A family trust is not something you register with one form. It is created when a deed is signed and a settlement sum is paid, and only then does the trustee apply for a TFN, an ABN if the trust will run a business, and any other registrations.
This guide walks through the setup steps in order for the 2025-26 and 2026-27 income years: the deed, the roles, the tax registrations, the family trust election and the 30 June resolution that every trustee has to get right. Figures were checked against ATO family trust guidance, the Australian Business Register and business.gov.au.
It is written for families, business owners and property investors weighing up a trust for the first time. If you are still deciding whether a trust suits you at all, start with our family trust guide, or our guide to moving from sole trader to company if a company is also on the table.
Key takeaways
- A trust starts when the deed is signed and the settlement sum is paid, not when the ATO issues a number.
- The trustee needs a TFN for the trust, and an ABN only if the trust carries on an enterprise.
- A corporate trustee costs $636 to register from 1 July 2026 and every director needs a director ID.
- A trust is only a family trust for tax purposes once the trustee makes a family trust election, and it can make only one.
- Distributions outside the family group after an election attract family trust distribution tax at 47%.
- Income resolutions must be made by 30 June each year or the trustee can be taxed at the top rate.
Family trust setup at a glance
| Step | What happens | Key point |
|---|---|---|
| 1. Choose the roles | Trustee, appointor, settlor and beneficiaries | Corporate trustee: $636 ASIC registration from 1 July 2026 |
| 2. Prepare the deed | Deed sets out powers, beneficiaries and income definition | Tailored to your family and your state |
| 3. Settle the trust | Settlor gives the settlement sum to the trustee | Trust exists from this point |
| 4. Bank account | Account in the trustee’s name for the trust | Keep trust money separate |
| 5. TFN and ABN | Trustee registers in its capacity as trustee | ABN only if carrying on an enterprise |
| 6. GST | Register if GST turnover is $75,000 or more | Optional below the threshold |
| 7. Family trust election | Made in the approved form after the specified year ends | Only one election per trust |
| 8. Each 30 June | Trustee resolves who gets the year’s income | Late or invalid resolutions shift tax to the trustee |
Source: ATO family trusts, ATO trust registration and reporting, ATO resolutions checklist, ATO registering for GST, business.gov.au 1 July 2026 changes, checked 9 October 2026.
Who are the people in a family trust?
Every discretionary trust has the same core roles. The deed names them and sets out what each can do.
- Settlor: the person who creates the trust by giving a small settlement sum to the trustee. After that their role is finished. The settlor is usually someone outside the family group, and the deed normally stops them benefiting.
- Trustee: the legal owner of the trust assets. The ATO says trustees are legally responsible for running the trust, including registrations, lodging returns and paying some tax.
- Appointor: the person who can remove and replace the trustee. In practice this is where control sits, so think carefully about who holds it and who takes over on death.
- Beneficiaries: the people and entities who may receive income or capital. In a discretionary trust they have no fixed share; the trustee decides each year.
Should the trustee be you or a company?
You can appoint one or more adults as trustee, or set up a company to act as trustee. The choice affects cost, paperwork and how easy it is to change control later.
| Issue | Individual trustees | Corporate trustee |
|---|---|---|
| Upfront cost | No company to register | ASIC company registration $636 from 1 July 2026 |
| Ongoing cost | None from ASIC | Proprietary company annual review fee $342 from 1 July 2026 |
| Director ID | Not needed for individuals acting as trustee | Every director needs one before appointment |
| Changing control | Assets must be retitled to the new trustee | Change the directors; the trustee stays the same |
| Mixing assets | Trust and personal assets held by the same person | Company holds only trust assets |
ASIC fees are taken from business.gov.au, and the director ID requirement and penalty of up to 60 penalty units are set out by ASIC. Our director ID guide explains how to apply.
How do you set up a family trust step by step?
Step 1: Get the deed drafted
The deed is the rulebook. It defines the beneficiaries, the trustee’s powers, how trust income is worked out, how the trustee must record decisions and when the trust ends. The ATO resolutions checklist reminds trustees that some deeds require income resolutions earlier than 30 June, so the deed wording matters every year, not just at setup.
Step 2: Settle the trust and open a bank account
The settlor signs the deed and hands over the settlement sum. The trustee then opens an account in the trustee’s name for the trust. Do not run trust money through a personal account.
Step 3: Duty on the deed and on assets
Duty rules are set by each state and territory, not the ATO. Settling a trust with a nominal sum is treated differently from moving property into it, and transferring land or a business into a trust can be a dutiable transaction. Check with your state revenue office before signing anything, and read our stamp duty guide if property is involved.
Step 4: TFN, ABN and GST
The ATO says a trust should have its own TFN, which the trustee registers for in its capacity as trustee, separate from any personal registration. Our page on TFN registration covers the basics of TFN applications.
Under ABR rules, a trust carrying on an enterprise is entitled to an ABN, and the name shows as “The Trustee for …”. An investment-only trust may not need one. Register for GST if the trust’s GST turnover is $75,000 or more, as set out on the ATO GST registration page.
Step 5: Decide on a family trust election
A family trust election is voluntary. It is made in writing in the approved form (NAT 2787 for 2026), for a specified income year that has already ended, and it names one living test individual whose family group then sets the boundaries for distributions. A trust can only make one election.
The election gives access to concessions such as the trust loss rules and franking credit access, but distributions outside the family group then attract family trust distribution tax at 47%, which the ATO has no discretion to waive.
What do trustees have to do every year?
- Resolve by 30 June: the ATO says resolutions to make beneficiaries presently entitled must be made by the end of the income year. Capital gains streaming has until 31 August.
- Lodge a trust tax return: the trustee must lodge regardless of the amount of net income unless the ATO says otherwise. See our trust tax return service.
- TFN withholding: closely held trusts must withhold from distributions to beneficiaries who have not given their TFN.
- Employer duties: if the trust employs staff, PAYG withholding, super and FBT apply as for any employer.
- Keep the election records: the family trust election must be shown on the return each year it is in force.
How are distributions to children taxed?
Distributions to beneficiaries under 18 are mostly taxed at penalty rates. Under the ATO trust return instructions, a resident minor’s eligible income is taxed at nil up to $416, 66c for each dollar between $417 and $1,307, and 45c on the entire amount once it reaches $1,308. The low income tax offset does not reduce tax on this income.
Worked example: splitting $60,000 of trust income in 2025-26
A trust has $60,000 of net income for 2025-26. By 30 June the trustee resolves: $20,000 to a 19-year-old daughter with no other income, $5,000 to a 15-year-old son and $35,000 to the spouse with no other income.
Daughter: ($20,000 – $18,200) x 16% = $288. The low income tax offset of up to $700 brings her income tax to nil.
Son: $5,000 is above $1,308, so 45% applies to the whole amount: $5,000 x 45% = $2,250, paid by the trustee on his behalf.
Spouse: ($35,000 – $18,200) x 16% = $2,688, less the $700 offset = $1,988.
Lesson: the $5,000 to the minor costs more tax than the $20,000 to the adult daughter. Resident rates are from the ATO tax rates page.
What can go wrong with a new family trust?
Most problems come from paperwork, not tax planning. Resolutions that are late, name someone outside the deed, or conflict with the deed’s wording can leave the trustee assessed on the net income, and the ATO says a trustee assessment may be at the top rate.
Another trap is making a family trust election without checking who the trust has paid in the past or wants to pay in future. Distributions outside the family group are taxed at 47% and the election cannot simply be withdrawn. If a company beneficiary will receive distributions, read our Division 7A and UPE guide before the first resolution.
Rule of thumb: Set up the trust, then diarise two dates every year: the 30 June income resolution and the trust tax return. Most costly trust problems start with one of these being missed.
Common mistakes when setting up a family trust
- Using a generic deed: a deed that does not suit your family or state can cause duty and distribution problems later.
- Buying assets before the trust exists: contracts signed in a personal name and later moved to the trust can trigger extra duty and CGT.
- Mixing money: paying trust expenses from a personal card makes records unreliable.
- Missing the 30 June resolution: the trustee can end up taxed on the income.
- Electing without checking the family group: payments to cousins, friends or unrelated companies can attract 47% family trust distribution tax.
FAQ about setting up a family trust
How long does it take to set up a family trust?
The deed can usually be prepared and signed within a few days once you have chosen the trustee, appointor and beneficiaries. If you want a corporate trustee, the company has to be registered first and every director needs a director ID before appointment. The TFN and ABN applications follow after the trust is settled, so allow a few weeks before the trust is ready to trade or buy assets.
Do I need a lawyer to set up a family trust?
There is no law that says a lawyer must draft the deed, but the deed decides who can benefit, who controls the trust and how income is defined. A poorly drafted or generic deed can cause problems with distributions and with state duty. Most families have the deed prepared by a lawyer or a specialist document provider and get tax advice from their accountant on the structure.
Is a family trust the same as a discretionary trust?
Most family trusts are discretionary trusts, meaning the trustee decides each year who receives income. For tax purposes, though, the ATO only treats a trust as a family trust once the trustee makes a family trust election. Having the words family trust in the name does not make it one. The election brings concessions but also limits who can receive distributions.
Can I be the trustee and a beneficiary at the same time?
Yes, in most discretionary trusts the same person can be a trustee and a beneficiary, and it is common for parents to hold both roles. The key is that the trustee must act under the deed and record decisions properly. Problems arise when a sole individual trustee is also the only beneficiary, so the deed and roles need to be set up with advice.
Does a family trust pay tax?
Generally the beneficiaries pay tax on their share of the trust net income at their own rates. The trustee is assessed instead when no beneficiary is presently entitled by 30 June, when income is appointed to someone who is not a valid beneficiary, or for minors and non-residents. A trustee assessment can be at the top rate, which is why the yearly resolution matters.
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Nanak Accountants can review your plans, coordinate the deed and corporate trustee, register the TFN and ABN and handle the yearly resolutions and trust return, with tax planning built in. Call 1300 626 258 or contact us.
This article is general information only and is not personal tax or legal advice. Figures and rules were checked against the ATO family trusts, trust registration, resolutions checklist and trust tax return instruction pages, the Australian Business Register, ASIC and business.gov.au on 9 October 2026. Rates and thresholds change, so confirm the current position before acting.
