Voluntary Trusts in Australia: 2025 Guide to Uses and Benefits

As Australians look for smarter ways to manage and protect their wealth, voluntary trusts are emerging as a go-to strategy for individuals and families. With the Australian legal and financial landscape seeing new updates in 2025, understanding how voluntary trusts work—and whether they’re the right fit—has never been more important.

What Is a Voluntary Trust?

A voluntary trust is a legal arrangement where a person (the ‘settlor’) intentionally transfers assets to a trustee, who then manages these assets for the benefit of nominated beneficiaries. Unlike statutory or court-ordered trusts, voluntary trusts are established by choice, allowing for greater flexibility in structure and purpose.

• Discretionary trusts are the most common voluntary trust in Australia, offering trustees flexibility in distributing income or capital.
• Unit trusts allocate fixed entitlements to beneficiaries (unit holders), often used in property or investment syndicates.
• Testamentary trusts are created via a will and come into effect upon the settlor’s death.

Policy Updates and Legal Trends in 2025

The Australian Taxation Office (ATO) and regulators have introduced several changes in 2025 aimed at increasing transparency and compliance around trust structures:

• Expanded Reporting: Trustees must now provide more detailed annual reports, including beneficiary distributions and trust asset valuations, as part of the ATO’s push for transparency.
• Family Trust Elections: New rules clarify who can be designated as beneficiaries to reduce tax avoidance schemes, making compliance checks more robust.
• Digital Trust Deeds: The rise of digital legal services means establishing and amending trusts is more streamlined, with e-signatures and cloud-based records now widely accepted by major banks and the courts.

These changes mean establishing and maintaining a voluntary trust in 2025 requires careful planning, but also offers more options for digital administration and compliance.

Who Should Consider a Voluntary Trust?

Voluntary trusts can be an effective tool for a range of Australians, from family business owners to retirees looking to manage their legacy. Some key benefits include:

• Asset Protection: Trusts can shield assets from creditors, divorce proceedings, or business risks. For example, a family business owner may use a discretionary trust to protect company shares from personal liability.
• Tax Planning: Income can be distributed to beneficiaries in lower tax brackets, reducing the overall family tax burden. With the ATO’s increased scrutiny in 2025, professional advice is vital to remain compliant.
• Succession Planning: Testamentary trusts ensure assets pass according to your wishes and can provide for vulnerable beneficiaries, such as children with disabilities.
• Investment Flexibility: Unit trusts are popular for property syndicates or family investment groups, allowing clear division of returns and responsibilities.

Real-world example: The Nguyen family in Melbourne set up a discretionary trust in 2025 to manage rental properties. The trust distributes income to adult children studying at university, taking advantage of their lower marginal tax rates while also protecting the properties from business risks faced by the parents.

Key Steps to Setting Up a Voluntary Trust in 2025

1. Define the Purpose: Is it for asset protection, family wealth, or business investment?
2. Select Trustees and Beneficiaries: Trustees must be capable and trustworthy, as they control the assets. Beneficiaries should be clearly defined, with flexibility for future changes if needed.
3. Draft a Trust Deed: This legal document sets out the rules and powers of the trust. In 2025, digital trust deeds are standard, but legal review is crucial.
4. Register and Fund the Trust: Open a dedicated trust bank account, register with the ATO for a Tax File Number (TFN), and transfer initial assets into the trust.
5. Ongoing Compliance: Keep detailed records, file annual tax returns, and review the trust’s structure regularly to adapt to changing laws or family circumstances.

Final Thoughts

Voluntary trusts remain one of the most flexible and powerful tools for Australians aiming to secure their financial future in 2025. With updated regulations, digital innovations, and increased scrutiny from regulators, professional guidance and careful structuring are more important than ever. Whether your goal is protecting family wealth, managing investments, or ensuring a smooth succession, a voluntary trust can be tailored to fit your needs.