Many Chinese and Asian families in Australia set up a family trust in the 1980s or 1990s to run the business, hold property or invest. The founders have often never looked at the trust deed since. Somewhere in it is a date, sometimes only a few decades after the trust started, when the trust “vests”.
When that date arrives, the trustee’s flexibility to decide who benefits usually ends, and the family can face unplanned tax and duty costs. Children may live in Singapore or Shanghai, and nobody may be sure who controls the trust. This article explains what happens when a family trust vests and what can be done beforehand.
What does vesting mean?
A family trust is usually a discretionary trust. Until vesting, the trustee chooses each year which beneficiaries receive income and capital. On the vesting date, the beneficiaries’ interests become fixed. The deed says who takes: often the children or grandchildren living at that date, in equal shares, or a list of “default beneficiaries”.
The deed may set a fixed date, a number of years, or an event. Many deeds also let the trustee bring the date forward.
The 80-year limit and how it differs by state
Trust deeds have vesting dates because of the rule against perpetuities, which stops property being tied up for too long. Most Australian states and territories allow a maximum perpetuity period of 80 years. In general terms:
- Victoria, New South Wales, Western Australia, Tasmania, the ACT and the Northern Territory: a trust generally cannot run for more than 80 years. Many older deeds chose a much shorter period.
- Queensland: from 1 August 2025, the Property Law Act 2023 (Qld) allows trusts governed by Queensland law to last up to 125 years. Existing trusts may be able to use the longer period only if the deed or the beneficiaries’ consent or a court allows the vesting date to be varied, and before the current date passes.
- South Australia: the rule against perpetuities has been abolished, so a trust governed by South Australian law need not have a vesting date. However, where interests remain unvested 80 years or more after the trust was created, the Supreme Court may, on application, order that they vest.
Which state’s law governs a trust also depends on where it is administered, not just on the deed.
What happens when a family trust vests
Loss of discretion
After vesting, the trustee can no longer choose who benefits. The trust may continue to exist, with the trustee holding the assets for the fixed takers, but income must follow their fixed entitlements.
The ATO’s view, in Taxation Ruling TR 2018/6, is that once the vesting date has passed, it is too late to change it. Continuing to run the trust as if nothing happened does not extend the date. Income after vesting belongs to the takers on vesting, and the trust’s tax returns should reflect that.
Capital gains tax
Vesting by itself does not usually create a new trust. But CGT events can arise depending on what happens:
- if assets are transferred to the beneficiaries, a CGT event will usually occur for the trust;
- if a single beneficiary becomes absolutely entitled to an asset, that can also be a CGT event; and
- if the family tries to continue the trust on new terms after vesting, the ATO may treat that as creating a new trust, which is a CGT event for the assets.
The CGT reform that is now law changes how gains are calculated from 1 July 2027, replacing the 50% discount with indexation and a 30% minimum tax for gains accruing after that date. For trusts vesting after that date, valuations at 1 July 2027 will matter.
Stamp duty and land tax
Transferring land or business assets out of a trust to beneficiaries can attract stamp duty. Some states have exemptions or concessions for distributions from a trust to a beneficiary who was already a beneficiary, but the conditions are strict and differ by state. A transfer to a foreign person may attract surcharge duty and land tax surcharges.
Options before the vesting date
The key point is timing. Options exist before the vesting date. After it, they are very limited.
- Extend the vesting date under the deed. Many deeds give the trustee power to vary the deed or nominate a different vesting date. If that power is used properly and the new date stays within the perpetuity period, the ATO accepts that this does not create a new trust or a CGT event.
- Apply to the Supreme Court. If the deed gives no power, the trustee may apply to the court of the relevant state to vary the trust.
- Plan an orderly vesting. Sometimes vesting is the right outcome, if planned and modelled in advance.
The resettlement risk
Changing a trust deed can carry a risk that the trust is treated as “resettled”, meaning a new trust is created and the assets are treated as disposed of. The ATO’s general view, following court decisions, is that a variation made under a proper power in the deed does not of itself create a new trust, as long as the trust continues with continuity of property and membership. Changes that go beyond what the deed permits, or that alter the trust’s essential nature, carry more risk. Each variation needs careful drafting.
Family trust elections and trust losses in brief
Many family trusts have made a family trust election. This helps with the trust loss rules and franking credits, but distributions outside the nominated family group attract family trust distribution tax at the top rate. Vesting, extending the date or restructuring should be checked against any election. Losses carried forward by the trust may be lost if the trust ends or its beneficiaries change, so the effect on losses is part of the planning.
Checklist: is your trust approaching its vesting date?
- Find the original trust deed and every variation, and confirm the vesting date.
- Identify the appointor, the trustee and its directors, and the default beneficiaries.
- Check whether the deed allows the vesting date to be varied, and the limits on that power.
- Confirm which state’s law governs the trust.
- Ask your accountant to model CGT, duty and loss consequences of vesting versus extending.
- Make any extension well before the date, by a properly executed deed.
Frequently asked questions
What happens when a family trust vests?
The trustee loses the discretion to choose who benefits, and the takers named in the deed become entitled to the income and capital. The trust may continue for them or be wound up, and transferring assets can trigger CGT and stamp duty.
How do I find my family trust vesting date?
It is in the trust deed, usually in the definitions section under “vesting date”. Check the original deed and all later variations, because a variation may have changed the date. Your accountant or lawyer can help you locate and read it.
Can a family trust vesting date be extended?
Often yes, but only before the date passes and only within the perpetuity period, generally 80 years (125 years for Queensland trusts from August 2025). It must be done under a power in the deed or by court order. After vesting, it is too late.
Does a family trust have to vest after 80 years in South Australia?
South Australia has abolished the rule against perpetuities, so a trust governed by its law need not have a vesting date. But the Supreme Court can order interests to vest if they remain unvested 80 years or more after the trust started.
How Chua Tan Associates can help
A trust’s vesting date is often the moment a family realises it has not planned who will control the trust, or how assets should pass. Chua Tan Associates reviews trust deeds, prepares deeds of variation and extension, advises on the chain of control from appointor to trustee company, and coordinates the trust plan with the family’s Wills. Justin Chua trained in accounting and is an Accredited Family Business Advisor, and we work alongside the family’s accountant, with lawyers in other states and overseas where beneficiaries live elsewhere, in English, Mandarin and Cantonese. Because vesting has tax and duty consequences, we recommend getting advice from a qualified tax adviser working together with your lawyer well before the date.
Related reading
Chua Tan Associates acts for families, executors, trustees and their professional advisers in estate planning, estate administration and estate disputes in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice.
简体中文 
English (Australia) 
繁體中文