Trust property has long been a pillar of Australian wealth management, enabling families, investors, and business owners to structure their assets efficiently. But in 2025, a wave of policy changes has altered the landscape for trusts—impacting taxation, reporting, and compliance. Whether you’re considering setting up a family trust, already have property held in trust, or want to understand the implications for your business, it’s crucial to stay up-to-date with the new rules and opportunities.
What Is Trust Property and Why Do Australians Use It?
At its core, trust property refers to assets held by a trustee on behalf of beneficiaries, under a legal arrangement known as a trust. The trustee has a fiduciary duty to manage those assets according to the terms of the trust deed. In Australia, common types of trust property include real estate, shares, business assets, and cash.
- Family trusts are popular for protecting family wealth, managing succession, and distributing income tax-effectively.
- Unit trusts are frequently used for property syndicates and joint ventures.
- Testamentary trusts are established via wills to manage assets for minor or vulnerable beneficiaries.
The reasons Australians use trusts are varied:
- Asset protection from creditors or marital disputes
- Tax planning by distributing income to beneficiaries in lower tax brackets
- Succession planning for smoother transfer of assets between generations
For example, a Melbourne family with an investment property portfolio may hold assets in a discretionary trust, allowing them to distribute rental income to family members in the most tax-efficient way, while also sheltering the properties from personal liabilities.
2025 Policy Updates: What’s Changed for Trust Property?
Recent years have seen the Australian Taxation Office (ATO) and regulators ramp up scrutiny on trusts, particularly around tax avoidance and transparency. The 2025 federal budget introduced several key changes:
- Expanded reporting requirements: All trusts (except bare trusts) must now provide detailed annual disclosures, including beneficiary details and asset registers, as part of new anti-money laundering measures.
- Clarity on “income of the trust estate”: The definition has been tightened to close loopholes around streaming capital gains and franked dividends, impacting how family trusts distribute certain types of income.
- New tax integrity measures: The ATO has been granted additional powers to review distributions to adult children and non-residents, targeting arrangements deemed to have a “tax avoidance purpose”.
These changes mean trustees and beneficiaries must be more diligent than ever. For example, a Queensland small business owner using a family trust structure will need to keep meticulous records and ensure distributions are commercially justifiable, or risk ATO audits and penalties.
Trust Property in Practice: Risks, Rewards, and Real-World Examples
Trust property offers significant advantages, but also comes with responsibilities and risks. Here’s how it plays out in real life:
- Case Study: The Family Farm
A rural NSW family holds their generational farm in a discretionary trust. When the matriarch passes away, the trust structure enables smooth succession to her children, without triggering stamp duty or capital gains tax—provided the trust deed is up to date and all compliance requirements are met under 2025 rules.
- Case Study: Small Business Succession
A Sydney café owner uses a unit trust to bring in investors. When selling the business, the trust structure helps distribute proceeds among unit holders according to their stake. But under the 2025 reporting regime, all beneficial owners must now be disclosed to the ATO, increasing transparency but adding to compliance costs.
Common risks and pitfalls include:
- Failing to update the trust deed to reflect legislative changes
- Distributing trust income in a way that breaches the “beneficiary entitlement” rules
- Not keeping adequate records, leading to disputes or ATO penalties
In 2025, the margin for error is slimmer. Trustees need to be proactive, seeking up-to-date legal and accounting advice to ensure their trust arrangements remain compliant and effective.
Looking Ahead: Is Trust Property Still Worth It?
Despite increased regulation, trust property remains a powerful tool for asset protection, tax planning, and wealth transfer—especially for families and business owners with significant assets. The key is to adapt to the new landscape:
- Review trust deeds regularly to ensure they meet the latest legal requirements
- Document the purpose and commercial rationale for all distributions
- Embrace transparency: With regulators demanding more disclosure, robust record-keeping is non-negotiable
With careful management, trusts can still deliver substantial benefits. But the days of “set and forget” are over.
