Key takeaways
- The family members control a trustee company, the trustee company runs the family trust, and the trust owns the trading company.
- The trading company runs the business and can pay dividends up to the trust, which then distributes income to beneficiaries.
- Holding the shares in a trust can help with asset protection, and a corporate trustee limits the trustee's liability.
- It costs more to run than a simple company, and proposed trust tax changes from 1 July 2028 need to be factored in.
One of the most common structures we set up for growing businesses is a trading company owned by a family trust, with a company acting as the trustee. It can look complicated on paper, so we made a short whiteboard video that walks through how the pieces fit together. The full transcript is below.
Video transcript
Intro
Let’s look at a common structure for a small business: a trading company owned by a family trust, with a company acting as the trustee.
The individuals
It starts with the individuals. Usually the family members behind the business.
Corporate trustee
They set up a company to act as trustee. The individuals are its directors and shareholders, so they control the trustee company, and through it, the trust.
Family trust
The trustee company runs the family trust, which is a discretionary trust. The individuals, and often other family members, are its beneficiaries.
Trading company
Rather than the individuals owning the business directly, the family trust owns all the shares in the trading company. The trading company runs the business, and the individuals usually sit on its board as directors.
Income flows
When the business makes a profit, the trading company can pay dividends up to the trust. The trustee then decides each year how to distribute that income among the beneficiaries.
Why use it
So why use this structure? The shares are held by the trust, not by the individuals personally, which can help with asset protection. A corporate trustee limits the trustee’s liability, and makes changes of control simpler over time. And the discretionary trust gives flexibility in how income is distributed each year.
Close
That’s the structure in a nutshell. The individuals control the trustee company, the trustee company runs the family trust, and the trust owns the trading company. This is general information only, and not financial or tax advice. Speak with your accountant before setting one up.
What to weigh up
This structure can work very well, but it isn't right for everyone. A few things to think about before setting one up:
- More entities, more running costs. You'll have two companies and a trust, each with its own registrations, tax return and ongoing obligations, such as ASIC annual fees for both companies.
- Trust distributions need planning every year. The trustee generally needs to decide how income is distributed by 30 June, and the decision needs to be properly documented.
- Franking credits. Dividends from the trading company usually come with franking credits. To pass these through to beneficiaries, many family trusts need to make a family trust election, which has its own consequences.
- Proposed trust tax changes. The 2026–27 Budget proposes a 30% minimum tax on discretionary trusts from 1 July 2028. It isn't law yet, but anyone setting up or reviewing a trust structure should factor it in. Read our explainer on the proposed changes.
- Getting the paperwork right. The trust deed, the trustee company, and the share register showing the trust as owner all need to be set up correctly from the start. Fixing them later can be costly.
We set up and look after these structures, from the initial advice and registrations through to the yearly accounts, tax returns and trust distributions. See our company and trust services or book a free consultation to talk through whether it suits your business.
Sources
Last reviewed 16 October 2026. This article is general information only and doesn't take into account your personal circumstances. It isn't tax, legal or financial advice. Tax laws change, and proposed measures may change before they become law. Talk to us before acting on anything here.
