By Tracy Collins, Accredited Specialist (Wills & Estates), Special Counsel — Nevile & Co. Lawyers
If your discretionary (family) trust was set up in the 1970s, 80s or 90s, there’s a good chance the deed sitting in a drawer somewhere no longer matches the law — or your family.
Discretionary trusts were the go-to structure for decades because they’re flexible and tax-effective. But many older deeds were never updated, and the gaps they contain can be expensive.
Three questions every trustee should be able to answer
1. Can you put your hands on the original deed and every variation that’s been made since?
Trusts are often run for years on a photocopy, with informal trustee or controller changes that were never properly documented.
2. What happens if the person who controls the trust dies or loses capacity?
Many old deeds say nothing about succession of the appointor/principal — the person who really runs the trust. That silence has caused real family disputes.
3. Does your deed exclude “foreign persons” from the list of possible beneficiaries?
Almost all pre-2015 deeds don’t. If even one potential beneficiary (think: a child’s overseas spouse) falls into that category, your trust can be deemed a foreign trust.
Why this matters: the tax consequences
- Foreign purchaser duty & land tax surcharges — an extra 8% duty on purchase and up to 4% extra land tax every year on Victorian property if your trust is deemed foreign.
- Tax at 47% on undistributed income — under s99A, if a distribution resolution doesn’t strictly match the deed’s beneficiary class, the ATO can tax the trustee at the top marginal rate, with no tax-free threshold.
- Unintended CGT and stamp duty — a deed variation made outside the proper variation power can be treated as creating a new trust (“resettlement”), triggering CGT and duty on assets that were never actually sold.
- Family disputes and lost asset protection — unclear control of a trust is a magnet for disputes and weakens the very protection the trust was meant to provide.
These issues are usually discovered at the worst possible time — during an audit, a property sale, a death in the family, or a separation — when options are limited and costs are highest.
The fix is usually straightforward — if you act now
A trust review involves tracking down the full document history, checking who really controls the trust and what happens if they can’t, confirming foreign persons are properly excluded, and checking that past distributions actually match the deed. Most issues, caught early, can be fixed by deed for a modest cost. Caught late, they can cost tens or hundreds of thousands of dollars.
Take action today
If your trust deed is more than a few years old, don’t wait for a revenue office audit or a family crisis to find out it’s not fit for purpose.
Contact Tracy Collins at Nevile & Co. Lawyers for a discretionary trust review. 📞 (03) 9664 4700 ✉️ nevileco@nevile.com.au
This article is general information only, current as at June 2026, and is not legal or tax advice. Please obtain advice specific to your circumstances.
