In many Chinese and Asian families, the family trust is run by the parents through a trustee company, with the children as beneficiaries. Each year the accountant sends a distribution resolution in June, someone signs it, and life goes on. For years nobody asks how those decisions were made.
That changes when a parent dies, a sibling feels left out, a child separates, or the ATO reviews the trust. Then the question becomes whether the trustee’s decisions were properly made and recorded. This article explains, in general terms, the duties of a family trustee in Australia and the habits that help decisions stand up.
What a family trustee must do
A trustee holds property for others, not for itself. The trust deed sets out the trustee’s powers, and the general law and state trustee legislation (in Victoria, the Trustee Act 1958) add duties on top. In broad terms, a trustee of a discretionary trust must:
- Act honestly and in good faith, for the purposes for which the power was given, and not for an improper or collateral purpose.
- Give real and genuine consideration to whether and how to exercise a discretion. Australian courts have long held that they will look at whether a discretion was actually exercised properly, rather than substituting their own view of the best outcome.
- Inform itself of relevant matters, including who the beneficiaries are and, in an appropriate case, their circumstances.
- Avoid conflicts between its own interests and its duty, unless the deed permits the conflict and the trustee handles it properly.
- Keep proper accounts and records, and keep trust property separate from its own.
- Act within the deed. A distribution to someone who is not a beneficiary, or made in a way the deed does not allow, may be invalid.
Genuine consideration: what the courts have said
For many years, families assumed that a discretionary trustee could simply distribute as it liked, and courts would rarely interfere. The traditional position, often traced to the Victorian decision in Karger v Paul [1984] VR 161, is that a court asks whether the discretion was exercised in good faith, upon real and genuine consideration and for its proper purposes, but does not ask whether the decision was the wisest one.
More recent Victorian Court of Appeal decisions have shown that these duties have real content. In Owies v JJE Nominees Pty Ltd [2022] VSCA 142, a family trust had distributed income for years in fixed proportions among family members. The Court found that the trustee had not properly informed itself about the circumstances of two of the primary beneficiaries before making its decisions, and the trustee was removed and replaced by an independent trustee. Signing the same resolution every year without thinking about the beneficiaries carries risk.
Distribution resolutions and the 30 June deadline
For tax purposes, the ATO’s guidance is that a resolution distributing trust income for an income year must generally be made by 30 June, the end of that income year. If the trust deed requires an earlier date, the deed’s date applies. Points to note from the ATO’s guidance (as at October 2026):
- The ATO does not prescribe a form, because deeds differ. Whether the resolution must be in writing depends on the deed, but the ATO recommends a written record.
- To stream franked distributions to particular beneficiaries, the entitlement must be recorded in writing by 30 June. To stream capital gains, the relevant entitlement must generally be created and recorded by 31 August after the end of the income year.
- A resolution can use a clear method, such as a percentage of the income, rather than a dollar figure that is not yet known.
- If no beneficiary is presently entitled to the income at 30 June, or the resolution is ineffective, the income may be assessed to a default beneficiary or to the trustee, and trustee assessments can be at the top rate.
The ATO also scrutinises arrangements where one beneficiary is made entitled but someone else actually benefits (section 100A of the Income Tax Assessment Act 1936), so the money should be dealt with consistently with the resolution.
Minutes: the record of how the decision was made
A distribution resolution says what was decided. Good minutes also show how. For a family trustee company, useful minutes record:
- the date, who attended, the power being exercised and the beneficiaries considered;
- the information the directors had, such as the accounts, the accountant’s advice and any relevant beneficiary circumstances;
- any conflicts declared and how they were handled; and
- the decision itself, in terms that match the deed.
A trustee is generally not obliged to give beneficiaries its reasons for a discretionary decision, but if reasons are recorded and disclosed, a court may examine them. Minutes should be accurate and measured, not a script.
Using advisers without handing over the discretion
Trustees may, and often should, take advice. Victorian law allows trustees to employ agents, such as accountants and lawyers, to carry out trust business. Relying in good faith on competent advice is an important protection.
What the trustee generally cannot do is hand over the discretion itself. A family trustee who simply signs whatever the accountant prepares, without understanding or considering it, risks a finding that no real decision was made. The accountant can recommend; the trustee must decide.
When family members are both trustee and beneficiary
In most family trusts the parents are directors of the trustee company and also beneficiaries, and later the children may be too. Family trust deeds usually allow this, but a conflict does not disappear just because it is permitted. Consider a family where the eldest son, as sole director, distributes most of the income to himself and his own company after his father’s death, while his sisters receive little. Even if the deed allows it, his sisters may question whether he gave genuine consideration to all the beneficiaries.
Practical safeguards include having more than one director, declaring interests at each meeting, giving reasons in the minutes where a director benefits, and setting out in a family charter how the trustee will consider each branch of the family.
Checklist for a family trustee
- Read the trust deed and any variations, and note the beneficiaries, the income definition and any resolution deadline.
- Diarise a trustee meeting in early June each year, well before 30 June.
- Obtain draft accounts or estimates and the accountant’s written recommendation.
- Consider each beneficiary, including those you are not distributing to, and their circumstances.
- Make a written resolution that matches the deed and the tax requirements, including any streaming.
- Keep signed minutes and supporting documents with the trust records.
- Pay or deal with distributions consistently with the resolution.
Frequently asked questions
What are the duties of a trustee of a family trust?
In general terms, a trustee must act honestly and within the trust deed, give real and genuine consideration to its decisions, consider the beneficiaries, avoid unmanaged conflicts, and keep proper accounts and records. The deed and state trustee legislation add more specific rules.
Does a trust distribution resolution have to be made by 30 June?
Generally yes. The ATO’s guidance is that income distribution resolutions should be made by 30 June each year, or by an earlier date if the deed requires. A written record is recommended and is needed to stream franked distributions; capital gains streaming generally has until 31 August.
Can a trustee just follow the accountant’s advice?
A trustee can and should take advice, and acting on competent advice in good faith is a protection. But the trustee must still make the decision itself and understand what it is deciding. It cannot simply hand its discretion to the adviser.
How Chua Tan Associates can help
Chua Tan Associates helps family trustees understand their deed, set up a simple annual decision process, and prepare resolutions and minutes that reflect genuine decisions. We review the chain of control from appointor to trustee company to directors, advise on conflicts when parents and children are both trustees and beneficiaries, and help families with members overseas make decisions properly at a distance. Justin Chua trained in accounting and is an Accredited Family Business Advisor and a Nationally Accredited Mediator and Family Dispute Resolution Practitioner, and we work alongside the family’s accountant in English, Mandarin and Cantonese. Because the tax rules are detailed, we recommend that distribution decisions are made with advice from a qualified tax adviser working with your lawyer.
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