What is a Family Trust?
A family (discretionary) trust is a legal structure that holds assets on behalf of beneficiaries (family members). The trustee decides how to distribute income each year. Key benefit: income can be distributed to family members on lower tax rates, potentially saving thousands in tax. Popular among Chinese Australian business owners and property investors.
Setup and Costs
Setup: $1,500-3,000 through a solicitor or accountant. Annual compliance: $1,500-3,000 for trust tax return preparation. Stamp duty on trust deed: varies by state ($200-500). The trust needs its own TFN and bank account. A corporate trustee (Pty Ltd company) is recommended for asset protection — costs an extra $500-1,000 to set up plus $307/year ASIC fees.
Tax Benefits
Income splitting: distribute rental income, dividends, or business profits to family members on lower tax rates (including adult children, spouse, or parents). Example: $100,000 trust income distributed equally to 4 beneficiaries = $25,000 each, taxed at much lower marginal rates than if one person earned $100,000. CGT discount: trusts receive the 50% CGT discount on assets held 12+ months.
When It Makes Sense
Worth considering if: combined family income exceeds $200,000, you have investment properties or share portfolios, you run a business, or you want asset protection from creditors/litigation. NOT worth it for simple situations — the compliance costs outweigh benefits if your income is under $100,000 or you have no assets to protect.