How to set up a trust in Australia

How a trust works

A trust is a legal arrangement where one person or company (the trustee) looks after assets for the benefit of others (the beneficiaries). It starts with a settlor, who creates the trust and outlines the rules. The trustee manages the trust’s money, investments or property according to these rules, making decisions and carrying out duties in the beneficiaries’ best interests. The beneficiaries are those who will receive the benefits or income from the trust, either now or in the future.

In short, the settlor sets up the trust, the trustee controls and manages the assets and the beneficiaries receive the benefits. This structure helps protect and efficiently manage assets, ensuring they are used as intended by the settlor.

What to consider before setting up a trust

Before setting up a trust, it’s important to weigh several key considerations. Start by assessing the initial set up costs, which can vary depending on the complexity of the trust and legal advice required. Consider the ongoing administrative workload and compliance requirements, as trusts must adhere to regular reporting and record-keeping standards. Legal and tax obligations are significant as trusts are governed by specific laws and must meet Australian Taxation Office requirements, including applying for an ABN and TFN. Lastly, trustees carry substantial responsibilities, as they are legally obligated to manage the trust’s assets in the best interests of the beneficiaries, following both the trust deed and relevant legislation.

Steps to set up a trust in Australia

Setting up a trust in Australia involves several key steps to ensure it meets legal requirements and suits your needs. This guide walks you through the essential actions and considerations for establishing a trust with confidence.

Step 1. Choose the type of trust

When choosing the type of trust to establish in Australia, it’s important to consider your primary objectives, such as protecting family assets, managing investments or supporting business operations. Each trust structure, whether family (discretionary), unit (fixed ownership) or testamentary (via a will), offers distinct advantages and obligations. Assess factors like the flexibility of distributions, tax implications and the level of control required. Consulting with a legal or financial adviser can help you match the trust type to your specific needs and ensure compliance with relevant regulations.

Step 2. Appoint the trustee

Choosing a trustee is a crucial step, as this person or company will be responsible for managing the trust’s assets and ensuring all legal obligations are met. You can appoint either an individual trustee or a corporate trustee. Individual trustees are typically chosen for their personal knowledge of the beneficiaries and the trust’s purpose, but they may be limited by their availability, expertise or continuity, especially if circumstances change, such as retirement or incapacity. Corporate trustees are particularly favoured for larger or more complex trusts, as they can provide impartiality, specialist expertise and ensure the trust’s administration is not disrupted by personal changes. For these reasons, appointing a corporate trustee is often preferred, especially when long-term stability and professional oversight are priorities.

Step 3. Prepare the trust deed

The trust deed is a formal legal document that sets out the terms, conditions and framework under which the trust will operate. It specifies the roles and responsibilities of the trustee, details the beneficiaries and outlines how the trust’s assets are to be managed and distributed. It’s essential to ensure the deed is drafted carefully, tailored to your objectives and complies with Australian laws. Seeking professional legal advice is strongly recommended.

Step 4. Settle the trust

To formally establish the trust, the trust deed must be signed by all relevant parties, including the settlor and the trustee. The settlor then provides an initial settlement sum, often a nominal amount, which the trustee receives on behalf of the trust. This process activates the trust and is a crucial legal requirement for its validity in Australia.

Step 5. Apply for an ABN and TFN

After settling the trust, it’s essential to register for an Australian Business Number (ABN) and a Tax File Number (TFN). These are required for the trust to operate lawfully, report income and fulfil tax obligations with the Australian Taxation Office. Having an ABN is also necessary if the trust intends to conduct any business activities, issue invoices or register for Goods and Services Tax (GST). The application can be completed online and you’ll need details from your trust deed and trustee information to proceed.

Step 6. Open a trust bank account

Step 6 involves the trustee opening a dedicated bank account in their name on behalf of the trust to properly manage and segregate its funds. This is a key requirement for maintaining the trust’s financial integrity and ensuring all transactions are conducted transparently. To open the account, you’ll typically need to provide the trust deed, proof of the trustee’s identity and details of the trust’s ABN and TFN, as obtained in the previous steps. Keeping the trust’s finances separate from personal or business accounts helps to uphold legal compliance and simplifies accounting and reporting obligations.

Open a NAB business bank account.

Each step in setting up and managing a trust carries important legal and financial implications. It’s strongly recommended that you seek professional legal and financial advice to ensure the trust is established correctly and managed in accordance with all legal requirements. This will help you protect the trust’s assets, meet your obligations as a trustee and achieve your goals for the beneficiaries.

Please note, trusts typically do not require the use of Statutory Trust Accounts (STAs). Rather, ordinary business accounts are usually acceptable. STAs are generally reserved for professions in certain industries (such as lawyers, real estate agents, etc.) who have an obligation under legislation to hold client funds in such a specialised account.

Trusts checklist

Our trusts checklist will help you find out what documents we require to complete your business bank account application.