Trust Law (AU) glossary
Trusts are one of the most widely used structures in Australian law — for asset protection, tax planning, estate planning, and commercial arrangements. Trust law in Australia is primarily judge-made, supplemented by state Trustee Acts and federal tax provisions. This glossary explains the core language practitioners need.
This glossary covers 40 terms that trust and estate lawyers encounter when advising on trusts in Australia. Each definition references the relevant legislation, case law, or ATO guidance where applicable.
Definitions
Absolute entitlement
The right of a beneficiary to call for the transfer of trust property to them — arising when they are of full age, capacity, and solely entitled.
Accumulation
The retention and reinvestment of trust income rather than distribution — subject to statutory limits in some jurisdictions.
Appointer
The person with the power to appoint and remove the trustee of a discretionary trust — often the most powerful role in the trust structure.
Bare trust
A trust where the trustee holds property for a single adult beneficiary with no active duties — the trustee must transfer the property on demand.
Beneficiary
A person or entity for whose benefit the trust property is held — may be a named beneficiary, a class of beneficiaries, or an object of a power.
Breach of trust
Any act or omission by a trustee that is inconsistent with the terms of the trust or the duties imposed by law — giving rise to personal liability.
Capital beneficiary
A beneficiary entitled to the corpus of the trust, as distinguished from an income beneficiary entitled to income only.
Charitable trust
A trust established for a charitable purpose — not subject to the rule against perpetuities and entitled to tax concessions.
Constructive trust
A trust imposed by equity to prevent unconscionable conduct — arising by operation of law rather than the intention of the parties.
Corpus
The capital or body of the trust property, as distinguished from the income it generates.
Default beneficiary
The beneficiary entitled to trust property if the trustee of a discretionary trust does not exercise the power of distribution before vesting.
Discretionary trust
A trust where the trustee has discretion to decide which beneficiaries receive income or capital and in what proportions — the most common Australian trust structure.
Distribution
The payment or allocation of trust income or capital to a beneficiary — must be resolved before the end of the income year for tax purposes.
Equitable compensation
The remedy for breach of trust — requiring the trustee to restore the trust fund to the position it would have been in but for the breach.
Express trust
A trust deliberately created by a settlor, whether by deed or declaration — in contrast to trusts arising by operation of law.
Family trust
A discretionary trust used for a family group — in taxation, a trust that has made a family trust election specifying a test individual.
Family trust distribution tax
A penalty tax imposed when a family trust distributes to persons outside the family group of the test individual.
Family trust election
An irrevocable election made by a trustee specifying a test individual, allowing the trust to access franking credits and carry-forward losses.
Fixed trust
A trust where each beneficiary's entitlement is fixed by the trust deed — in contrast to a discretionary trust where the trustee decides.
Guardian
A person named in a discretionary trust deed who must consent to the exercise of certain trustee powers — a safeguard for beneficiaries.
Hybrid trust
A trust with both discretionary and fixed entitlements — for example, a unit trust with a discretionary income distribution power.
Income
The returns generated by trust property — rent, dividends, interest — as distinct from capital gains, though trust deeds often define income broadly.
Income beneficiary
A beneficiary entitled to income from the trust during its operation, as distinct from a capital beneficiary entitled to the corpus on vesting.
Nominee
A person who holds property on behalf of the true owner — effectively a bare trustee with no active duties.
Object
A person within the class eligible to receive distributions from a discretionary trust — broader than named beneficiaries.
Power of appointment
The power of the trustee to decide which objects or beneficiaries receive trust income or capital — the defining feature of a discretionary trust.
Present entitlement
The current right of a beneficiary to demand payment of their share of trust income — the trigger for taxation under section 97 ITAA 1936.
Purpose trust
A trust established for a purpose rather than for identifiable beneficiaries — generally void unless the purpose is charitable.
Resettlement
The creation of a new trust — whether by amendment that changes the fundamental nature of the trust or by transfer to a new trust structure. Can trigger CGT.
Resulting trust
A trust arising by implication where property is transferred without adequate consideration and no gift was intended — the property results back to the transferor.
Rule in Saunders v Vautier
The principle that adult beneficiaries who together hold the entire beneficial interest can terminate the trust and call for the trust property.
Section 100A
The anti-avoidance provision in the ITAA 1936 that applies where a beneficiary is made presently entitled under a reimbursement agreement — taxing the trustee at penalty rates.
Settlor
The person who establishes the trust by transferring property to the trustee — in Australian discretionary trusts, usually contributes a nominal sum.
Testamentary trust
A trust created by a will, taking effect on death — benefiting from concessional tax treatment for minor beneficiaries.
Trust deed
The document establishing the trust, setting out the trustee's powers, the beneficiaries, and the terms of the trust.
Trust property
All property held by the trustee on trust — including real property, shares, cash, and intangible assets.
Trustee duties
The obligations imposed on a trustee by law and the trust deed — including the duty to act in good faith, avoid conflicts, and invest prudently.
Unit trust
A fixed trust where beneficial interests are divided into units — each unit holder has a proportional entitlement to income and capital.
Variation
An amendment to the trust deed — the power to vary must be expressly included and exercised consistently with the trust's fundamental terms.
Vesting
The date on which the trust must terminate and the trust property must be distributed — set by the trust deed within the perpetuity period (typically 80 years).
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These definitions are general explanations for educational purposes — not legal or tax advice. Trust law varies between states and territories and ATO positions change. Always verify against the current trust deed, legislation, and rulings.
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