trust still worth it?
There are lots of ways to be right here, and a family trust still earns its place in some situations. The table compares it with the structures most people weigh it against.
| Family trust | Investment company | Your own names | Investment bond | |
|---|---|---|---|---|
| Set-up cost | Around $2,000 | $1,000 to $2,000 | Nothing | Nothing beyond the fund’s fees |
| Yearly cost | $2,000 or more | $1,000 to $3,000 | Nothing | Fees inside the bond, often around 1% |
| Tax on income | The beneficiaries’ rates | 30% | Your marginal rate | Up to 30%, paid inside the bond |
| Tax on gains after 1 July 2027 | Real gain at the beneficiary’s rate, 30% minimum | 30% on the whole gain | Real gain at your rate, 30% minimum | Up to 30% inside the bond |
| Proposed 2028 change | 30% minimum tax, no credit for company beneficiaries | None | None | None |
| Who it often suits | Business owners, asset protection | High earners building long-term investments | Lower earners, simpler situations | High earners who want access before 60 |
For business owners whose profit can flow through a trust, a trust and bucket company can still work under the draft, through the one-off election. A trust that elects to fix its income to a bucket company sits outside the minimum tax, so the profit is taxed once at 30% in the company. It needs to be set up right well before 1 July 2028. My current view is that the bucket company is better owned by you personally than by the trust under the new rules, which is a change from how we’ve usually set it up at Pivot, with the trust owning the company. That’s something to work through with your accountant before the draft becomes law.
For people worried about being sued through their work, a trust’s asset protection is the main reason to have one, and that’s a specialist legal conversation rather than a tax one. For employees on a salary building investments, an investment company or an investment bond (an investment account where tax is paid inside at up to 30%, with no further tax after 10 years) often does the job with lower costs and no exposure to the proposed trust changes, and we’re seeing more people choose a company instead. Our guide to tax-efficient investing compares how each structure taxes a dollar of income.
How do you set up a family trust?
If a trust still makes sense after modelling, the set-up itself is fairly quick, usually a week or two. For most people it runs in this order.
- Model the trust against a company, a bond and your own names with your adviser, using what your investments will look like in ten years, not today
- If you’re using a corporate trustee, register the company with ASIC, which needs each director to have a director ID first
- Have a lawyer or accountant draft the deed, naming the trustee, appointor, successor appointor and beneficiaries, and allowing income and gains to be streamed separately
- The settlor gives the settled sum to the trustee and the deed is signed, and in some states it needs to be stamped, particularly if the trust will buy property
- Apply for a tax file number for the trust, and an ABN if it will run a business
- Open the trust’s bank and investment accounts in the trustee’s name, as trustee for the trust
- Book the first distribution resolution before 30 June, and set a reminder for every year after
Your accountant or registered tax agent handles the registrations and the yearly returns, and a lawyer drafts the deed. The ATO’s trusts guidance covers registering and reporting.
Frequently asked questions
How much does it cost to set up a family trust in Australia?
Typically around $2,000 to set up, covering the deed and a corporate trustee, and at least $2,000 a year to run for the tax returns and the ASIC fee. It can cost more with a bucket company, property or a more complex deed.
Is a family trust worth it in 2026?
For many investors without a business, it’s harder to justify than it was. The 50% capital gains tax discount is going for growth after 1 July 2027, and a 30% minimum tax on discretionary trusts is proposed from 1 July 2028. Trusts can still suit business owners and people who need asset protection.
Can I set up a family trust myself online?
Online providers sell trust deeds, and some people use them. But the deed decides who controls the trust and whether it can stream income the way you’ll need, so most people have a lawyer or accountant draft it. A mistake in the deed is expensive to fix later.
How long does it take to set up a family trust?
Usually a week or two. Registering a corporate trustee can be done in a day once the directors have director IDs, the deed takes a few days to draft and sign, and the tax file number follows.
Can a family trust buy an investment property?
Yes, if the deed allows it. But a loss on a property inside a trust stays in the trust and can’t be passed to the beneficiaries to reduce the tax on their salaries, and in some states land tax on property held in a trust is higher. Both are worth modelling before a property goes in.
What happens if a trust doesn’t distribute income by 30 June?
If the trustee doesn’t resolve who receives the income by 30 June, the trustee can be taxed on it at the top rate of 47%, or the deed’s default beneficiaries may be assessed. That’s why the yearly resolution is the one deadline a trust can’t miss.
How Pivot Wealth helps
We model whether a family trust, a company, a bond or your own names suits your income and the investments you’re building, and lay out what each costs and saves. A lawyer drafts the deed and your registered tax agent sets up and runs the structure, and we work alongside both. If you’d like to talk it through, you can book a 10-minute chat.
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Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.