Trust or Company?

Choosing the Right Structure to Protect Your Family Wealth in Australia

You’ve worked hard to build your wealth through business, property, or investments. But one question often gets overlooked until it’s too late:

            “What’s the best legal structure to protect my family’s assets?”

 The answer depends on what you’re protecting against: tax, creditors, family conflict, or all of the above.

The Trust Route: Flexibility & Family-Focused

A family (discretionary) trust is commonly used to:

• Distribute income flexibly to family members
• Reduce tax through income splitting
• Protect assets from third-party claims (e.g. business liability, bankruptcy)
• Plan for intergenerational transfer and inheritance
  
  

Benefits:

• You stay in control (as trustee or appointor)
• Future-proofing: can delay access to immature or vulnerable beneficiaries
• Often harder for ex-partners or creditors to reach
  
  

Case Study:
A couple with children, multiple investment properties and shares wanting to protect assets and reduce annual tax across the family.

The Company Option: Simplicity & Growth-Ready

A private company (Pty Ltd) is usually chosen for:

• Active business trading
• Holding IP or commercial property
• Clear-cut ownership via shares
• Straightforward governance
  
  

Benefits:

• Flat 25% corporate tax rate (vs personal marginal rates)
• Suitable for bringing in investors or partners
• Easier to sell or exit later
  
  

Common Use: Business founders looking to scale and eventually exit — or reinvest profits efficiently.

Case Study:
A Sydney-based couple in their 50s own three investment properties and have adult children. They want to:

• Pass wealth tax-effectively
• Avoid in-law complications
• Retain control during their lifetime
  
  

They choose to restructure under a family trust — appointing themselves as trustees now, with a mechanism for succession planning.

So… Which One?

________

FAQs

Q: Can I use both a trust and a company?
A: Absolutely. Many high-income families use a company as the trustee of a family trust, combining benefits of both.

Q: Can I put my family home in a trust?
A: Generally not advisable as it may affect your main residence CGT exemption and could trigger stamp duty. It’s usually better to keep your home in personal names.

Q: What about tax differences?
A: Trust income is taxed at the beneficiary’s marginal rate. Company profits are taxed at 25% (if base rate entity), but franking credits apply when distributed.

Q: Is it too late to restructure?
A: Not at all. Many families restructure during transitions (retirement, asset growth, business sale). But timing and planning are key.

(Note: This article provides general information only and does not constitute legal advice. You should seek advice from a qualified professional before acting on any of the information contained herein.)

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