Blue Orchid Accounting - Pattern

Advantages and Disadvantages of a Trust Business Structure


A Trust is formed when a trustee holds the assets and runs the business, distributes incomes to beneficiaries, and follows the provisions in the trust deed. Consider a Trust if more than one family is involved in running the business. 

If you use a trust for your business structure, the trust: 

  • must have its own tax file number (TFN) for lodging its annual tax return
  • must apply for an ABN and use it for all business dealings
  • must be registered for GST if annual GST turnover is $75,000 or more
  • may be liable to pay tax depending on the wording of its deed and whether any income the trust earns is distributed to its beneficiaries
  • may be able to access small business tax concessions
  • must pay super for any of its employees (this may include the trustee if they are also employed by the trust).


Who pays income tax? 

While a trust must lodge an annual tax return, whether the trust pays tax (or not) is determined by how the trust income is distributed: 

  • if all trust income is distributed to adult resident beneficiaries, the trust is not liable to pay tax – each beneficiary reports the income in their own tax return
  • if all or part of the net trust income is distributed to non-residents or minors, the trustee is assessed on that share on behalf of the beneficiary – these beneficiaries may need to declare their share of the trust’s net income in their own income tax returns, and can claim a credit for the tax paid on their behalf by the trustee
  • where the trust accumulates net trust income (does not distribute it), the trustee is assessed on that accumulated income at the highest individual tax rate.