Family Office vs Trust: Legal Guide for Australian Families

Understanding the distinction between a family office and a trust is essential for Australian families managing intergenerational wealth. These structures play very different roles in asset management, taxation, and governance. Choosing the right model depends on the complexity of your family’s finances, succession goals, and legal obligations.

What Is a Family Office?

A family office is a privately controlled entity that manages the financial, legal, and administrative affairs of a high-net-worth family. It is typically established as a company or trust and is used to oversee investments, tax planning, legal compliance, estate succession, and asset governance across generations.

In Australia, family offices are commonly structured as proprietary limited companies under the Corporations Act 2001 (Cth). They may also operate through trust structures depending on asset classes and privacy requirements. Family offices do not just hold wealth—they coordinate and execute strategies for preserving and growing it, often across multiple entities such as family trusts, companies, and foundations.

What Is a Family Trust?

A family trust is a legal arrangement in which a trustee holds and manages assets on behalf of designated beneficiaries, typically family members. Most commonly structured as a discretionary trust, this vehicle allows the trustee to distribute income and capital based on discretion, rather than fixed entitlements.

Other trust types relevant in Australian contexts include:

• Unit trusts, where beneficiaries hold defined units representing their entitlement.
• Hybrid trusts, which combine both discretionary and fixed elements.

Family trusts are governed under state-based Trustee Acts, the common law of trusts, and relevant sections of the Income Tax Assessment Acts 1936 and 1997.

Core Differences: Structure, Control, and Function

The fundamental differences between a family office and a family trust lie in their legal form, operational function, and governance approach. Key distinctions include:

• Legal Structure: A family office is a legal entity, typically a proprietary limited company or managed trust. A family trust is a fiduciary relationship governed by a trust deed.
• Control and Governance: Family offices are managed by directors or executives, governed under corporate law. Trusts are controlled by a trustee under the terms of the trust deed and the influence of the appointor (if any).
• Purpose and Function: A family office actively manages wealth, risk, succession, and compliance across entities. A family trust passively holds and distributes assets, typically for tax efficiency and estate planning.
• Administrative Complexity: Family offices require a higher degree of professionalisation, including accounting, legal, and investment advisors. Trusts involve lower overhead and less formal governance.
• Tax Implications: Family offices may be taxed at corporate rates, whereas trusts allow income streaming to beneficiaries, often resulting in a lower overall tax burden.
• Regulatory Considerations: Family offices may require an AFSL if providing investment advice. Trusts are subject to minimal external regulation, unless they operate as managed investment schemes.

When to Use a Family Office?

A family office is generally recommended when:

• The family controls complex and diversified assets, such as property portfolios, operating businesses, or offshore investments.
• There is a need for multi-generational succession planning, family constitutions, and structured governance frameworks.
• A net wealth threshold of $30 million or more justifies the cost and complexity.
• Philanthropy, legacy planning, and cross-jurisdictional tax matters require coordinated professional oversight.

When to Use a Family Trust?

A family trust is more appropriate when:

• The goal is to protect family assets and allow flexible income distribution.
• The family wants to reduce tax liabilities through income streaming to lower-rate beneficiaries.
• There is no need for a full-service management entity like a family office.
• The trust serves as a holding structure for property, shares, or operating companies.

Legal and Tax Considerations

Before establishing either structure, it is critical to understand the legal obligations and tax implications under Australian law. Each structure is subject to different regulatory frameworks, compliance burdens, and planning strategies that must be carefully managed to avoid penalties and optimise benefits.

Family Office

• Must comply with corporate governance requirements and, if applicable, licensing under ASIC.
• May need to register for GST, PAYG withholding, and payroll tax depending on operations.
• If offering investment services, it may trigger financial services licensing obligations under the Corporations Act 2001 (Cth).

Family Trust

• Subject to state trustee legislation and common law principles.
• Must prepare annual resolutions for income distribution or risk having all income taxed at the top marginal rate.
• Asset protection benefits may be set aside in divorce or bankruptcy if not properly structured.

Succession and Governance Differences

Beyond day-to-day administration, succession planning and governance mechanisms vary significantly between a family office and a family trust. These differences impact how control is transferred across generations, how decisions are made, and how disputes are resolved — especially within complex family dynamics.

• Family offices often implement formal governance such as family councils, investment committees, and family constitutions.
• Family trusts rely on appointor powers, trustee discretion, and proper trust deed drafting to control asset distribution upon death or incapacity.

In practice, many high-net-worth Australian families use both structures together—with the trust holding assets and the family office managing operations, compliance, and reporting.

FAQs: Family Office vs Trust in Australia

Before choosing between these structures, families often ask:

What is the main difference between a trust and a family office?

A trust holds assets on behalf of beneficiaries. A family office actively manages wealth, legal, and administrative affairs for the entire family group.

Can a family trust own a family office?

Yes. A family trust can hold shares in a proprietary company that operates as the family office, effectively combining both structures.

Which is better for tax planning in Australia?

Trusts offer flexible income distribution and potential tax savings. However, a family office may provide broader strategic oversight, including tax consolidation across entities.

Do you need both?

Many wealthy families use trusts to own assets and a family office to manage legal, financial, and personal matters across generations.

Final Thoughts

Choosing between a family office and a family trust depends on the scale and complexity of your family’s affairs. For many Australian families, the best approach may be to use both in a layered strategy: the trust as the asset-holding vehicle, and the family office as the governance and management hub. Legal advice is essential to ensure each structure aligns with your tax position, estate plan, and long-term vision.