Which Banks Lend to Family Trusts in Australia?

In Australian law, a family trust—most commonly a discretionary trust—is one of the most frequently used structures for asset protection, intergenerational wealth transfer, and tax minimisation. When families seek to borrow within this framework, a key question arises: which banks lend to family trusts in Australia? Lending to trusts involves a higher degree of legal and credit scrutiny than personal borrowing, as trustees act under fiduciary obligations and can only borrow within the express terms of the trust deed.

Do Banks in Australia Lend to Family Trusts?

Yes. Major banks, regional lenders, and some specialist financiers do extend credit to family trusts. However, approval depends on strict compliance with both the trust deed and the lender’s requirements. Where deeds lack borrowing powers, or trustee resolutions are defective, loans may be unenforceable. Lenders therefore demand precise documentation before advancing credit. For families uncertain about compliance, professional legal guidance or even advice on finding a good family law lawyer can be critical to ensuring both enforceability and protection.

Major Banks Lending to Family Trusts

The Big Four banks—Commonwealth Bank, Westpac, ANZ, and NAB— provide facilities for family trusts, but each imposes distinctive legal and credit conditions:

• Commonwealth Bank (CBA): Requires certified trust deeds, trustee resolutions, and personal guarantees from directors of corporate trustees. CBA often demands legal confirmation that the trustee is empowered to borrow.
• Westpac: Supports family trust lending but insists on full disclosure of beneficiaries and trustee financial standing. Trustee resolutions are reviewed closely for compliance with the trust deed.
• ANZ: Offers residential, investment, and business loans but usually restricts loan-to-value ratios for trust borrowers compared to individuals.
• NAB: Extends facilities to trusts with property and business assets. Corporate trustee arrangements are strongly preferred to reduce enforcement risk.

All four banks require enforceable trust deeds, properly appointed trustees, and, in most cases, personal guarantees to bind beneficiaries or directors.

Regional and Non-Bank Lenders

Outside the majors, regional banks (e.g., Bendigo Bank, Bank of Queensland) and non-bank lenders (such as Pepper Money and Liberty) provide alternatives. These institutions are often more flexible in assessing non-traditional income streams or complex family structures. However, they usually offset higher risk through elevated interest rates and stricter covenants.

Legal Requirements for Family Trust Loans

Banks will not advance credit to a trust unless the legal foundation is sound. Typical requirements include:

• Certified copy of the trust deed and amendments confirming the trustee’s borrowing powers.
• Trustee resolutions authorising the loan, executed in compliance with the deed and state trust law.
• Verification of trustee authority, particularly for corporate trustees under the Corporations Act 2001 (Cth).
• Financial statements and tax returns of the trust and its controllers.
• Personal guarantees from directors or primary beneficiaries, ensuring recourse if trust assets are insufficient.

If the deed is silent on borrowing, or if resolutions are invalid, lenders may refuse to advance funds or later challenge enforceability.

Documentation Required by Banks

Beyond the deed and resolutions, lenders require:

• Identification of trustees and beneficiaries.
• Minutes evidencing the decision to borrow.
• Evidence of the trust’s financial capacity.
• ATO records, TFN, and ABN if applicable.

This ensures both lender compliance and trustee protection from potential breaches of fiduciary duty.

Loan Rates for Family Trusts

Interest rates applied to family trust loans are generally comparable to those for individuals but may be marginally higher due to additional risk. The distinction lies not in rate but in structure: lenders may impose reduced loan-to-value ratios, stricter serviceability tests, or ongoing compliance checks tied to trust governance.

Family Trust Loans for Property Investment

Trusts are frequently used to acquire property. Banks recognise this and structure loans accordingly, but with caveats:

• Trustees must hold explicit power to mortgage trust assets.
• Guarantors are usually required to support obligations.
• Where distributions are used to service loans, resolutions must comply with the Income Tax Assessment Act 1936 (Cth) and be made before 30 June each year.

Failure to meet these obligations may expose trustees to personal liability.

Major Banks vs Regional Banks

When exploring which banks lend to family trusts in Australia, families often compare the approach of large national institutions with that of smaller regional banks. Both operate under the same legal framework but differ in lending criteria, compliance processes, and flexibility. Understanding these distinctions is crucial before selecting a lender that aligns with the trust deed and long-term financial strategy.

• Major banks: Provide scale, lower rates, and robust compliance, but impose rigid conditions.
• Regional banks: Offer more personalised service and can be flexible for smaller trusts or non-standard income streams.
• Non-bank lenders: Cater to trusts excluded by major banks, though with higher costs and risk.

Ultimately, the appropriate choice depends on the trust deed’s scope, the trustee’s authority, and the family’s financial objectives.

FAQs on Family Trust Loans in Australia

When families consider borrowing through a trust, several recurring legal questions arise.

Are family trusts eligible for home loans in Australia?

Yes. Most banks allow trusts to borrow for residential property provided the deed permits, trustee resolutions are valid, and guarantees are in place.

What documentation is needed for a loan application?

Certified trust deed, trustee resolutions, identification of trustees and beneficiaries, and evidence of financial standing are essential.

Do non-bank lenders support family trust loans?

Yes. Non-bank lenders often assist where major banks decline, particularly for complex or unconventional trust structures.

How do family trusts secure loans?

Trustees must ensure borrowing powers exist under the deed, execute resolutions, and provide guarantees. Courts may strike down unauthorised borrowings as ultra vires.

Which is better: major banks or regional banks?

Major banks offer lower rates but stricter compliance; regional banks may provide greater flexibility. The correct option depends on the trust’s structure and legal capacity.

Conclusion

Determining which banks lend to family trusts in Australia is not merely a financial exercise but a legal one. Lenders demand enforceable trust deeds, compliant trustee resolutions, and personal guarantees to protect against unenforceability. Families must therefore approach borrowing with careful legal and accounting oversight to avoid invalid transactions and personal liability.

Engaging professional guidance—such as through LegalFinda, which connects families with experienced trust lawyers—ensures that both the lending arrangement and the trust structure operate within Australian law while meeting long-term asset protection and wealth planning objectives.