In 2025, the concept of an ‘account in trust’ is more relevant than ever for Australians navigating estate planning, investments, and family finance. Recent regulatory changes and heightened compliance requirements have transformed how trust accounts function, impacting everyone from parents saving for their children to business owners managing client funds. Here’s a deep dive into what’s new, what’s essential, and how to make the most of an account in trust in today’s financial landscape.
What is an Account in Trust?
An account in trust is a financial account held by one party (the trustee) on behalf of another (the beneficiary). In Australia, trust accounts are widely used in scenarios such as:
- Parents or grandparents managing savings for children
- Solicitors or real estate agents holding client funds
- Business owners managing deposits or advance payments
The trustee is legally responsible for managing the funds according to the trust’s terms, and the beneficiary is the ultimate owner, even if they can’t access the money immediately.
2025 Regulatory Updates: What’s Changed?
Several policy changes in 2025 have reshaped the landscape for trust accounts in Australia:
- Enhanced Reporting Standards: The ATO’s 2025 compliance reforms require more detailed reporting of trust account transactions to combat tax evasion and ensure transparency.
- Digital Verification: All new trust accounts must now undergo digital identity verification for both trustees and beneficiaries, streamlining onboarding but raising the bar for due diligence.
- Interest Distribution Rules: The Australian Prudential Regulation Authority (APRA) updated rules clarify how interest earned on trust accounts is taxed and distributed, particularly for minors and non-resident beneficiaries.
For example, a Melbourne law firm now faces monthly digital reporting requirements for its client trust account, while a parent opening a savings account for a child must provide biometric ID verification at most major banks.
Real-World Uses and Practical Considerations
Trust accounts aren’t just for the wealthy or corporate clients. Everyday Australians use them for:
- Children’s savings: Parents can open a trust account at banks like NAB or Westpac, ensuring funds are legally separated and protected until the child comes of age.
- Property transactions: Trust accounts are mandatory for solicitors and real estate agents handling deposits, providing legal safeguards for buyers and sellers.
- Family trusts: Investors use trust accounts to manage assets for tax efficiency and estate planning, especially after the 2025 tightening of family trust beneficiary rules.
Key tips for managing an account in trust in 2025:
- Stay compliant: Keep up with digital verification and reporting requirements.
- Understand tax implications: Income from trust accounts may need to be reported under the beneficiary’s TFN, especially for minors.
- Document everything: Maintain clear records of deposits, withdrawals, and beneficiary instructions to avoid disputes or compliance issues.
Potential Pitfalls and How to Avoid Them
While trust accounts offer flexibility and protection, they also come with risks:
- Mismanagement: Trustees have a legal duty to act in the best interests of the beneficiary. Misuse of funds can lead to civil or even criminal penalties under Australian law.
- Tax surprises: If trust income is not distributed as required, penalty tax rates may apply—especially following the ATO’s 2025 trust income crackdown.
- Access issues: Beneficiaries may not be able to access funds until a specified event (such as turning 18), so it’s important to structure the trust terms carefully.
For example, a family who set up a trust account for a child’s education must ensure distributions are properly documented to avoid triggering penalty tax rates under the new ATO guidelines.
Conclusion: Make Trust Accounts Work for You in 2025
Trust accounts remain a powerful tool for protecting assets, managing family wealth, and ensuring regulatory compliance in Australia. With the 2025 reforms, the key is to stay informed, embrace digital processes, and keep meticulous records. Whether you’re a parent, investor, or business owner, understanding the new rules can help you unlock the full benefits of an account in trust—safely and efficiently.
