3 reasons to own a family trust in Australia

You don’t need to be a billionaire to benefit from a family trust. But you do need a reason.

I see plenty of people with a trust that does nothing. And plenty more who should have set one up years ago.

A family trust, or discretionary trust, is a structure that holds investments for your family. The trustee decides each year who receives the income. Here are the three reasons it can be worth it.

1. Flexible income across your family

On the 47% top rate, every dollar of investment income in your name loses almost half to tax.

A trust can distribute income to family members on lower tax rates. A partner who works part time. Adult children at university. In some cases, a company beneficiary taxed at a flat rate.

Each year the trustee can choose again, as your family’s incomes change.

The fine print

• Children under 18 pay penalty rates on most trust income, so it rarely helps to distribute to them
• The ATO is watching distributions to adult children closely. The money must genuinely benefit the person who receives it
• Your salary and RSUs can’t go through a trust. It is for investments you build, not your pay

2. Protecting what you build

Assets held in a trust are not owned by you personally. That can put them out of reach if something goes wrong in your own name.

For a senior exec, that might mean a claim against you as a director or officer. For others it is simply peace of mind.

Protection depends on the trust being set up and run properly. A trust deed from 15 years ago may need a review.

3. Passing wealth to the next generation

A trust doesn’t die. Control of the trust can pass to the next generation without selling assets or triggering capital gains tax.

Paired with a proper will, and sometimes a testamentary trust, it can be a clean way to look after your kids and grandkids.

I cover this in more detail in generational wealth management.

A note on the 2027 CGT changes

Capital gains made by trusts have long received the 50% CGT discount. From 1 July 2027, that discount is replaced by CPI indexation and a 30% minimum tax on real gains, for trusts as well as individuals.

Gains made before July 2027 keep the old treatment. If you are planning a trust structure now, model it under both sets of rules.

When a family trust isn’t worth it

• You have no investments to put in it yet
• Everyone in the family is already on a high tax rate
• You plan to invest mainly through super
• You won’t keep the trust records and tax returns up to date

A trust costs money to set up and to run every year. It should save you more than it costs.

How I use trusts with clients

For many tech execs, a trust becomes useful after they start selling down RSUs or building a portfolio through debt recycling. That is when there is real investment income to share.

I work with your accountant on the setup, then build the trust into your overall plan. See my tax planning and wealth management services, or book a call below.