If you’re a trustee of a family or discretionary trust, a review probably isn’t at the top of your to-do list. That’s fair, but the longer it sits there, the more it can cost you.
Every trust structure carries ongoing obligations. The deed, the distributions, and the trustee resolutions don’t run on autopilot. And skipping even one can create tax exposure for you and your beneficiaries.
This article covers what to look at before you decide whether a restructure is the right move. Read on to see where most trustees drop the ball.
What Is a Family Trust Review, and Why Does It Count?
A family trust review is a structured check of your trust deed, resolutions, and distributions to confirm everything still holds up legally and financially. Across Australia, we’ve seen trustees set up their trust and not check back for years. That’s where problems start.
Here’s what each area actually covers and why it deserves your attention.
What the Trust Deed Actually Controls
The trust deed controls who can receive distributions, what powers the trustee holds, and which assets fall inside the trust estate. It’s the founding document of the whole arrangement. Every decision the trustee makes has to operate within what the deed allows.
Remember that an outdated deed can block legitimate distributions or sit in direct conflict with current tax legislation. (Older deed? Worth a read.) This is far more common in trusts established 10 or more years ago.
So if your deed hasn’t been reviewed since the trust was set up, that’s your first stop.
When Did You Last Check Your Trustee Resolutions?
Suppose you’ve made valid resolutions every year and kept clear records to back them up. That means your beneficiaries are correctly entitled to trust income, and your tax exposure stays minimal.
That said, trustee resolutions must still be made each income year to correctly distribute trust income to beneficiaries.
When you miss the 30 June deadline, the ATO can assess the trustee directly on all trust net income. Equally, vague or incomplete resolutions create the same exposure. The ATO scrutinises these closely, and they need to be clear, dated, and properly documented to hold up.
An earlier date requirement in your deed may also mean your deadline isn’t 30 June at all.
Is Your Family Trust Election Still Valid?
A family trust election locks in the trust’s family group for tax loss and franking credit purposes. It’s one of the more valuable arrangements available to discretionary trusts, but it only works if the family group hasn’t changed in a way that breaks the original conditions.
If new family members, companies, or beneficiaries have come into the picture, the election may no longer reflect the trust’s current structure. Revoking or varying it carries serious tax implications. So, get professional advice before you go near it.
The Trust Restructure Checklist: Where to Begin
Working through a trust restructure checklist early means fewer surprises when tax time or a major family change arrives.
Small businesses and family groups across Australia often put this off until something forces their hand. With the discretionary trust tax checklist, now’s the time to get across your trust structure before anything changes.
Let’s walk through the key areas worth covering before any restructure conversation with your adviser:
- Confirm the Deed Is Current: The trust deed should reflect how the trust actually operates today. Check for any amendments, and confirm the deed gives the trustee the powers needed for the proposed restructure. Note that an outdated deed can restrict your options considerably.
- Check Beneficiaries and Appointors: Review whether current beneficiaries, trustees, and appointors still reflect the family’s intentions. People’s circumstances change, and a deed that hasn’t kept up can create access and distribution problems down the track.
- Review Distribution Records: Go through recent trustee resolutions, tax returns, and distribution minutes for gaps or inconsistencies. The EOFY trust checklist published by the ATO is a solid government reference point for what good record-keeping looks like in practice.
- Consider the Trust Structure: Think about whether the current structure still suits the family’s wealth and asset protection goals. A trust established for one purpose may no longer be the right vehicle as business assets and family dynamics shift over time.
A well-prepared review gives your adviser something concrete to work with. It also means you’re not paying for them to hunt down basic information you could have gathered yourself.
Capital Gains Tax and the Trust Estate: What to Watch
At first, capital gains tax looks straightforward inside a trust. Then you realise the trustee’s resolution determines who pays what and at what rate. Once you get that wrong, the tax consequences land in entirely the wrong place.
So let’s break down what actually needs your attention here.
How Capital Gains Flow Through Discretionary Trusts
In a discretionary trust, trust capital gains don’t flow automatically to beneficiaries. The trustee decides who receives them through a formal resolution each income year. What’s more, without a valid resolution in place, the ATO can tax the trustee directly on the full capital gain at the top marginal rate.
The trust estate must have a presently entitled beneficiary to pass a capital gain through correctly. That determination needs to happen before 30 June. Poor planning at this step can deny individual beneficiaries access to the 50% CGT discount, which is a high cost when you’re dealing with high-value assets.
The 50% CGT Discount: Who’s Presently Entitled?
After confirmation of which beneficiary is presently entitled to a capital gain, you can assess the CGT discount position. Individual beneficiaries can access a 50% reduction on capital gains from assets held for more than 12 months. That’s a meaningful difference when the trust estate holds property or other long-term capital assets.
On top of that, present entitlement must be established in the same income year in which the capital gain arises. A corporate beneficiary isn’t eligible for the CGT discount at all, so the choice of who receives a capital gain has some tax consequences.
Foreign persons also face restrictions, and their entitlements need careful consideration before any distribution is resolved.
Stamp Duty Risks in a Trust Restructure
Many trustees assume a trust restructure is stamp duty-free. In most Australian states, that assumption is wrong. Transferring assets between trusts, or from a trust to a beneficiary, can attract duty and trust obligations that catch people off guard.
Not all restructurings are excluded from duty, even when no cash changes hands. Always get state-specific advice before any dutiable property is transferred as part of a restructure plan.
When Stamp Duty Applies to Trust Assets
Stamp duty applies when dutiable property, such as real estate or certain business assets, is transferred as part of a trust restructure. Each state sets its own rules, so the trigger points and exemptions vary significantly across Australia. In Victoria, for example, duty can apply even where the trustee and beneficiaries remain the same.
State-by-State Differences Worth Knowing
NSW, VIC, and QLD each treat trust-related property transfers differently under their own duties legislation. Some states offer concessions for carefully managed family trust restructures. Others treat those same transfers at open-market rates, with no concession available regardless of the circumstances involved.
How to Reduce Your Stamp Duty Exposure
A duties specialist should review the full restructure plan before any property is transferred. Beyond that, a few practical steps can help reduce your exposure:
- Get state-specific advice early
- Restructure in stages where possible
- Confirm exemptions before any transfer
- Check your deed allows the proposed change
For further information on stamp duty as it applies to your state, contact your state revenue office directly. With duty sorted, the next area worth reviewing is how trust income and distributions are being handled each year.
Trust Income and Distribution: Key Issues to Resolve
Trust income must reach presently entitled beneficiaries before 30 June each year, or the tax consequences are immediate and significant.
Without a presently entitled beneficiary, the trustee gets assessed under section 99A of the Income Tax Assessment Act at 47% tax. At that rate, a poorly timed distribution can wipe out a sizeable chunk of the trust’s net income in one hit.
In contrast, corporate beneficiary arrangements work quite differently. Distributing trust income to a company can reduce the tax paid on that income, since the corporate rate sits well below individual marginal tax rates.
That said, amounts later paid out to shareholders can create double taxation concerns. A non-refundable credit for tax already paid at the corporate level helps offset this, but the arrangement needs to be carefully managed.
Discretionary testamentary trusts are worth noting too. These appear in wills and can distribute income to beneficiaries, including minors, at ordinary marginal tax rates rather than penalty rates. That’s a great advantage for families with children involved in the trust estate.
Past distribution minutes are worth reviewing as well if any gaps appear across prior income years. A clean paper trail protects you if the ATO ever reviews the trust’s net income position.
Reviewing Your Trust Deed Before Any Restructure
Now that distributions and tax are covered, the trust deed itself needs the same level of attention before any restructure moves forward. Across our experience working through these reviews, the deed is where the most overlooked gaps tend to sit.
Here’s a quick reference table of what to check and why it counts:
| What to Check | Why It Counts |
| Trustee powers | Confirms the trustee can legally execute the proposed restructure |
| Beneficiary definitions | Ensures all intended recipients are validly included in the deed |
| Vesting date | Flags whether the trust is approaching its end date |
| Amendment provisions | Shows whether a deed variation is possible without a full resettlement |
| Asset transfer clauses | Confirms the deed permits transfers without triggering stamp duty issues |
| Business name references | Identifies whether any register a business name obligations appear in the structure |
A deed that can’t support the proposed restructure can expose the trust estate to unintended tax consequences, stamp duty liabilities, and in some cases, a full resettlement of the trust.
In short, if a deed variation goes too far, the ATO may treat the trust as a new trust entirely. That determination can trigger capital gains tax on all transferred assets. It’s a significant consideration for private groups with substantial wealth held inside the structure.
Small businesses operating through discretionary trusts face this risk too. A deed variation that inadvertently resets the trust can also affect asset protection arrangements that were carefully established over years. So before any variation is drafted, get a specialist to confirm the scope of what the deed currently allows.
For income tax purposes, the rules around deed variations and trust resettlement are well documented on the ATO website and easy enough to find.
Key Takeaways From a Fruitful Trust Review
A well-run trust review gives trustees a clear picture of what’s working, what isn’t, and what needs fixing before it becomes a liability. When you go through it properly, it puts you in a much stronger position heading into any restructure conversation with your adviser.
These are the areas that consistently come up across a thorough trust review:
- Check the Trust Deed First: The deed sits at the centre of every decision in the trust structure. And honestly, if it doesn’t reflect how the trust currently operates, everything built on top of it becomes shaky. Confirm trustee powers are adequate and that no amendment is overdue.
- Distribution and Tax Records Count: Trust distributions and trustee resolutions need to be correctly documented each income year. Without that, gaps in the record can result in trust income being taxed at the highest marginal rate. Basic housekeeping goes a long way here.
- Capital Gains Need Careful Structuring: Getting present entitlement right across discretionary trusts determines how much tax is paid and by whom. So if capital gains are streamed to the wrong beneficiary, the tax outcome shifts significantly and in the wrong direction.
- Factor Stamp Duty in Early: Duty can catch trustees off guard during a restructure. That’s why reviewing your deed and getting state-specific advice before any assets are transferred is the only way to keep that exposure in check.
- Keep a Paper Trail Throughout: The ATO expects clear documentation of all key takeaways from any trust review. In practice, individual names on resolutions, dates, and distribution amounts all need to appear correctly in your records.
So it’s clear that a trust review isn’t a one-off exercise. Most advisers recommend revisiting these areas every two to three years, or sooner if the family group changes or new business assets come into the trust estate.
Common Mistakes in a Trust Restructuring Checklist
Even experienced trustees make avoidable errors when they work through a trust restructure without proper professional guidance. In our experience with Australian private groups, the same mistakes appear again and again.
The most common mistake? Assuming the original trust deed is still fit for purpose without reading it again. Trustees often operate on the basis that nothing has changed, when in reality the family group has grown, business assets have shifted, and the deed hasn’t kept pace with any of it.
Failing to make annual trustee resolutions on time sits right alongside that. It’s one of the most frequently seen oversights, and the consequences are immediate. When a resolution is missed, the trustee can be assessed on the full net income of the trust at the top marginal rate. That’s a steep price for an administrative slip.
Overlooking state-based stamp duty rules during a restructure is another area where things go wrong. Many trustees assume that transferring assets within a family trust structure attracts no duty. In Victoria and NSW, for example, that assumption can result in unexpected and significant tax bills.
Watch out for these in particular:
- Individual names on transfer documents affect duty calculations
- Asset capacity determines how stamp duty is applied
- State rules vary significantly across NSW, VIC, and QLD
- Timing of transfers can change your duty exposure
And finally, not documenting the reasoning behind distribution decisions is a mistake that’s easy to underestimate.
The ATO has become increasingly focused on trust distributions to low-income beneficiaries under section 100A of the Income Tax Assessment Act. Without clear records showing the commercial rationale behind each distribution, the trust’s position becomes difficult to defend under scrutiny.
Ready to Review Your Family Trust? Start Here
Getting your family trust reviewed now puts you ahead of any compliance gaps before the next financial year closes. Most trustees who wait do so because the process feels overwhelming. In reality, working through it section by section makes it far more manageable than it looks.
A good adviser will help you identify where the deed, distributions, and tax positions need attention. They’ll also tell you whether a full restructure is warranted or whether a targeted fix does the job. Either way, you won’t be guessing.
The team at abmag.com.au covers Australian business and tax topics to help owners and trustees make informed decisions with confidence. If you’d like to contact our experts directly, we’re happy to point you in the right direction.
Frequently Asked Questions
How Often Should a Family Trust Be Reviewed?
The ATO recommends trustees review their family trust election and family group information at least once a year. Beyond that, a full structural review every two to three years is a solid baseline for most discretionary trusts.
Any major change, such as a new beneficiary, a divorce, or a shift in business assets, warrants an earlier review.
What Is the Proposed Minimum Tax on Discretionary Trusts?
As part of the 2026-27 Federal Budget, the Australian Government announced a proposed 30% minimum tax on discretionary trusts from 1 July 2028. This measure is not yet law, so trustees should treat it as a proposed change and seek current advice.
Under the proposal, the minimum tax applies at the trustee level, and non-corporate beneficiaries who are presently entitled to trust income would receive a non-refundable credit for tax paid by the trustee.
Can You Change the Trustee Without a Full Restructure?
Replacing a trustee doesn’t automatically trigger a full trust restructure, but the trust deed must allow for the change. In most states, a deed of retirement and appointment is needed, and the process needs to be documented correctly.
For further information on whether stamp duty applies to the trustee change in your state, check directly with your state revenue office.
What Key Issues Trigger a Trust Restructure?
Several key issues can signal that a restructure is worth considering, including an approaching vesting date, a change in the family group, or a deed that can’t support current distributions.
A corporate beneficiary arrangement that no longer suits the trust’s tax position is another common trigger. A specialist adviser should assess all circumstances before any restructure is executed.
Do Discretionary Trusts Need a New Deed After a Family Change?
A new trust deed isn’t always required when the family group changes, but the existing deed must be reviewed carefully. In some cases, a deed variation is enough to address the change involved.
For others, the scope of the variation may be so significant that a full resettlement is the only option, and that carries both capital gains tax and stamp duty consequences worth considering.
Disclaimer: This article is for general information only and does not constitute financial, tax, legal, or accounting advice. Everyone’s circumstances are different, and you should seek advice from a qualified accountant, tax adviser, or other professional before making any decisions. Australian Business Magazine (ABMAG) is not responsible for any actions taken based on the information in this article.
