By the time you reach this point, the hard decisions are usually behind you. You have decided a trust makes sense for the family's investment properties, for the trading business, or to hold the shares of an operating company. The trust deed is being drafted and the trustee has to be named in it. That person or company will hold legal title to the trust's assets, sign its contracts, make its distributions and answer for its obligations. Whether the trustee is you personally or a company you set up for the job shapes liability, asset protection and succession for decades, so it is worth getting the choice right before the deed is settled.
The two options, stated plainly
Australian law recognises two kinds of trustee for a private trust. An individual trustee is one or more natural persons who sign the trust deed and consent to act. A corporate trustee is a company that acts as trustee, usually a proprietary company incorporated for no purpose other than the job. Both are common. A trust cannot be its own trustee, because a trust is not a separate legal entity; the trustee is the person or company that holds the assets on behalf of the beneficiaries.
The real question underneath the headline one is narrower: given what the trust will own and who will benefit from it, does the extra cost of a company buy protection you will actually use? For most family and business trusts, both options are legally open. There are exceptions worth knowing before you decide. Self-managed super funds have their own trustee rules under the superannuation legislation, and lenders or insurers will sometimes insist on a corporate trustee before they will deal with the trust. Those constraints matter, but they do not change the substance of the choice for an ordinary discretionary or unit trust.
What to weigh up when choosing a trustee
Who carries the liability when the trust is sued
A trustee is personally liable on contracts it enters in that capacity. If the trustee signs a lease, a loan or a supply agreement for the trust and the trust cannot pay, the other party can sue the trustee personally. The trustee has a right to be indemnified out of trust assets, but if those assets fall short, the trustee's own assets make up the difference. Trustees also owe duties of care, diligence and skill, including the prudent person standard in s 14A of the Trustee Act 1925 (NSW), and a trustee who breaches those duties can be personally liable to the beneficiaries for the loss. The reach of that exposure differs sharply between the two options:
- Individual trustee: the person who signed is exposed. Their home and savings can be reached if the trust's assets are insufficient, subject to any indemnity provisions in the deed.
- Corporate trustee: the company is the contracting party and the entity that can be sued. Directors and shareholders are not personally liable for the company's debts merely because they control it, though personal guarantees, breaches of director duties and insolvent trading can still expose directors personally.
How cleanly trust assets stay separate from your own
With an individual trustee, trust assets are registered in a person's name, as trustee for the trust. The separation works on paper but blurs in practice. If that person is sued, made bankrupt or goes through a divorce, the question of which assets belong to the trust and which to the individual can take time and money to untangle. With a corporate trustee, the trust's assets sit in the company's name, which keeps the boundary visible to banks, insurers, the ATO and the courts. Cleaner separation also supports asset protection: a creditor of the individual can generally reach only what that individual owns, not assets held by the corporate trustee. That protection is not absolute, and it can be eroded by personal guarantees or by transfers made to defeat creditors, so the structure is only part of the picture.
What happens when the trustee dies or loses capacity
This is where the two options diverge most sharply, and it is the factor people weigh least. Death is the most dramatic trigger, but it is not the only one. An individual trustee who wants to retire, loses capacity or is removed can also be replaced by registered deed under the same provisions of the Trustee Act 1925 (NSW), and an individual trustee's death is simply the clearest example. When it happens, the change of trustee begins immediately. Under s 6 of the Trustee Act 1925 (NSW), a new trustee may be appointed by registered deed where a trustee has died, and under s 9 the deed of appointment vests the trust property in the new trustee. But Torrens system land does not vest until a transfer is executed and registered, and shares need a formal transfer of registration. While the estate is being administered, the trust can sit in limbo, and if the deed or the beneficiaries cannot agree on a replacement, the matter may end up before the court, which can appoint a trustee and make vesting orders under ss 70 and 71.
A corporate trustee, by contrast, is a continuing entity. It does not die. If a director dies or retires, the company's constitution and the trust deed provide for the remaining directors or the appointor to appoint a replacement, and legal title to the trust's assets stays where it is. That continuity is usually the single strongest argument for a corporate trustee where the trust holds land, a business or assets that will outlive the founder.
Regulators treat the same problem as a practical one. The ATO's guidance on choosing an SMSF trustee structure notes that when an individual SMSF trustee dies or leaves, the fund must either appoint another trustee, move to a corporate trustee structure, or wind up, and the ATO must be notified within 28 days of any change. With a corporate trustee, the fund simply changes directors and the asset ownership documents do not change.
What it costs to set up and run each option
An individual trustee costs almost nothing to put in place. The person signs the deed and a consent to act, and no separate entity needs to be registered. A corporate trustee means registering a company with ASIC, which involves a registration fee and an annual review fee, a constitution, a director identification number for each director, and the company's own records and lodgements alongside the trust's. There is also an administration point: the company files its own tax return in addition to the trust's. Where the savings sit depends on the time horizon:
- Cheaper now: an individual trustee, with no registration and no annual fees.
- Cheaper later: a corporate trustee, because changing trustees is usually a matter of changing directors rather than re-registering assets. Every time an individual trustee changes, land transfers, share transfers and other re-registrations may attract duty, registration fees and third-party consent, which can quickly exceed the company's set-up cost.
How each option is taxed (the answer is the same)
The trustee's identity does not change how the trust's income is taxed. A trust is taxed as a flow-through arrangement. Income to which beneficiaries are presently entitled is included in their assessable income and taxed at their marginal rates under s 97 of the Income Tax Assessment Act 1936 (Cth). Income the trust keeps, with no beneficiary presently entitled to it, is taxed in the trustee's hands at a special rate under s 99A, which for most discretionary trusts is the top marginal rate. For 2025-26 that is 45% plus the 2% Medicare levy, per the ATO's resident tax rates, so leaving income undistributed is expensive. In the narrower cases where s 99A does not apply, such as some deceased estate and bankruptcy trusts, s 99 instead taxes retained income at progressive individual rates. A common misconception is that a corporate trustee gets company tax rates on trust income. It does not. The corporate trustee pays tax on the trust's undistributed income at the same special rate an individual trustee would pay, and as a company it separately reports its own income.
How an Artificer Legal lawyer helps you choose and set up the trustee
Choosing a trustee is a decision people often make on the advice of an accountant, and much of it can be worked out on a spreadsheet. The parts that cannot are the legal ones, and that is where an Artificer Legal lawyer adds value. We start by stress-testing the assumptions behind each option against your actual circumstances: what the trust will own, who the beneficiaries are, who might bring a claim against the trustee, and how long the trust is expected to last. We then model the downside. We look at what happens to the trust's land if the individual trustee is sued personally, how distributions are handled if the trustee loses capacity, and how the trust deed's appointor clause operates if a trustee needs to be removed. For a corporate trustee, we draft the company's constitution so it is fit for the trustee role, handle the ASIC registration, make sure each director has a director identification number, and check that the trust deed gives the corporate trustee the powers it needs. Where the trust is already running with an individual trustee and has outgrown the structure, we can plan the switch: appointing the company, transferring the assets, and dealing with the duty and registration consequences. We also check the special regimes that constrain the choice, such as SMSF trustee rules or a lender's requirement for a corporate trustee under a borrowing arrangement.
Start with succession, not the set-up fee
Most people choose an individual trustee because it is cheaper and simpler, and most of the time that is a perfectly defensible decision. But cost is the wrong place to start. The question that takes the most effort to get right is succession: what happens to the trust when the trustee dies, loses capacity or wants out. If the answer is that land and shares have to be re-registered, duty paid and third parties asked for consent while an estate is being administered, the corporate trustee's continuity usually justifies its set-up cost. If the trust holds only cash and marketable securities and the beneficiaries are adults who can act quickly, an individual trustee may be all you need.
The key points to hold onto are these. A trust is not a separate legal entity; the trustee holds the assets for the beneficiaries, and whoever wears that hat is personally liable on the trust's contracts, subject to an indemnity out of the trust's assets. An individual trustee is cheap and simple but exposes a person to liability, blurs asset separation and makes succession depend on re-registering assets. A corporate trustee costs more to establish and maintain but confines liability to the company, keeps trust assets cleanly separated and lets the trust continue through changes of directors. The tax treatment is the same either way, with distributed income taxed in the beneficiaries' hands and undistributed income at the top rate. Settle the deed with an appointor who can remove and replace trustees, and take advice before the trust starts trading or borrowing, because the choice is much harder to unwind once the assets are in.