A family income trust is a discretionary trust structure commonly used by Australian families to manage income-generating assets and strategically distribute income among beneficiaries. Under this structure, a trustee holds and manages the trust property, exercising discretion over income allocations in accordance with the trust deed.
This legal arrangement separates ownership from control — the trustee holds legal title to assets but must act in the best interests of the beneficiaries, bound by fiduciary duties and trust law principles under the Trustee Act 1925 (NSW) and relevant state legislation.
Australian families choose income trusts because they offer a legally flexible way to manage wealth, distribute income tax-effectively, and protect family assets. Specifically:
In short, family income trusts are chosen for their combination of tax planning, legal control, asset protection, and succession advantages — particularly for families with significant assets or complex dynamics.

A family income trust operates through a legally recognised structure governed by a trust deed and administered by a trustee. The key legal mechanics include:
In summary, a family income trust functions as a separate legal entity that manages and distributes wealth on behalf of a family, with legal obligations under Australian trust law and taxation frameworks.
Under the Income Tax Assessment Act 1936 (Cth), trusts are not taxed as separate entities (except in specific cases). Instead:
The ATO’s guidance on Section 100A and trust reimbursement arrangements means families must ensure trust distributions are genuine and not part of a tax avoidance scheme. For this reason, trustees need to be fully aware of the rules that apply to income distributions to avoid adverse tax consequences.
Establishing a trust involves precise legal documentation and clear financial planning:
Legal errors in this stage — such as ambiguous deed clauses or unclear appointor powers — can invalidate distributions or create significant tax risks.

Despite its benefits, a family income trust must be managed with precision. Key legal issues include:
To mitigate these, trustees should seek ongoing legal and accounting advice and ensure compliance with the Trustee Act, tax rulings, and family law jurisprudence.
Australian legal professionals recommend the following governance practices:
These steps protect the trust from legal challenge, ensure compliance, and preserve intended benefits.

A brief guide to common legal questions from Australian families:
The trustee administers trust property and exercises discretion over income distributions within the legal framework established by the trust deed and trust law.
Yes. Family income trusts allow for structured succession planning, avoiding probate and reducing CGT on death in some cases (depending on the asset).
Legally, the trustee owns the assets. Beneficiaries hold only equitable interests — this separation can provide legal protection, subject to judicial interpretation.
They serve different purposes. A will takes effect on death, while a trust operates during life and enables flexible distributions, making it complementary, not a substitute.
Yes. Distributions to minors under 18 attract penalty tax rates. Families often limit income to adult beneficiaries or use education-specific arrangements. Another key consideration is the impact on pension entitlements for beneficiaries, as certain distributions may affect eligibility for government benefits.
A family income trust remains one of the most strategic legal structures for Australian families seeking wealth management, tax planning, and intergenerational control. However, these trusts require precise legal structuring and disciplined compliance.
For tailored legal advice on whether a family income trust suits your family’s structure and goals, consult with a trust and estate specialist on LegalFinda — your guide to leading Australian legal professionals in family wealth law. For families unsure of how to find a good family lawyer, LegalFinda provides a practical starting point to connect with trusted advisers who can structure a trust correctly from the outset.

The LegalFinda Editorial Team is composed of qualified Australian solicitors, legal researchers, and content editors with experience across family, property, criminal, and employment law.
The team’s mission is to translate complex legislation into clear, reliable guidance that helps everyday Australians understand their legal rights and connect with the right lawyer.


