Using a Family Trust for Your Business in Australia (2026): How It Works, What It Costs and What's Changing

Family trusts are a fixture of Australian small business — farms, trade businesses, medical practices, shops and property-owning family groups all use them. They can spread income across a family and keep business assets away from the person who signs the contracts. They are also more expensive and more complicated than a sole trader or partnership, the ATO watches them closely, and the federal government has proposed a minimum tax on discretionary trusts from 2028. This guide is for owners considering a trust and for families who already have one. It explains discretionary and unit trusts, trustee companies, what set-up really costs, how distributions are taxed, section 100A, the 2026 changes, and a worked A$ example.

Quick answer

A family trust used for business is normally a discretionary trust: a trustee (often a company) runs the business under a trust deed and decides each year which family beneficiaries receive the income, who then pay tax at their own rates. It needs its own TFN, ABN and annual trust return. From 1 July 2028 the government proposes a 30% minimum tax on discretionary trust income — announced and drafted, but not yet law.

• Trustee must make beneficiaries entitled to income by 30 June each year

• Undistributed income is taxed to the trustee at 45%

• Distributions to under-18s above A$416 are taxed at up to 45%

• Section 100A taxes the trustee if someone else really gets a beneficiary's money

• Losses stay in the trust — they can't be passed to beneficiaries

How a trust structure works

A trust isn't a legal entity in its own right. It's a relationship: a trustee holds property and runs the business for the benefit of beneficiaries, under rules set out in a trust deed. The trustee signs contracts, holds the bank account, employs staff and is legally responsible for the trust's operations and tax. The beneficiaries are the people (and companies or other trusts) who can receive the income or capital.

Four roles appear in almost every business trust:

The trustee can be an individual or a company. Most advisers recommend a company for a trading trust because the trustee is personally liable for debts it incurs running the business, with only a right to be reimbursed from trust assets. A company trustee confines that liability to the company, which business.gov.au notes gives some asset protection. Its directors still have duties, and banks and landlords commonly ask directors for personal guarantees.

Discretionary trusts vs unit trusts

There are two common types for business. In a discretionary trust, no beneficiary has a fixed share: the trustee decides each year who gets what, within the class of beneficiaries in the deed. That flexibility is what makes them useful for income splitting, and it's what the proposed minimum tax targets. In a unit trust, the beneficial interest is divided into units, like shares, and income and capital follow the units. Two unrelated families going into business together often use a unit trust, sometimes with each family's discretionary trust holding the units.

Discretionary trust vs unit trust

	Discretionary (family) trust	Unit trust
Who gets income	Trustee decides each year	Unit holders, in proportion to units
Best for	One family's business or investments	Unrelated parties investing together
Income splitting	Yes, within the beneficiary class	No — fixed by unit holdings
Selling or bringing in an investor	Awkward — no units to sell	Straightforward — transfer or issue units
Proposed 30% minimum tax from 2028	Would apply (unless excluded or electing)	Not intended to apply to fixed trusts
Typical published deed price	From about A$166 to A$550+	About A$550+

Who gets income

Discretionary (family) trust

Trustee decides each year

Unit trust

Unit holders, in proportion to units

Best for

Discretionary (family) trust

One family's business or investments

Unit trust

Unrelated parties investing together

Income splitting

Discretionary (family) trust

Yes, within the beneficiary class

Unit trust

No — fixed by unit holdings

Selling or bringing in an investor

Discretionary (family) trust

Awkward — no units to sell

Unit trust

Straightforward — transfer or issue units

Proposed 30% minimum tax from 2028

Discretionary (family) trust

Would apply (unless excluded or electing)

Unit trust

Not intended to apply to fixed trusts

Typical published deed price

Discretionary (family) trust

From about A$166 to A$550+

Unit trust

About A$550+

Trading through a trust doesn't change your GST or employer obligations. The trust registers for GST once turnover reaches A$75,000, withholds PAYG from employees and pays super guarantee for them — including a trustee or director it employs. Trusts don't pay PAYG instalments; beneficiaries pay instalments on their expected share instead.

Setting up a trust for a business, and what it costs

A trust is created by a deed, not by registration with ASIC. The steps are: choose the trustee and, if using a company, register it; have the deed prepared and signed; have the settlor pay the settled sum; pay any state duty on the deed; then register the trust for a TFN and ABN — business.gov.au says you can do this through the Business Registration Service. The ABN is registered in the trustee's capacity, so the ABN record shows "The Trustee for [name of trust]".

Setting up a trading trust

1. 1

   Get advice on whether a trust suits you

   business.gov.au recommends seeing a lawyer, accountant or business adviser first. Trusts are expensive and hard to unwind.

2. 2

   Register the trustee company

   Directors need a director ID first. ASIC registration is A$636; annual review fee A$342.

   Company registration guide
3. 3

   Prepare and sign the deed

   Name the trustee, appointor, beneficiaries, default beneficiaries and vesting date. The settlor pays the settled sum to the trustee.

4. 4

   Pay state duty if it applies

   Some states and territories charge duty on trust deeds or declarations. Check your state revenue office before signing.

5. 5

   Register the TFN, ABN and GST

   Apply in the trustee's name for the trust's TFN and ABN, plus GST and PAYG withholding as needed. The ABN is free.

   ABN registration guide
6. 6

   Open accounts and move the business in

   Bank accounts, leases, contracts, licences and insurance should be in the trustee's name 'as trustee for' the trust.

On costs, only the ASIC figures are official. Deed prices are set by the market. When we checked published price lists in October 2026, an online discretionary trust deed template was A$166.10 including GST (Cleardocs), and a law firm's deed store listed discretionary and unit trust deeds at A$550 including GST (Sladen Legal). Accountants and lawyers who prepare the deed, company and registrations as a package typically quote more — commonly from several hundred to a few thousand dollars depending on advice. Treat these as estimates. Then budget for the trustee company's ASIC fees each year, a trust return and a company return, the trustee resolutions and financial statements. For many small family businesses the annual accounting cost of a trust-plus-company structure runs into thousands of dollars, which is the main reason trusts rarely make sense for low profits.

How trust income is taxed

The trustee lodges a trust tax return every year, whatever the income, including a statement of how the income was distributed. Who pays the tax depends on entitlement. A beneficiary who is presently entitled to a share of the trust's income includes the matching share of the trust's net (taxable) income in their own return. If a beneficiary is under 18 or a non-resident, the trustee pays tax on their behalf. Income no beneficiary is entitled to is taxed to the trustee — at 45% under section 99A for most trusts, without the tax-free threshold.

That's why the 30 June resolution matters. The ATO says a resolution making beneficiaries entitled to income is only effective for tax if it's made by the end of the income year, or by any earlier date in the deed. Capital gains can be streamed to particular beneficiaries by appointing trust capital within two months after year-end. If a resolution fails — a beneficiary outside the deed's class, a vested trust, a missing signature — default beneficiaries or the trustee may be taxed instead.

Distributions to children are restricted by Division 6AA. A beneficiary under 18 who receives unearned income such as trust distributions pays nothing on the first A$416, then 66% of the excess up to about A$1,307, and 45% on the whole amount above that. A A$5,000 distribution to a 15-year-old costs A$2,250 in tax, so family trusts rarely distribute to minors beyond small amounts. Adult children at university are taxed at ordinary rates.

Business losses stay in the trust. A trust can't distribute a loss; it carries the loss forward against future income, subject to the trust loss rules. That's a real cost for start-ups compared with a sole trader or partnership, where a loss can often reduce other income straight away.

Beneficiaries' shares of net small business income qualify for the small business income tax offset of up to A$1,000 each where the trust's turnover is under A$5 million. Under the CGT changes now in law, the 50% CGT discount that trusts pass to individual beneficiaries is replaced by indexation and a 30% minimum tax for gains accruing from 1 July 2027; earlier gains keep the discount.

A family trust election is a separate, voluntary choice that makes the trust a "family trust" for tax purposes. It helps with trust losses, franking credits and some concessions, but distributions outside the nominated family group then attract family trust distribution tax at the top rate. Many trusts called "family trusts" have never made one.

Section 100A and other ATO risk areas

Section 100A is the rule the ATO uses against distributions that are really made for someone else's benefit. It can apply where a beneficiary is made presently entitled to income under an arrangement in which another person receives a benefit and a purpose is reducing tax. If it applies, the beneficiary's entitlement is disregarded and the trustee is taxed on that income at the top rate.

Does section 100A bite?

Step 1

Beneficiary made entitled to income

Step 2

Did someone else get the benefit?

Step 3

Was a purpose to reduce tax?

Step 4

Ordinary family or commercial dealing?

Step 5

If not excluded: trustee taxed

at the top rate on that income

There's no reimbursement agreement where a beneficiary simply receives and uses their own entitlement, where the arrangement is an ordinary family or commercial dealing, or where the beneficiary is under 18 or under a legal disability. The ATO's view is set out in TR 2022/11, and its compliance approach in PCG 2022/2: arrangements in the green zone (ordinary dealings, or no tax purpose) won't attract compliance resources except to confirm they fit, while red-zone arrangements will be reviewed as a priority. A classic red-zone pattern is distributing to an adult child on a low income and then using their entitlement to repay the parents for school fees or other costs the parents incurred.

Unpaid present entitlements to a "bucket company" are the other long-running issue. The ATO had treated an unpaid entitlement owed to a related company as a loan under Division 7A. In Commissioner of Taxation v Bendel [2026] HCA 18, decided on 10 June 2026, the High Court held 5:2 that an unpaid entitlement isn't, of itself, a Division 7A loan. Commentators stress that the result turns on the facts and that section 100A, Subdivision EA and Part IVA still apply; the Treasurer has said a separate measure on unpaid entitlements will be progressed. Get current advice before relying on the decision.

The proposed minimum tax on discretionary trusts

In the 2026–27 Budget on 12 May 2026, the government announced a 30% minimum tax on discretionary trusts. From 1 July 2028, trustees would pay 30% on the trust's taxable income. Beneficiaries other than companies would receive non-refundable credits for that tax. Companies receiving distributions wouldn't get credits, so bucket-company distributions could be taxed twice.

Discretionary trust minimum tax — where it's up to

12 May 2026

Announced in the 2026–27 Budget

July 2026

Treasury consultation paper

3 September 2026

Exposure draft legislation released

18 September 2026

Consultation closed

1 July 2027

Proposed 3-year restructuring rollover opens

1 July 2028

Proposed start of the 30% minimum tax

30 June 2030

Proposed rollover window closes

The Budget papers exclude fixed and widely held trusts, super funds, special disability trusts, deceased estates and charitable trusts, plus primary production income, certain income relating to vulnerable minors, amounts subject to non-resident withholding tax and income from assets of existing discretionary testamentary trusts. The exposure draft released on 3 September 2026 added an option for a discretionary trust to stay outside the tax by electing to make fixed distributions to pre-nominated beneficiaries, which the Treasurer says wouldn't require a restructure or trigger state stamp duty. It also proposes franking credit refunds for income subject to the minimum tax, and an exemption for distributions to charities. The government estimates fewer than 10% of active small businesses would be affected in any year.

It isn't law yet. Consultation closed on 18 September 2026 and details can change, so treat the figures in this section as the proposal, not the rules. We'll update this page when a bill is introduced.

Worked example: a plumbing business in a family trust

Dan runs a plumbing business through the Dan Family Trust, with a company trustee. In 2026–27 the trust's net income is A$240,000. The trustee resolves by 30 June to distribute A$120,000 to Dan, A$83,000 to his wife Lee, who does the books and has no other income, and A$37,000 to their 19-year-old daughter at university, with the money paid into her account for her rent and fees. All are residents with no other income. Medicare levy is calculated with the 2025–26 low-income thresholds, the latest published.

A$240,000 trust income in 2026–27

	Dan	Lee	Daughter (19)	Family total
Distribution	A$120,000	A$83,000	A$37,000	A$240,000
Income tax	A$26,520	A$15,420	A$2,820	A$44,760
Low income tax offset	—	—	− A$700	− A$700
Small business offset	− A$1,000	− A$1,000	− A$451	− A$2,451
Medicare levy	A$2,400	A$1,660	A$740	A$4,800
Total tax	A$27,920	A$16,080	A$2,409	A$46,409

Distribution

Dan

A$120,000

Lee

A$83,000

Daughter (19)

A$37,000

Family total

A$240,000

Income tax

Dan

A$26,520

Lee

A$15,420

Daughter (19)

A$2,820

Family total

A$44,760

Low income tax offset

Dan

—

Lee

—

Daughter (19)

− A$700

Family total

− A$700

Small business offset

Dan

− A$1,000

Lee

− A$1,000

Daughter (19)

− A$451

Family total

− A$2,451

Medicare levy

Dan

A$2,400

Lee

A$1,660

Daughter (19)

A$740

Family total

A$4,800

Total tax

Dan

A$27,920

Lee

A$16,080

Daughter (19)

A$2,409

Family total

A$46,409

If Dan earned the same A$240,000 as a sole trader, he'd pay A$51,370 plus 45% of A$50,000, less the A$1,000 offset, plus A$4,800 levy: A$77,670. The trust result is about A$31,000 lower because the income uses three people's tax-free thresholds and lower brackets. That's the attraction — and also why the ATO cares where the money goes. The daughter's distribution is safe from section 100A only if she genuinely receives and benefits from it; if the funds went back to Dan to repay his own costs, the ATO could tax that A$37,000 to the trustee at 45%.

Now apply the proposed minimum tax to the same year, as announced. The trustee would pay 30% of A$240,000, or A$72,000. Each family member would get a non-refundable credit for their share — Dan A$36,000, Lee A$24,900, the daughter A$11,100. Because every one of them would otherwise pay less than 30% on their share, the credits wipe out their personal tax but the unused credits are lost. The family's total would rise from about A$46,400 to about A$72,000. Under the draft, Dan's family could avoid that by electing fixed distributions, restructuring into a company or fixed trust using the rollover, or — if they were farmers — relying on the primary production exclusion. How the credits interact with the Medicare levy and offsets will depend on the final law.

When a trust makes sense — and when it doesn't

A discretionary trust can suit a profitable, established business owned by one family, where there are adult family members on lower incomes who genuinely take part or benefit, where business assets need protecting from the operator's personal risks, and where the owners may sell later and want access to the small business CGT concessions. A unit trust can suit unrelated parties co-owning a business or property who want fixed shares.

A trust usually doesn't suit a new business that may make losses, an owner with no family members to distribute to, a single professional whose income is personal services income (the PSI rules can attribute it back), or anyone who'll be uncomfortable with annual resolutions, minutes and a separate set of books. If the main appeal is keeping profit at a lower rate, a company may do that more simply — compare them in our business structures guide and the company tax rate guide. And with the minimum tax proposed from 2028, anyone setting up a new discretionary trust in 2026 should model both the current rules and the proposed ones before signing.

Common mistakes that cost families money: missing the 30 June resolution; distributing to someone who isn't a beneficiary under the deed; leaving entitlements to adult children unpaid and then using the money for the parents; mixing trust and personal bank accounts; signing contracts in a director's own name instead of as trustee; and never reviewing an old deed — many deeds written decades ago don't allow streaming or the distributions the family has been making.

Official links

• business.gov.au — TrustStructure basics and registration
• ATO — TrustsRegistration, returns, distributions
• ATO — Section 100A reimbursement agreementsExclusions and risk zones
• ATO — Trustee resolutions checklist30 June deadline
• Treasury — Minimum tax on discretionary trusts exposure draftProposal, not yet law
• Business Registration ServiceTrust TFN and ABN

Next steps

If you already run a business through a discretionary trust, book a review with your accountant before 30 June: confirm the deed allows the distributions you make, check last year's entitlements were actually paid, and model the proposed 2028 minimum tax against the fixed-distribution election and a company. If you're starting out, run your expected profit through the break-even calculator first — the extra running costs of a trust only pay off once profit is well above what one person needs to live on.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is a family trust for a business?

It's usually a discretionary trust whose trustee — often a company — runs the business and holds its assets for a group of family beneficiaries. Each year the trustee decides how the trust's income is shared among them, and the beneficiaries pay tax at their own rates. 'Family trust' in the tax sense means a trust that has made a family trust election, which is a separate, voluntary step.

How much does it cost to set up a family trust?

Deeds are sold from about A$166 for an online template to A$550 or more from a law firm's deed store, with assisted services costing more (published prices checked October 2026; estimates, not fixed fees). Add A$636 if you register a trustee company, then A$342 a year in ASIC fees, plus annual accounting for the trust and company returns. Some states charge duty on the deed.

How are trust distributions taxed?

Beneficiaries who are presently entitled to trust income include their share of the trust's net income in their own returns and pay tax at their own rates. The trustee pays tax on income no one is entitled to, at 45% under section 99A, and pays on behalf of minors and non-residents. Minors' distributions above A$416 are taxed at penalty rates up to 45%.

What is section 100A?

Section 100A is an anti-avoidance rule. If a beneficiary is made entitled to trust income under an arrangement where someone else actually gets the benefit and a purpose is to reduce tax, the entitlement is ignored and the trustee is taxed at the top rate. Ordinary family or commercial dealings, and distributions to beneficiaries under 18, are excluded. The ATO's approach is in TR 2022/11 and PCG 2022/2.

Is the government taxing family trusts at 30%?

The 2026–27 Budget proposed a 30% minimum tax on the taxable income of discretionary trusts from 1 July 2028, with non-refundable credits for non-corporate beneficiaries. Draft legislation was released on 3 September 2026. As at October 2026 it is not law. Primary production income and some other income would be excluded, and restructuring relief is proposed from 1 July 2027.

When does the trustee have to decide distributions?

For the beneficiaries to be taxed instead of the trustee, the trustee must make them presently entitled to the trust's income by the end of the income year — 30 June — or an earlier date if the deed requires it. Capital gains can be streamed by appointing trust capital within two months of year-end. Record the resolution in writing and follow the deed exactly.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 11 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Trust — business.gov.au · accessed 11 October 2026
2. 2.Business structures – key tax obligations — Australian Taxation Office · accessed 11 October 2026
3. 3.Trusts – registering and reporting for tax — Australian Taxation Office · accessed 11 October 2026
4. 4.Trust taxation – reimbursement agreement (section 100A) — Australian Taxation Office · accessed 11 October 2026
5. 5.Trustee resolutions checklist — Australian Taxation Office · accessed 11 October 2026
6. 6.Family trusts — Australian Taxation Office · accessed 11 October 2026
7. 7.Income Tax Rates Act 1986 — compilation from 1 July 2026 (s 12, s 13, Schedule 11) — Federal Register of Legislation · accessed 11 October 2026
8. 8.Budget Paper No. 2 2026–27 — Tax Reform: introducing a minimum tax on discretionary trusts — Australian Government (budget.gov.au) · accessed 11 October 2026
9. 9.Exposure draft legislation – Minimum tax on discretionary trusts (media release, 3 September 2026) — The Treasury (Treasurer) · accessed 11 October 2026
10. 10.Tax reform – introducing a minimum tax on discretionary trusts — Australian Taxation Office · accessed 11 October 2026
11. 11.High Court rules in favour of Bendel — The Tax Institute · accessed 11 October 2026
12. 12.Discretionary (Family) Trust Deed — Cleardocs · accessed 11 October 2026
13. 13.Trust deed store — Sladen Legal · accessed 11 October 2026