What is a family trust (discretionary trust)?
A family trust — technically a discretionary trust — is a structure where a trustee holds and manages assets for a group of beneficiaries, usually a family, and decides each year how to distribute the income among them. That discretion over who receives what, together with the asset protection it offers, is why it sits at the centre of many high-income structures.
Reviewed by Justin Porrins, CFP® · SMSF Specialist Advisor™ · Last reviewed 31 August 2026
Why high earners use one
- Flexibility to distribute income among beneficiaries each year
- Asset protection separating ownership from control
- A vehicle for holding investments or a business
- A foundation for succession and intergenerational planning
How distributions work
Each year before 30 June the trustee resolves how to distribute the trust’s income; that income is then taxed in the hands of the beneficiaries at their own rates. Income left undistributed is generally taxed at the top marginal rate, so the resolution matters.
A tool, not a silver bullet
A trust’s value is in how it’s designed and how it connects to any company or super around it. The wrong setup — or the wrong ownership — turns a good structure into a leaking one. The entity isn’t the point; the architecture connecting your entities is.
Rule changes worth watching
Trust settings are moving. The CGT discount rules change from 1 July 2027 for individuals, trusts and partnerships. A 30% minimum tax on trust distributions has been announced from 1 July 2028 but is not yet law, and a three-year restructure rollover for discretionary trusts has been proposed alongside it. None of this makes a well-designed trust wrong — it makes reviewing one before those dates sensible. We update this page as measures pass.
Common questions
Does a family trust save tax?
It can, by distributing income to beneficiaries on lower marginal rates — but not on its own, and not automatically. The benefit depends on who the beneficiaries are and how the trust fits the wider structure. General information only, not personal advice.
What is the difference between a family trust and a unit trust?
A family (discretionary) trust gives the trustee discretion over distributions each year. A unit trust divides ownership into fixed units, so each holder has a defined, transferable entitlement — useful when unrelated parties invest together.
Written and reviewed to our editorial & corrections policy.
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