Welcome to my weekly Insights blog. Once a week, we cover topics such as wealth creation, super, estate planning and tax. This is Part 5 of our 10-part series on how wealthy Australian families build, protect and pass on their wealth.
Most Wills leave everything to the children outright. It’s simple, but it means the inheritance lands in their personal names, exposed to their creditors, a future divorce, and their own high marginal tax rate.
Wealthy families often do it differently. Their Wills create testamentary trusts, so each child’s inheritance is held in a trust that protects it and can save tax for years to come.
Key takeaways
A testamentary trust is a trust set up by your Will. It only comes into existence after you die.
It can protect an inheritance from a beneficiary’s creditors, bankruptcy or relationship breakdown.
Income distributed to children and grandchildren under 18 is generally taxed at normal adult rates, including the tax-free threshold, instead of penalty rates.
Since 1 July 2019, that concession only applies to income from assets that came from the deceased estate.
Testamentary trusts cost more to set up in your Will and need an annual tax return, so they suit larger estates or families with specific risks.
What is a testamentary trust?
A testamentary trust is a trust written into your Will. Instead of leaving your daughter $1 million outright, for example, your Will leaves it to a trust where she is the main beneficiary, and usually the trustee or one of the controllers.
She can still use the money, invest it, and benefit from it. But because the trust holds the assets, it’s not simply her personal property. And each year, the trustee can decide how to distribute income among her family.
Benefit 1: asset protection
Assets held in a well-drafted discretionary testamentary trust are generally harder for a beneficiary’s creditors or trustee in bankruptcy to reach. That matters for children who run businesses, work in high-risk professions, or may face financial trouble.
It can also help in a relationship breakdown, as we covered in Part 2. The protection is stronger when control is shared, for example with a sibling or independent co-trustee, rather than held by the child alone.
Benefit 2: tax savings for grandchildren
Normally, unearned income paid to children under 18, such as trust distributions, is taxed at penalty rates designed to stop income splitting. Income from a testamentary trust is an exception. It’s taxed at normal adult rates, so each child can receive income up to the tax-free threshold of $18,200 without paying tax.
For a family with three young children, that could mean more than $50,000 a year of investment income taxed at little or nothing, instead of at a parent’s top marginal rate. Over 10 or 15 years, the savings can be substantial, and can fund school fees or a first home deposit.
Since 1 July 2019, this concession only applies to income from assets that came from the deceased estate, or assets bought with them. Adding your own money to a testamentary trust won’t get the same treatment.
Types of testamentary trust
Type
Best for
Key feature
Discretionary testamentary trust
Most families
The trustee decides distributions each year for flexibility and tax planning
Optional (“elective”) trust
Families who want flexibility
Each child chooses whether to take the inheritance outright or in a trust
Protective trust
Vulnerable beneficiaries, such as those with addiction, gambling or spending problems
An independent trustee controls the money and pays it out for the beneficiary’s needs
Special disability trust
A family member with a severe disability
Can help preserve Centrelink benefits, but has strict rules
Is it right for your family?
A testamentary trust is usually worth considering if:
Your estate, including super paid to your estate and life insurance, is substantial
You have young grandchildren, or children likely to have them
A child runs a business, is in a high-risk profession, or has an unstable relationship
A beneficiary needs protecting from themselves or others
The trade-offs are a more complex Will, which costs more to prepare, and an annual trust tax return once the trust is running. For smaller estates, the cost may outweigh the benefit.
Frequently asked questions
What is the difference between a family trust and a testamentary trust?
A family trust is set up during your lifetime with a trust deed. A testamentary trust is set up by your Will and only starts after you die. Income from a testamentary trust paid to minors is generally taxed at adult rates, which isn’t the case for a family trust.
Can super go into a testamentary trust?
Yes, if your super death benefit is paid to your estate, for example through a binding nomination to your legal personal representative. It can then flow into the testamentary trusts set up by your Will.
Can I add a testamentary trust to my existing Will?
Usually you’d make a new Will rather than amend the old one, because testamentary trust clauses are detailed. Your estate lawyer can advise on the best approach.
A Will that keeps working after you’re gone
A simple Will hands over your wealth in one go. A Will with testamentary trusts keeps protecting your family and saving tax for decades. It’s one of the clearest examples of how wealthy families plan differently.
At TaxAssist Accountants Dee Why, we model the tax benefits of testamentary trusts for Northern Beaches families and work alongside your estate lawyer to get the structure right. Call us on (02) 9045 1511 or email [email protected] to find out if one suits your family.
This article contains general information only and does not take into account your personal circumstances. It is not legal or financial product advice. Wills and testamentary trusts should be prepared by a qualified lawyer.
Not every business is having a great year. If yours runs through a company and 2026–27 is looking like a loss, there’s some good news. The ATO confirmed in September that loss carry-back is law again.
How it works
Instead of waiting for future profits to use a loss, an eligible company can carry it back against tax it paid in either or both of the two previous years and receive a refundable tax offset. For most companies, that means a 2026–27 loss carried back to 2024–25 and/or 2025–26, claimed in the 2026–27 company tax return.
Who can use it
companies and other corporate tax entities (not sole traders, partnerships or family trusts)
revenue losses only, not capital losses
the company must have paid tax in one or both of the previous two years and be up to date with its returns
the refund is capped by the company’s franking account balance at the end of the loss year.
Our tip: think before you pay dividends
Because the refund is capped by your franking balance, paying franked dividends before 30 June can shrink what you get back. If a loss is on the cards, plan dividends and the year-end position together, now rather than in June.
The Melbourne Cup runs next Tuesday, 3 November, and plenty of local businesses will be booking a long lunch for the team. It’s a great way to say thanks, but the tax treatment depends on where you go and how much you spend per head.
The $300 rule
A Cup Day lunch with drinks is generally entertainment. For staff and their partners:
Under $300 per person (GST inclusive): usually no FBT under the minor benefit exemption, but no tax deduction and no GST credits either.
$300 or more per person: FBT applies at 47% on the grossed-up value, although the cost becomes deductible and you can claim the GST credits.
On your own premises on a working day, staff only: food and drink for employees is generally exempt from FBT, but again not deductible.
Clients who come along: no FBT, but no deduction or GST credits for their share.
One catch: if your business uses the 50/50 split method for meal entertainment, the minor benefit exemption isn’t available.
Our tip
For most small businesses, keeping the per-head cost under $300 is the simplest outcome. Keep the receipt and a list of who attended, and remember the Christmas party is a separate event with its own $300 test.
Planning the end-of-year party and gifts too? Ask our Dee Why team before you book.
Plenty of people on the Northern Beaches post about food, fitness, surf and home life, and some are being paid for it in cash, products or experiences. On 22 October the ATO put content creators on notice: if money, gifts or perks are coming in regularly, you’re probably in business for tax purposes.
What counts as income
According to the ATO, it’s not just what lands in your bank account. Income can include:
advertising and platform payments
sponsorships and affiliate links
tips, donations and subscriptions
free products, services or experiences you receive in exchange for promotion, generally valued at market value.
The ATO says it finds undeclared income through data matching with platforms, its lifestyle assets program and tip-offs. If your turnover reaches $75,000 you’ll also need to register for GST.
Hobby or business?
The ATO has released a draft ruling, TR 2026/D2, on when an individual is carrying on a business, with consultation open until 27 November. The upside of being in business is that you may be able to claim expenses such as equipment and software, apportioned if you also use them privately.
Our tip
Start a simple spreadsheet today: what you received, from whom, when and what it’s worth. If you’re a local business that gifts products to creators, keep the same record on your side.
If you prepare your own tax return, this is your week. The usual 31 October deadline falls on a Saturday this year, so the ATO has confirmed self-lodgers have until 11:59pm local time on Monday 2 November to lodge their 2025–26 return on time.
Need more time? Saturday is the cut-off
If your return is more complicated (a rental property, a side business, crypto, a capital gain), you don’t have to rush it. If a registered tax agent adds you to their client list by Saturday 31 October, most people get until 15 May 2027 to lodge.
A couple of catches to be aware of:
if you have earlier-year returns still outstanding, your 2026 return may be due on 31 October regardless
lodging late won’t push back the date a tax bill is due, which for self-preparers is generally 21 November
if you lodge late without an agent, the ATO can apply a failure-to-lodge penalty.
Our tip: don’t just trust the pre-fill
The ATO pre-fills a lot of your return, but it doesn’t know everything. Before you hit lodge, check bank interest, dividends, rental income, private health cover and any income from side work or online platforms. A rushed return is where most mistakes happen.
Welcome to my weekly Insights blog. Once a week, we cover topics such as wealth creation, super, estate planning and tax. This is Part 4 of our 10-part series on how wealthy Australian families build, protect and pass on their wealth.
In Part 1, we saw why wealthy families hold investments in a family trust. But here’s a question many trust owners have never asked: when you die, who controls the trust?
Assets in a family trust don’t form part of your estate, so your Will can’t simply leave them to someone. What passes on is control. If that isn’t planned, the wrong person can end up deciding who benefits from everything you’ve built.
Key takeaways
Your Will cannot give away assets held in a family trust, because the trust owns them, not you.
Control of a family trust usually sits with the appointor, who can remove and replace the trustee.
The trust deed decides who becomes the appointor after you die. If it’s silent, control can pass in ways you didn’t intend.
With a corporate trustee, control also depends on who inherits your shares in the trustee company and who becomes a director.
Money the trust owes you, such as a loan account or unpaid distributions, is part of your estate and should be dealt with in your Will.
The three roles that matter
Role
What they do
Why it matters
Trustee
Legally owns and manages the trust’s assets and decides distributions each year
Runs the trust day to day
Appointor (sometimes called principal or guardian)
Can remove the trustee and appoint a new one
Holds the ultimate control
Beneficiaries
The people and entities who can receive income or capital
Receive the benefit, but don’t control the trust
Think of the appointor as the person holding the keys. Whoever is appointor can, in effect, decide who runs the trust, and therefore who benefits from it.
What happens when you die
If you’re the appointor. The trust deed sets out what happens. Some deeds name a successor. Others pass the role to your legal personal representative (your executor), or let you nominate a successor in your Will. Some older deeds say nothing at all, which can leave the trust without anyone able to change the trustee.
If you’re an individual trustee. Any surviving trustee usually continues. If you were the sole trustee, a new trustee needs to be appointed, often by the appointor, and the trust’s assets have to be transferred into the new trustee’s name. That can be slow and costly, especially for real estate.
If there’s a corporate trustee. The company keeps going, so the trust’s assets don’t need to be re-titled. But someone still needs to control the company. Your shares in the trustee company pass under your Will, and the company needs a new director if you were the only one. This is why many families use a corporate trustee and plan its succession carefully.
How wealthy families plan trust succession
Read the trust deed. Find the original signed deed and every variation since. Check who the appointor is and what happens to the role on death or loss of capacity.
Name successors. Nominate successor appointors, often a spouse first and then one or more adult children jointly, in the way the deed allows.
Use a corporate trustee. It makes changes of control much simpler and avoids re-titling assets.
Align your Will. Your Will should deal with your shares in the trustee company, any appointor role the deed lets you pass on, and any loans the trust owes you.
Plan for loss of capacity, not just death. Check whether an attorney under your enduring power of attorney can act as appointor, and whether the company has an alternate director.
Don’t forget the loan account
Over the years, many people lend money to their family trust, or are allocated distributions that are never actually paid out. These amounts are debts the trust owes you, and they form part of your estate.
If they aren’t planned for, your executor may have to call in the debt, forcing the trust to sell assets. Your Will should say who receives these loans, or you might forgive them during your lifetime after getting tax advice.
Frequently asked questions
Can I leave my family trust to my children in my Will?
Not directly, because the trust’s assets aren’t yours to give. But you can usually pass control of the trust through the appointor role and your shares in a corporate trustee, as long as your Will matches what the trust deed allows.
Who is the appointor of a family trust?
The appointor is the person, or company, named in the trust deed with the power to remove and appoint the trustee. Because of that power, they effectively control the trust.
What if I can’t find my original trust deed?
Act now rather than leaving it for your family. A lost deed makes it hard to prove who controls the trust and what powers they have. A lawyer can often help reconstruct it from copies and records, but it’s far easier while you’re alive.
Make sure the keys go to the right person
A family trust can protect your wealth for generations, but only if control passes smoothly. Checking your deed, naming successors and lining up your Will takes a few hours now and can prevent years of family disputes later.
At TaxAssist Accountants Dee Why, we help Northern Beaches families review their trust deeds, loan accounts and succession arrangements, working alongside your estate lawyer. Call us on (02) 9045 1511 or email [email protected] to book a trust review.
This article contains general information only and does not take into account your personal circumstances. It is not legal or financial product advice. Trust deed variations and Wills should be prepared by a qualified lawyer.
