What is a trust?

A trading trust is usually an entity that holds property (capital) for certain beneficiaries.

This type of business structure is formed when a gift or settlement is made to a trustee (a person or a company) on behalf of a trust that's yet to be formed. A solicitor then draws up a trust deed that sets out the trust's powers and formalises its administration.

While there may be ease of succession in a trust business structure, trading trusts are a complex and expensive business structure. They're also subject to higher compliance costs.

How to register as a trust

If you decide that starting a trust is the right choice, follow these steps to register:

  1. Decide if you want to register a business name (you only need to do this if you're using a name other than your personal name).
  2. Check to see if the business name is available.
  3. Make sure it doesn't infringe on existing trade marks.
  4. Use the Business Registration Service to register your business name.
  5. Get your solicitor to draw up a trust deed.
  6. Apply for the relevant licences and registrations.

Licences and registrations for a trust

A trust usually needs to register for the following registrations:

  • Australian business number (ABN) – The trustee must register for an ABN for the trust if the trust is carrying on an enterprise in Australia.
  • Tax file number (TFN) – A trust must have its own TFN to use when lodging its annual tax return. The trustee can apply for it on the application form for an ABN.
  • Goods and services tax (GST) – If the trust is carrying on an enterprise and its turnover is $75,000 or more, it must register for GST. For non-profit organisations, the registration threshold is $150,000.

Other licences and permits

Check the Australian Business Licence and Information Service (ABLIS) to find other local, state and federal licences, registrations and permits that you need for your business.



Other things to consider

Employing staff

If a trust employs people, the trustee will be responsible for paying:

Distributing income

Rather than shareholders, a trust has beneficiaries who are entitled to distributions of capital and income. These distributions are controlled by the trustee and form part of a beneficiary's personal income, subject to income tax and provisional tax.

Winding up a trust

A trust can be wound up and the assets distributed, but only with the consent of the beneficiaries. Getting consent can be difficult in situations where beneficiaries are:

  • children, or
  • specified by class rather than by name (such as the 'siblings' or 'grandchildren' of the primary beneficiary)

If you're considering using this structure, carefully consider any tax savings and the potential difficulties involved in winding up.