A family trust deed is often bought as a standard document, signed and filed away. Then a property is sold, a parent dies, a child moves to Singapore or Shanghai, or the tax law changes, and the family discovers how much the deed decides: who benefits, who controls, how income is treated and what can be changed.
For Chinese and Asian families spread across several countries, the deed may also need to deal with foreign-person surcharges, non-resident children and control passing across borders. What a particular deed should contain depends on the family’s circumstances.
Parties and the settlement
The settlor makes the initial gift that creates the trust. Whether the settlor can benefit, and who is an appropriate settlor, can raise tax and validity questions.
A nominal cash settlement is not always free of duty. New South Wales (section 58 of the Duties Act 1997 (NSW)) and Victoria can charge duty on a declaration of trust, and lodgement and stamping requirements apply (as at October 2026).
The trustee
Families often consider a corporate trustee rather than individuals, because assets can stay in the company’s name when people die or fall out. If so, how the company’s constitution and shareholding fit with the deed becomes important.
The deed’s mechanism for replacing a trustee, and for vesting assets in a new trustee, matters in practice. In New South Wales, the duty treatment of a change of trustee can depend on conditions that include whether a trustee is, or can become, a beneficiary.
Beneficiaries
Most deeds name primary beneficiaries and define general beneficiaries widely, with default beneficiaries who take if the trustee makes no choice.
- Exclusions. Whether to exclude the settlor, the trustees or foreign persons can affect tax, duty and land tax. In NSW, a foreign-person exclusion for surcharge purposes must meet specific requirements, including irrevocability.
- Adding and removing beneficiaries. The scope of any such power, and whose consent it needs, deserves attention.
The income clause
Older deeds often raise issues here. In Commissioner of Taxation v Bamford [2010] HCA 10, the High Court considered how “income of the trust estate” is determined under the deed and trust law, and how that relates to the trust’s net income for tax purposes. A mismatch can produce unexpected tax outcomes for beneficiaries.
- Defining income. Some deeds allow the trustee to align trust income with net income for tax purposes or to classify receipts.
- Streaming. Subdivision 115-C (capital gains) and Subdivision 207-B (franked distributions) of the ITAA 1997 permit streaming only where the deed allows it and the requirements, including timing, are met.
- Default beneficiaries. Where no valid resolution is made in time, a default clause can affect who is presently entitled, and the trustee may otherwise be assessed.
Distribution powers
Issues include whether income and capital powers are separate, whether income can be accumulated, whether distributions in specie are permitted, and how loans to beneficiaries are handled.
Where income is appointed to a family company but left unpaid, Division 7A questions can arise. In Commissioner of Taxation v Bendel [2026] HCA 18, the High Court held that such an entitlement is not itself a loan for Division 7A purposes, but other provisions, including section 100A, remain relevant.
Tax elections
A family trust election under Schedule 2F of the ITAA 1936 can affect trust losses and franking credits, but distributions outside the family group can attract family trust distribution tax. Whether the deed supports these elections, and how they affect future distributions, are questions for advice.
The 2026 reforms: build in flexibility
The CGT changes are law: from 1 July 2027, the CGT discount is replaced by indexation and a minimum tax for gains accruing after that date.
A minimum tax on discretionary trusts from 1 July 2028 is proposed in the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026, introduced on 14 October 2026. It is not yet law. Whether a deed gives the trustee enough flexibility to respond once the law is settled is worth considering.
Control roles
The appointor, and any guardian or protector, often holds power to replace the trustee and consent to variations. Succession on death or incapacity, how incapacity is shown, and whether an attorney or legal personal representative can act are common issues. Belfield v Belfield [2012] NSWCA 416 is often referred to on whether an attorney could exercise an appointor’s power, but the result depended on the deed and legislation.
The variation power
The breadth of the power to vary, whose consent it needs and what it prohibits can determine what can be changed later. A variation outside the power may raise resettlement risk.
The vesting date
The permitted perpetuity period differs between states. Queensland changed its rules for trusts governed by its law from 1 August 2025, and South Australia has abolished the rule against perpetuities, subject to the Supreme Court’s power to order vesting.
Other clauses
- Powers: investment, borrowing and guarantee powers, and any anti-Bartlett clause for family company shares.
- Indemnity and exoneration: the trustee’s indemnity and the limits on exoneration.
- Information rights: what beneficiaries may see, including the status of a letter of wishes.
- Governing law and place of administration: and whether these can change if the family moves.
Cross-border clauses
A trust’s residency for tax purposes can depend on where its trustees reside and where its central management and control is exercised (section 95(2) of the ITAA 1936). If trustees or directors move overseas, the trust’s residency can change, with possible CGT consequences.
Where children live overseas, the trustee may be assessed on their share of income, and if a trust becomes foreign, distributions to Australian residents may be taxed under section 99B.
A practical drafting checklist: questions to discuss with your adviser
- Who should be settlor, and has duty been dealt with?
- Should the trustee be a company, and does its constitution match the deed?
- Who are the beneficiaries, and should anyone, including foreign persons, be excluded?
- Does the income clause support equalisation, streaming and tax elections?
- Who controls the trust after the founders, and how is incapacity handled?
- What can be varied later, and when does the trust vest?
An illustrative example
A hypothetical scenario, not a real case.
A Sydney family trust owned a property under an off-the-shelf deed with a wide definition of general beneficiaries. When the family wanted to replace the founder as trustee with a company owned by the children, questions arose about whether the new trustee could itself benefit and how that affected the duty on the change. The right approach depended on facts that needed advice.
Frequently asked questions
What clauses should be in a family trust deed?
Commonly considered clauses deal with trustee replacement, beneficiaries and exclusions, income and streaming, default beneficiaries, distribution and election powers, appointor succession, variation and vesting. Families with overseas members may need further clauses.
Should the settlor of a family trust be a beneficiary?
Allowing the settlor to benefit can raise tax and validity issues, which is why many deeds exclude the settlor.
Is stamp duty payable on a family trust deed?
It can be, even for a nominal settlement, depending on the state.
Every family’s situation is different, and the answer often turns on details. Book a consultation so we can review your documents and circumstances before you act.
How Chua Tan Associates can help
Chua Tan Associates drafts and reviews family trust deeds and corporate trustee constitutions. Justin Chua trained in accounting (Bachelor of Commerce, accounting major), is an affiliate member of STEP (the Society of Trust and Estate Practitioners), and advises on the legal and tax structure of family wealth together. He is a Nationally Accredited Mediator and an Accredited Family Business Advisor. We work with the family’s accountant and registered tax agents, and with lawyers in Asia, and advise in English, Mandarin and Cantonese.
Important: This article is general information only and must not be relied on. It is not legal, tax or financial advice, does not take your circumstances into account, and may not reflect changes in the law after publication. Laws of other countries may also apply. Do not act or refrain from acting on the basis of this article. Reading it or contacting us does not create a lawyer–client relationship. Please book a consultation for advice on your situation.
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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.
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