Setting up a trust can be a smart way for small business owners in Australia to manage profits, protect assets and plan for tax effectively. But the trust structure only works if your trust deed is clear, valid and tailored to how your business actually operates.
If you’re searching for a practical, plain-English trust deed example, this guide walks you through the key clauses, the roles involved, and common pitfalls with “free” trust deed templates. We’ll also outline the steps to set up and sign your trust deed properly so your structure is compliant and ready to support your growth.
What Is A Trust Deed And When Do Small Businesses Use One?
A trust deed is the governing document that creates a trust and sets the rules for how it operates. It’s a legally binding deed, so the wording matters. In small business, trusts are most commonly used as:
- Discretionary (family) trusts - the trustee has discretion to distribute income and capital among a defined class of beneficiaries.
- Unit trusts - beneficiaries hold units (like shares) and distributions are usually proportional to unit holdings.
- Hybrid trusts - features of both discretionary and unit trusts (less common and typically used for specific planning goals).
Many founders use a trust to hold business assets or company shares, to distribute profits to family members or co-owners, and to plan for succession. If you plan to run your operations through a company, a trust can also beneficially hold the company’s shares, which is a common structure for growth and protection.
If you’re weighing up trusts versus other structures, it helps to understand the key trust requirements in Australia (like getting a TFN and ABN, when needed), and how a deed differs from a contract under Australian law. For context, a deed has stricter execution rules than an ordinary agreement - more on signing requirements below - and this is covered in our guide to what a deed is under Australian law.
Who’s Who In A Trust Deed?
Before we dive into a trust deed example, it’s worth clarifying the key players named in the deed and how they relate to your business.
- Settlor: The person who “settles” the trust by gifting a nominal amount to create it, then steps away. The Settlor should not be a beneficiary or trustee. Learn more about the role of a Settlor in an Australian trust.
- Trustee: The legal decision-maker who controls the trust assets in line with the deed. For small businesses, the trustee is often a company (for asset protection and continuity).
- Appointor/Principal: The person or entity with the power to hire or remove the trustee. This is an important control lever and should be considered carefully for succession planning.
- Beneficiaries: The people or entities who may receive income or capital distributions under the deed.
If your trust will hold shares in a trading company, think ahead about how distributions and control will work between the trust, the company and any co-founders. Where a unit trust is used between unrelated parties, a separate Unitholders Agreement is commonly used to set rules between unit holders (similar to a shareholders agreement in a company).
And if your plan is for the trust to hold ownership in a company, it’s worth understanding how beneficial ownership of shares through a trust works in practice.
Trust Deed Example: Key Clauses To Include
Every trust deed is different, but most small business deeds cover a familiar set of topics. Below is a practical “trust deed example” outline with the clauses most business owners should expect to see. Use this as a checklist when reviewing a trust deed document or template.
1) Definitions, Name And Commencement
Sets the trust’s name, commencement date and key definitions used throughout the deed. Clear definitions help resolve ambiguity later.
2) Trust Fund And Additional Property
Describes the initial settled sum (often $10) and confirms further assets can be added to the trust. This is critical if the trust will acquire business assets or company shares over time.
3) Beneficiaries And Eligibility
Lists beneficiaries (or classes of beneficiaries) and how they are identified. Discretionary deeds usually include a wide class (e.g. spouse, children, related entities). Unit trusts set out the unit holders and unit classes.
4) Distribution Of Income And Capital
Explains how and when the trustee can distribute income or capital, whether income can be “streamed” (e.g. capital gains, franked dividends) and what happens if no resolution is made by year-end (default beneficiary provisions).
5) Trustee Powers And Limitations
Authorises the trustee to run the business or hold investments, borrow and give security, deal with bank accounts, and appoint agents or advisers. It should be broad enough for realistic business operations, but not so broad that it’s vague.
6) Appointor/Principal Powers
Sets who can remove and appoint a trustee, and on what terms. This is a major control point, so it’s wise to include successor appointor provisions for continuity.
7) Indemnity And Limitation Of Liability
Protects the trustee when acting properly under the deed, while confirming beneficiaries’ interests are limited to trust assets. If your trustee is a company, this can help ring-fence personal risk.
8) Records, Accounts And Resolutions
Requires the trustee to maintain proper accounts and records, and sets the process for making distribution resolutions before the end of the financial year. This helps with audit trails and banking or ATO enquiries.
9) Variation Of The Deed
Allows the deed to be varied in future, subject to any restrictions. This is essential for keeping the structure up-to-date with law changes, bank requirements or your business strategy.
10) Vesting Date (End Date)
States when the trust must end (often up to 80 years, depending on applicable rule against perpetuities). Plan well ahead of the vesting date if your business may still be operating.
11) Addition/Exclusion Of Beneficiaries
Permits adding new beneficiaries (e.g. future children or entities) and excluding certain beneficiaries if needed for tax or control reasons. Use with care and tax advice.
Acknowledges the trustee may deal with related parties on arm’s length terms. This comes up if the trust leases property from a related entity or contracts related service providers.
Sample Clause Language (Illustrative Only)
Below is a simplified, illustrative snippet to show the tone of a typical distribution clause. Your deed should use precise wording appropriate to your goals and the relevant tax rules:
4.1 Distributions of Income
Subject to this Deed, the Trustee may in its absolute discretion prior to the end of each
Financial Year determine to pay, apply or set aside all or any part of the Income of the
Trust Fund to or for the benefit of one or more of the Beneficiaries in such proportions
as the Trustee thinks fit (including to the exclusion of others).
Note: “Income” and “capital” should be defined carefully in your deed. The ability to stream certain income (like capital gains or franked dividends) depends on the deed wording and the tax law in force at the time.
Can I Use A Free Trust Deed Template In Australia?
It’s tempting to use a free trust deed template. However, small differences in wording can have big effects on tax outcomes, banking approvals and operational flexibility. Common issues we see with generic templates include:
- Missing or outdated streaming clauses, which can affect how you distribute capital gains or franked dividends.
- No successor Appointor, creating control gaps if the Appointor dies or becomes incapacitated.
- Overly narrow beneficiary definitions (e.g. excluding a future spouse or entity), limiting distribution options.
- Insufficient trustee powers for the actual business activities you plan to undertake.
- Unclear vesting provisions or variation powers, which make it hard to adapt the deed later.
If you’re starting with a trust deed sample or template, treat it as a reference only and ensure it’s reviewed and adapted to your specific strategy. Your structure should also align with how your assets are held. For example, if you transfer assets into the trust, consider whether an in specie transfer is appropriate and what tax or duty implications may arise.
How Do I Set Up A Trust Deed? Step-By-Step
Here’s a straightforward roadmap for small business owners establishing a trust in Australia. The exact sequence can vary by state and your advisor’s process, but these are the core steps.
1) Choose Your Trust Type And Roles
Decide if a discretionary, unit or hybrid trust suits your goals. Confirm who will be the Trustee (company or individual), who will be the Appointor, and who is the Settlor.
Many founders choose a corporate trustee for extra protection and easier succession. If unrelated owners will participate via a unit trust, plan for a Unitholders Agreement to govern decision-making, transfers and dispute resolution between unit holders.
2) Prepare A Tailored Trust Deed Document
Work with a lawyer to draft or refine your trust deed so it reflects your beneficiaries, distribution strategy, banking needs and long-term control (Appointor succession). This is also the time to confirm whether the trust will beneficially hold company shares and how dividends will be dealt with.
If you’re planning to route business ownership through the trust, make sure you’re comfortable with beneficial ownership via a trust and any downstream agreements your company may need (e.g. constitution updates or shareholder arrangements between multiple trusts).
3) Execute The Deed Properly (Signing And Witnessing)
Because a trust deed is a deed (not a simple contract), execution requirements must be followed precisely. Check the signing blocks for individuals and/or companies, witness requirements and any state-based formalities.
For a quick refresher, see the legal requirements for signing documents in Australia and how wet ink versus electronic signatures apply to deeds. Execution done incorrectly can create headaches with banks, the ATO or your accountant down the track.
4) Attend To Stamping (If Required)
Some states impose nominal duty on trust deeds if stamped within a set timeframe. Requirements differ by jurisdiction, so check local rules promptly after signing to avoid penalties and ensure downstream transactions (like opening a bank account) go smoothly.
5) Set Up TFN/ABN And Banking
Apply for a TFN for the trust. If the trust runs a business or is required to register for GST, it will need an ABN. Our overview of trust requirements (ACN/ABN/TFN) explains the distinctions and when each is needed.
Open a dedicated bank account in the trustee’s name as trustee for the trust (e.g. “XYZ Pty Ltd ATF XYZ Family Trust”). Keep money flows separate from personal accounts - this helps preserve the integrity of the structure.
6) Minute Your First Resolutions And Keep Records
Record the trustee’s initial resolutions (accepting appointment, adopting the deed, appointing bank signatories, etc.) and keep an orderly minute book. At year-end, ensure all distribution resolutions are prepared on time and in the form your accountant expects.
7) Align Your Wider Documentation
If the trust will own a trading company or enter contracts, make sure your broader legal documents line up with your structure. This can include supplier or customer contracts, and if relevant, updates to a company’s constitution or shareholder arrangements where multiple trusts are involved.
If you’re new to deeds generally, it can help to revisit the fundamentals of what a deed is and why it’s used as you put your governance pack together.
Practical Tips As You Launch
- Keep all trust records, resolutions and tax statements together - it will save time at tax time and with any banker or ATO queries.
- Revisit your Appointor and successor Appointor periodically to ensure the right person holds ultimate control (especially after major life events).
- If beneficiaries or plans change, consider a deed of variation (if permitted) rather than making informal changes.
Key Takeaways
- A trust deed is the rulebook for your trust - the wording must match your small business goals, distribution plans and control preferences.
- Core roles include the Settlor, Trustee, Appointor and Beneficiaries; think carefully about Appointor powers and succession, as this is the ultimate control lever.
- A practical trust deed example will cover income/capital distributions, streaming, trustee powers, variation powers, indemnities and clear beneficiary definitions.
- “Free trust deed template Australia” searches can be risky - generic wording often misses key features or creates tax and banking issues later.
- Set up steps include drafting a tailored deed, executing it correctly, stamping where required, obtaining TFN/ABN, opening a bank account and keeping proper resolutions.
- If your trust will hold company shares or operate with multiple owners, consider companion documents like a Unitholders Agreement and make sure all governance documents align.
If you’d like a consultation on setting up or reviewing a trust deed for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
