Setting up a Trust

There are dozens of types of trusts, and XETA works with all types.

A trust is different from a sole trader or a company.

It’s a separate legal entity established by law to be managed by a trustee for the benefit of the beneficiaries. You could set up a trust to manage your properties and investments for the future wellbeing of your family, or you could set up a business under the trust to manage a business and use the business to help your beneficiaries.

The trustee needs to be someone of integrity who can understand their trustee obligations, such as acting in good faith

A trustee of a trust doesn’t necessarily have to be a professional. The trustee needs to be someone of integrity who can understand their trustee obligations such as acting in good faith. They need to be able to carry out their duty to act in the best interest of beneficiaries – not themselves. Most of the time, the most suitable trustee structure for a trust will be a newly incorporated proprietary company (Pty Ltd). One or more individuals will be appointed as directors of the trustee company. 

When you create a trust, it is important to consider who the ‘appointor’ of the trust is.  An appointor (also sometimes called the principal) is defined as a person with the ultimate power to appoint and remove trustees. 

Once the key decisions around selecting the trustee and appointor of the family trust is made, the next step is to draft the trust deed.

XETA's Trust Process

XETA provides trust set-up services for the standard types, and we have exclusive agreements with lawyers & solicitors in every state in Australia if you need to specialise and tailor your trust. We always recommend using our legal teams to consult, provide advice and oversee the trust establishment structure with our expert Tax Agents at XETA.

An important step in setting up a trust is settlement. Settlement involves an independent person unrelated to the beneficiaries transferring a settlement sum (usually $10) to the trustee. There needs to be a physical transfer of the settlement sum from the settlor to the trustee and this amount should be the first deposit into the bank account when the trust bank account is set up.  The settlor must hand over the settlement sum to the trustee to be held on the terms of the trust (as per the trust deed) for the benefit of the beneficiaries. The trustee must issue a receipt to record this has occurred. This is the point at which the trust is created because, by executing the trust deed and providing the settled sum:
  • the settlor has put the trustee in charge of trust property;
  • the settlor has defined for the trustee which persons fall within the class of beneficiaries, as stated in the trust deed; and
  • the trustee has agreed to act.
  • The settlor then steps out of the picture.
From a legal perspective it is advisable to limit the settlor’s role in a trust to the initial establishment of the trust and payment of the settled sum. To avoid the perception that the settlor’s declaration of trust is revocable (i.e. they can make changes to the trust, beneficiaries or even close the trust down), the settlor should be unrelated to the trustee and the beneficiaries of the trust. At this time the trustee(s) of the trust sign the trust deed to accept the appointment of trustee(s) of the trust.  By signing the trust deed they agree to be bound by the rules contained within the trust deed.
Whether a trust deed needs to be stamped and pay stamp duty or not is dependent on the State or Territory the trust is established in.
State / TerritoryStamping Instructions and Costs
NSWNeeds to be stamped by a registered OSR lodger within 3 months from date of execution. $500 ($10 per additional stamped copy).
VICNeeds to be stamped by a registered Duties Online Agent within 30 days from the date of execution. $200 (No charge for additional copies).
ACTStamping not required. Stamp duty is not payable.
QLDStamping not required. Stamp duty is not payable.
SAStamp duty is not payable, but deeds may still be stamped ‘exempt’.
WAStamping not required. Stamp duty is not payable.
NTStamping via NT Commission of Taxes within 60 days from the date of execution. $20 ($5 per additional copy).
TASStamping by SRO Tasmania within 90 days from the date of execution. $50 (no charge for additional copies).

Once the trust has been set up, XETA applies for the Australian Business Number (ABN) as well as the Tax File Number (TFN). This usually takes a couple of days. It can, however, take up to 28 days for the ABR to issue the ABN for a trust if they need to undertake any manual checks of the details provided as part of the registration.

We are often asked how to set up a trust account at a bank for a trust. A bank account should be opened in the name of the trustee (e.g. Trustee Company Pty Ltd) as trustee for the family trust.

A bank will typically require the ABN and TFN for the trust, as well as a copy or certified copy of the trust deed. In addition, a bank or other institution may also want to see a copy of the constitution, ASIC extract or Certificate of Incorporation for the trustee company.

The settlement sum should be the first deposit into the bank account of the trust.

An often overlooked aspect of setting up a family trust is choosing the correct bank account. Trustees of a trust need to ensure the main bank account is fit for purpose. They need to consider what it is going to be used for and who will need access.

For example, will it be used to execute investment purchases, or is it going to be a transacting account for a business? Does the bank account provide a data feed into the Trust’s online accounting software, such as Xero?

Once the bank account is set up and active, the family trust is officially operational and can receive additional capital via borrowings (including loans from beneficiaries), purchase investments and operate a business.

XETA helps you manage your trust’s compliance and regulatory activities to any level of detail you require. We make it easy for you.

Talk to our accounting & tax experts anytime you need!


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