The 7 Types of Trusts in Australia: What You Should Know
Trusts are a widely used legal structure in Australia, popular for investment planning, protecting family wealth, and managing business assets. One key feature when establishing a trust is choosing whether to appoint a corporate trustee. This decision can improve asset protection, reduce personal liability, and ensure clearer distribution control.
But not all trusts are the same — and choosing the right one depends on your goals. Whether you’re managing family finances, investing with others, or planning for the future, it’s essential to understand the types of trusts available in Australia.
Below, we break down the seven most common types of trusts to help you decide which structure suits your needs.
What Is a Trust?
A trust is a legal arrangement where a person (the settlor) transfers assets to a trustee, who manages those assets for the benefit of one or more beneficiaries. Trusts are commonly used to:
- Protect assets from creditors and legal claims
- Reduce or manage tax obligations
- Provide financial support for family members, including minors and those with disabilities
- Control how and when assets are distributed
Trusts are flexible and can be tailored to specific family or business circumstances.
Key Trust Terms Explained
- Settlor: The person who creates the trust by transferring assets and appointing a trustee. The settlor typically has no ongoing role in the trust.
- Trust Deed: The legal document outlining how the trust operates, including powers and duties of the trustee and how benefits are distributed.
- Trustee: The individual or company responsible for managing trust assets according to the trust deed. Trustees may be held personally liable if they fail to manage the trust properly.
- Beneficiaries: The people or entities who benefit from the trust. They have no control over the trust, but are entitled to income or assets as outlined in the deed.
What Is a Living Trust?
A living trust is created while the settlor is still alive. This contrasts with a testamentary trust, which takes effect after death. Living trusts are often used for asset protection, tax planning, and smooth wealth transfer without the need for probate.
The 7 Most Common Types of Trusts in Australia
1. Discretionary Trusts (Family Trusts)
In a discretionary trust, the trustee has full discretion over how income and assets are distributed among beneficiaries. This structure is popular for family groups due to:
- Tax planning flexibility
- Asset protection benefits
- Simple succession planning for family-owned businesses
Use case: Managing family wealth or operating a small business under a flexible structure.
2. Fixed Trusts (Including Unit Trusts)
In a fixed trust, beneficiaries have a set entitlement to income or assets. The trustee has no discretion in how benefits are divided.
A common example is the unit trust, where each beneficiary holds units (similar to shares). Distributions are made in proportion to units held.
Use case: Joint business ventures or shared property investments.
3. Hybrid Trusts
Hybrid trusts combine features of discretionary and fixed trusts. Some benefits (like income) may be fixed, while others (like capital distributions) are at the trustee’s discretion.
Use case: Flexible investment structures with multiple unrelated parties, offering tax planning and asset protection.
4. Testamentary Trusts
Established through a person’s will, testamentary trusts only come into effect upon death. They allow more control over how assets are distributed and offer tax advantages for minor beneficiaries.
Use case: Estate planning to protect assets and provide tax-effective income for children or dependents.
5. Special Disability Trusts
These trusts support the future needs of individuals with severe disabilities. They can be established by family members or through a will and allow contributions without affecting the beneficiary’s government benefits.
Use case: Long-term financial planning for family members with a disability.
6. Charitable Trusts
Charitable trusts are established to support specific causes or organisations. These trusts can attract tax concessions and must meet requirements set by the Australian Taxation Office (ATO).
Use case: Donating to a cause while receiving tax benefits.
7. Superannuation Trusts
All superannuation funds in Australia are structured as trusts. The trustee manages the fund for members’ retirement, and must follow strict rules set by the ATO and APRA.
Use case: Building retirement savings through employer contributions or self-managed super funds (SMSFs).
Quick Comparison: Types of Trusts
| Trust Type | Key Feature | Common Use |
|---|---|---|
| Discretionary Trust | Trustee decides who gets what | Family businesses, asset protection |
| Fixed Trust | Fixed entitlements | Investments, joint ventures |
| Hybrid Trust | Mix of fixed and discretionary elements | Complex investment structures |
| Testamentary Trust | Created via a will | Estate planning, protecting children |
| Special Disability Trust | For those with severe disabilities | Care funding without affecting benefits |
| Charitable Trust | Benefits a charity or cause | Philanthropy, tax-effective giving |
| Superannuation Trust | For managing retirement savings | Superannuation compliance and savings |
Final Thoughts
Choosing the right trust structure depends on your goals — whether it’s protecting assets, reducing tax, or passing on wealth. Because trust law can be complex and the tax implications significant, it’s crucial to get professional advice.
At Taxation House, we help individuals, families, and businesses structure trusts that align with their financial objectives and comply with ATO requirements.
➡️ Book a free consultation today to explore the right trust structure for your needs.
Disclaimer: This article is intended for general informational purposes only. It is not legal or financial advice. For tailored advice based on your specific situation, please consult a registered tax agent or legal professional.
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