Can an accountant set up a family trust? The honest answer is that it takes two professionals, and the boundary between them matters more than most business owners realise.
A family trust, usually a discretionary trust, is a structure in which a trustee holds assets for the benefit of a defined group of people, typically family members, and decides each year how the income and capital are distributed among them. For many Australian small businesses it is the backbone of the structure. It holds the shares in the trading company, owns key assets like property or intellectual property, and gives the family flexibility about which members pay tax on the trust's profits. But the trust itself is not created by a tax return or a bank account. It is created by a legal document, the trust deed, and drafting and executing that deed is legal work.
That is the core of the answer. Your accountant designs the structure, models the tax outcomes and runs the compliance. Your lawyer drafts the deed that brings the trust into existence and keeps it valid over the life of the business. This article walks through the moving parts: who does what, how a trust is actually created, the tax mechanics that make it worthwhile, the traps that surface years later, and when to bring each professional in.
The cast: who does what when a trust is set up
A trust setup is a team effort with a clear division of labour. On the advisory side there are two professionals, and inside the trust itself there are the roles created by the deed:
- Accountant: advises on whether a discretionary trust suits your tax position and business plan, recommends a corporate or individual trustee from a tax and administrative perspective, models distribution scenarios, applies for the trust's TFN and ABN, registers the trust for GST or PAYG withholding where needed, and manages the annual cycle of resolutions, tax returns and records.
- Lawyer: drafts and settles the trust deed, prepares the company paperwork if the trustee is a company, advises on control settings such as appointor powers and trustee replacement, and prepares deeds of variation or appointment when the structure changes over time.
- You, the business owner: sets the commercial goals, decides who fills the key roles, approves the deed settings before signing, signs the documents correctly and makes sure the trust is used the way the deed contemplates.
Four roles sit inside the trust itself, and the deed allocates power between them:
- Trustee: the person or company that holds legal title to the trust assets and manages them day to day.
- Settlor: provides the initial settlement sum, commonly a nominal $10, which brings the trust into existence. The settlor usually has no ongoing role or power.
- Appointor (or principal): the person who can remove and replace the trustee. Practitioners often call this the real control lever in the structure.
- Beneficiaries: the people or entities, usually family members, who may receive income or capital at the trustee's discretion.
The line between the two advisers is where most of the confusion sits. The accountant's advice is about the tax consequences of the structure. The lawyer's work is the document that creates the legal rights. A well-run setup uses both, and uses them in that order.
How a family trust is actually created
A trust is not registered. There is no ASIC registry entry and no ATO form that brings a trust into existence. A trust exists because three things are present at once: certainty of intention to create it, certainty of the property it holds, and certainty of the people who benefit from it. The High Court confirmed in Byrnes v Kendle [2011] HCA 26 that intention is judged objectively, from what the documents and conduct show, not from what the parties later say they meant. If the intention, the property or the beneficiaries are unclear, the trust may be void.
All three certainties are normally recorded in a single document: the trust deed. The deed names the trustee, defines the beneficiaries or classes of beneficiaries, sets out the trustee's powers and fixes a vesting date. It must be executed as a deed, which in Australia means signed, witnessed and delivered with the intention that it take effect immediately. Execution mistakes can be fatal to a trust, which is one reason the document is legal work rather than paperwork.
The last step in creation is the settlement sum. The settlor gives the trustee a nominal amount, commonly $10, and the trustee holds it on trust from that moment. From then on the trust is a separate structure, though not a separate legal person the way a company is, and the trustee must keep trust property separate from personal property.
If the trustee is a company, a corporate trustee, the company must be registered with ASIC, have its own ACN and constitution, and meet the usual requirements for Australian companies, including having at least one director who ordinarily resides in Australia. Many business owners choose a corporate trustee because a company never dies or loses capacity the way an individual can, which makes banking and later changes of trustee cleaner.
Why drafting the deed is a lawyer's job
Australian legal profession laws draw a line that matters here. Under the Legal Profession Uniform Law (NSW) No 16a of 2014, a person must not engage in legal practice unless they are an Australian legal practitioner, and the Law Society of NSW states that without a current practising certificate a person cannot engage in legal practice or provide legal services. Drafting a trust deed for a client is legal practice. The deed creates rights and obligations, and errors in it can destroy the protection the client is paying for.
That is not to say accountants stay out of trusts. Registered tax agents are authorised to give tax advice, and trust structures are squarely within their expertise. The boundary between tax advice and legal advice is not drawn identically in every state, and courts have been asked to draw it where accountants prepared trust and superannuation deeds for clients, for example in Western Australia in Legal Practice Board v Computer Accounting and Tax Pty Ltd (Supreme Court of WA, 2007), as noted in the ATO's decision impact statement. The safe way to think about it is that tax advice about the structure belongs to the accountant, and the document that creates the structure belongs to the lawyer.
Why does the distinction protect you, rather than just slow things down? Because the consequences of a defective deed land on the trust, not on the professional who drafted it. A trust that is void for uncertainty fails to protect the assets it was meant to protect. Banks and lenders will not finance a structure whose deed they cannot rely on. And a deed that conflicts with the tax assumptions your accountant modelled will produce surprises at assessment time. When the lawyer and the accountant work together at the start, all three of those outcomes become unlikely.
The tax mechanics behind the structure
The reason most family trusts exist is tax flexibility, so the mechanics are worth understanding even though your accountant will run them. Under Division 6 of the Income Tax Assessment Act 1936 (Cth), the net income of a trust estate is taxed either to the trustee or to the beneficiaries. Where a beneficiary who is not under a legal disability is presently entitled to a share of the trust income, that share of the net income is included in the beneficiary's assessable income (s 97). Where no beneficiary is assessed on the income, the trustee is taxed on it at the top marginal rate (s 99A). Each year the trustee resolves how much income to distribute to which beneficiaries before the end of the income year, so that the income lands in the hands of the family members best placed to pay tax on it. That annual resolution is where the accountant's modelling earns its keep.
Two features add to the value of the structure, and both need the deed to permit them. Capital gains can be streamed to particular beneficiaries under Subdivision 115-C of the Income Tax Assessment Act 1997 (Cth), so that a capital gain realised by the trust can be directed to a beneficiary with an offsetting capital loss or a lower marginal rate. Franked distributions can flow through the trustee to beneficiaries with the benefit of the franking credits under Subdivision 207-B of the same Act. If the deed lacks adequate streaming powers, the accountant cannot deliver the tax outcome they modelled, which is a classic example of the deed and the tax plan needing to be designed together.
There is one election worth knowing about. The trustee of a discretionary trust can elect that the trust be a family trust under Schedule 2F of the Income Tax Assessment Act 1936 (Cth). A family trust election allows losses to be used within the family group, but it restricts distributions to the specified individual and their family group, and distributions outside that group attract family trust distribution tax under Division 271 of the Schedule. The election is a commitment that is hard to unwind, so it should be made only after the accountant and the lawyer have looked at the structure as a whole.
Where the edge cases bite
Once the trust exists, the deed keeps governing it, and the traps tend to surface years later when the business has grown and nobody remembers what the deed says. The common ones are these:
- The vesting date: Every trust must come to an end. The deed fixes a vesting date, usually a specified date or an event such as the youngest beneficiary reaching a certain age, on which the interests in the trust property must vest, as the ATO's guidance on trust vesting explains. Under s 7 of the Perpetuities Act 1984 (NSW), the perpetuity period for an interest created by a settlement is 80 years, and modern deeds generally fix a vesting date within that window, though the rules vary from state to state. When the trust vests, the beneficiaries become absolutely entitled to the assets, which can itself be a CGT event (event E5 under s 104-75 of the Income Tax Assessment Act 1997 (Cth)). Vesting needs planning years out, not in the month it arrives.
- Resettlement risk: Amending a deed is not a purely administrative act. CGT event E1, creating a trust over a CGT asset, under s 104-55 of the Income Tax Assessment Act 1997 (Cth), can occur when a trust is created or resettled, and the roll-over in Subdivision 126-C of the same Act protects superannuation funds, not trading trusts. A change that alters the trust's essential character can be treated as a resettlement: the old trust ends, a new trust begins, and the assets may be taken to have been disposed of for CGT purposes. This is why deed variations are legal work, and why the accountant should model the consequences before anything is signed.
- Capacity confusion: Trust assets and accounts must be held in the trustee's capacity as trustee. Signing contracts or holding bank accounts in a personal name blurs the line between the trustee's personal assets and the trust's assets, and undermines the asset protection the structure exists to provide.
- Unrecorded loans: Money moving between the trust and the trading company should be documented in loan agreements, or the accountant will spend years unpicking casual arrangements at tax time.
- The appointor's death or incapacity: If the deed is silent on what happens when the appointor dies or loses capacity, control of the trustee can fall somewhere no one intended. Succession for the appointor role is a drafting decision, and it is hard to revisit cleanly later.
- A deed that does not match the tax plan: A deed that does not actually permit what the accountant assumed, whether streaming, particular classes of beneficiaries or capital distributions, is the most common source of trust problems, and it is entirely preventable when the two advisers talk to each other.
When to bring in the professionals
None of this requires you to become a trust lawyer, and none of it works if you treat the accountant and the lawyer as interchangeable. The usual sequence is: accountant first, to confirm that a discretionary trust is the right structure for your situation and to model the tax outcomes; lawyer second, to draft a deed that actually delivers what was modelled; and accountant again, to apply for the trust's TFN and ABN, register the trust for GST once its turnover reaches the registration threshold, and set up the compliance calendar. Year to year, the accountant runs the distribution resolutions and the tax returns. The lawyer comes back into the room when the deed needs changing, the trustee is replaced, or the business restructures.
If you are at the very beginning of the process, a short conversation with either professional will normally tell you whether a family trust is worth pursuing at all, and most firms offer an initial consultation without charge. A five minute conversation costs nothing and will usually give you an excellent steer on which way your structure should go. The cost of setting up a trust is modest compared with the cost of fixing a structure that was wrong from day one, so it is a conversation worth having before the first dollar moves into the trust.
Start with the deed, not the spreadsheet
The answer to the original question is that your accountant should be the first professional you call, and your lawyer should be the second. A family trust is created by a deed, not by advice, and the deed is legal work. When the two are designed together from the start, the trust does what it was set up to do: it holds the assets, protects them, and distributes the income efficiently across the family. When they are not, the problems surface later, at the bank, at tax time or in a dispute, and they are always more expensive to fix than they were to avoid. The structure only works if the deed and the tax plan are designed together, so the most useful step you can take early is a short conversation with both professionals before anything is signed.