Benefits of Discretionary Family Trusts​

We have recently seen some negativity around the use of trusts in family owned businesses.

Discretionary family trusts are a little more complicated than a partnership or company however the benefits of trusts quite often outweigh the complication and/or additional costs. They are therefore a very useful tool when it comes to tax minimisation particularly for use as service entities or for holding investments such as ownership in medical practices or shares.

A trust is an entity that holds assets for the benefit of its beneficiaries.

There are three important roles within any trust:

  1. Appointor – has ultimate control of the trust and can remove the trustee at any point in time
  2. Trustee – controls the day to day activities and is to act in the best interest of the beneficiaries of the trust. Is the legal owner of any assets
  3. Beneficiaries – receive distributions of income and capital at the discretion of the trustee

Due to the discretionary power given to the trustees, distributions of income and capital can vary in both amounts and beneficiaries from year to year. This becomes a very useful tool in minimising the tax payable by a family group.

Some of the benefits and costs associated with operating a business or holding investments through a trust are as follows:


  • Asset protection – If a person is not the appointor and is only a beneficiary of a trust, the person is only entitled to the share of undrawn income or capital they have been distributed in the current and prior years (e.g. if the trustee has declared a $50,000 distribution and $20,000 has been taken in cash from the business, $30,000 is the only amount owing to that person)
  • Flexibility – can change the amount of income and capital distributions from year to year and between beneficiaries
  • Succession planning easier – a simple change of appointor can allow control of the assets to pass between generations. No capital gains tax (CGT) nor stamp duty payable if there is a mere change in appointorship
  • Can access 50% CGT discount on assets held for more than 12 months
  • Can access Small Business tax concessions (if certain eligibility criteria are met)
  • Can access Small Business CGT concessions (if certain eligibility criteria are met)


  • Yearly compliance – slightly more complicated than a partnership and therefore compliance costs slightly more
  • Cannot use losses to offset other income (losses are quarantined in the trust for recoupment in later years)
  • Discretionary trusts can’t receive personal services income such as patient fees as this income is derived by medical practitioners individually or in partnership. Trusts can receive business income, service fees and investment income.

For further information

If you wish to discuss the use of discretionary family trusts in your business circumstances, please contact Rebecca Zuromski, Health Services Manager at William Buck on (08) 8409 4333 or email

Disclaimer: The contents of this article are in the nature of general comments only, and are not to be used, relied or acted upon without seeking further professional advice.  William Buck accepts no liability for errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice.  Liability limited by a scheme approved under Professional Standards Legislation.

Benefits of Discretionary Family Trusts​

Rebecca Zuromski

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