Many Chinese and Asian families in Australia set up a family trust decades ago and have not opened the deed since. The tax law and the family have both moved on.
Reviewing an old deed is often worthwhile. But a variation made outside the deed’s power can be invalid, and in some cases a variation can raise questions about whether a new trust has been created, with possible CGT and stamp duty consequences. This article outlines the issues. Whether and how a particular deed can be changed depends on its terms and the facts.
Why old deeds need review
- Income clauses. Some older deeds have no power to align trust income with taxable income, which can produce unexpected tax outcomes.
- Streaming. Capital gains and franked distributions can be streamed under Subdivisions 115-C and 207-B of the ITAA 1997 only if the deed permits it.
- Successor appointors. Control can become uncertain if the sole appointor dies or loses capacity.
- Foreign-person surcharges. Where family members live overseas, a trust holding residential land may face surcharge duty and land tax issues.
- The 2026 reforms. The CGT changes from 1 July 2027 are law. The proposed minimum tax on discretionary trusts from 1 July 2028, in a Bill introduced on 14 October 2026, is not yet law, and may raise questions about trustee powers.
- Vesting dates. Once a vesting date passes, the options narrow considerably.
The variation power
Most deeds give the trustee a power to vary, often subject to someone’s consent. Issues commonly include:
- Who exercises it, and, for a corporate trustee, whether its directors were validly appointed.
- Whose consent is needed, such as an appointor, guardian or protector. Our article on changing the appointor discusses disputes over these roles.
- Formalities, including whether a deed is required and whether retrospective changes are possible.
- Earlier variations, because a defect in one may affect later ones.
Limits on varying
A variation is valid only within the power. Deeds often restrict changes that would benefit the settlor, make the trustee a beneficiary, extend the vesting date beyond what the law allows, or amend the variation clause itself. Some powers allow only administrative changes.
Courts also read amendment powers in light of the trust’s purpose, and a change one deed permits may not be permitted by another.
Resettlement: when a variation creates a new trust
The concern is that a variation might be treated as ending the old trust and creating a new one, which can raise CGT event E1 or E2 and, potentially, tax as if trust assets had been disposed of.
In Commissioner of Taxation v Clark [2011] FCAFC 5, the Full Federal Court held that a trust continued despite substantial changes, including a change of trustee and in its activities, in circumstances the deed contemplated.
Following Clark, the ATO issued Taxation Determination TD 2012/21, which sets out its view on when a variation of a trust deed may or may not cause a CGT event, including where assets come to be held on a separate charter of rights. The ATO has also given guidance on extending vesting dates, and Taxation Ruling TR 2018/6 deals with trusts that have already vested. How these views apply to a particular change depends on the deed and the facts. Our article on family trust vesting dates discusses vesting further.
Stamp duty on variations
Duty is separate from CGT and varies by state.
- New South Wales. Revenue Ruling DUT 017 discusses when a variation may be dutiable, including where it involves a change in beneficial ownership of dutiable property (a head of duty since 19 May 2022).
- Victoria. The State Revenue Office has published its view on when a deed of variation may be dutiable, and lodgement requirements can apply.
- Other states have their own rules.
Practical cases
Adding an income equalisation clause
This type of change is often considered within a standard variation power, and the ATO has discussed it in its guidance. Timing relative to the income year can matter.
Adding a foreign-person exclusion
Removing a class of potential beneficiaries raises CGT, duty and surcharge questions. In NSW, a surcharge exclusion must meet specific requirements, and Revenue NSW has indicated that some approaches may not be enough; our article on foreign beneficiary exclusion clauses discusses these. Excluding an overseas child is also a family decision that interacts with the parents’ Wills.
Adding successor appointors
Whether the variation power extends to the appointor clause, and whose consent is needed, depends on the deed. Where the appointor is elderly, questions of capacity can arise.
Changing to a corporate trustee
A change of trustee does not by itself end the trust, but duty treatment differs between states and can depend on conditions, and assets must then be transferred into the new trustee’s name.
When the variation power is missing or defective
- Court approval. In Victoria, section 63A of the Trustee Act 1958 allows the Supreme Court to approve certain arrangements on behalf of beneficiaries who cannot consent. In New South Wales, section 81 of the Trustee Act 1925 allows the court to authorise particular dealings, but the Court of Appeal has held it does not confer a general power to amend a deed. Other states have their own provisions.
- Agreement of beneficiaries. In limited circumstances, beneficiaries who together are entitled to the whole fund can agree to vary or end a trust, although this is rarely achievable for a discretionary family trust.
An illustrative example
A hypothetical scenario, not a real case.
A trust held shares in a family company that had grown in value. To pass the business to one son, the trustee considered signing a “variation” declaring the shares held for him alone, under a power that allowed only administrative changes. Questions arose about whether the variation was within power, whether it could trigger a CGT event without any sale proceeds, and whether duty would apply. The right approach depended on facts that needed advice.
A review process: questions to discuss with your adviser
- Do we have the original deed and every variation and change of trustee?
- Who holds the variation power, whose consent is needed, and what does it prohibit?
- Which changes are we considering, and why?
- Could any change be treated as a resettlement, or attract duty in our state?
- How do the family trust election, losses and Division 7A affect the plan?
- Do the corporate trustee’s constitution, Wills and powers of attorney need to change too?
Frequently asked questions
Can you amend a family trust deed?
Often, if the deed contains a variation power and the change stays within it. Where there is no adequate power, other avenues may exist in limited circumstances.
Does varying a trust deed trigger a resettlement?
Not necessarily. The ATO’s view is in TD 2012/21, and the answer depends on the power relied on and what the variation does. Variations outside power carry real risk.
Is stamp duty payable on a trust deed variation?
It depends on the state and on what the variation does, particularly whether it affects beneficial ownership of dutiable property. Some states require lodgement.
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 reviews old family trust deeds and prepares deeds of variation, changes of trustee and appointor succession documents. 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, 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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