Cost to Set Up a Trust in Australia: Unveiling the Full Picture

Setting up a trust in Australia can be a highly strategic move for asset protection, estate planning, and tax management. But how much does it cost to establish one? The answer isn't as straightforward as you might think. The cost of setting up a trust depends on several factors, ranging from the type of trust, the complexity of your assets, legal fees, and ongoing administrative expenses. Let's break it down in detail.

The Types of Trusts and Their Associated Costs

One of the first things to consider is the type of trust you want to establish. In Australia, common trusts include:

1. Discretionary Trusts: These are the most common types used by families for asset protection and tax purposes. The cost to set up a discretionary trust can range from $1,500 to $3,000, depending on the complexity of the assets involved.

2. Unit Trusts: Commonly used in business structures, unit trusts distribute income to unit holders in proportion to their units. The cost for these trusts is typically between $2,000 and $5,000.

3. Testamentary Trusts: These are created as part of a will and take effect upon death. They are particularly useful for estate planning, especially when minors are involved. The cost can vary widely, ranging from $2,000 to $6,000, depending on how complex the estate is.

4. Special Disability Trusts: These are designed to provide for family members with severe disabilities. The setup costs usually start at $2,500 and can go up from there, especially if you need legal guidance on eligibility criteria.

Initial Setup Costs

For all types of trusts, you’ll need a qualified lawyer or accountant to help draft the trust deed. These professionals charge anywhere between $1,500 and $5,000, depending on the complexity. If the trust is part of a larger financial or estate plan, expect to pay on the higher end.

You’ll also have government fees to consider. While these are typically minor (around $200 to $500), they are a necessary part of the setup process. If you're purchasing property or assets for the trust, stamp duty may also be payable, and this can be significant depending on the value of the assets.

Ongoing Costs: Don't Overlook the Maintenance

While the initial cost of setting up a trust is significant, ongoing costs can be equally important. A trust requires careful management to remain legally compliant and effective for its intended purpose.

1. Annual Administration Fees: Expect to pay a professional trustee or accountant anywhere from $1,000 to $3,000 annually for administrative duties such as filing tax returns, managing distributions, and keeping financial records.

2. Audit Fees: Trusts that hold significant assets or are used in complex family structures may require auditing. Audit fees can range from $1,500 to $5,000 annually, depending on the trust's complexity and the auditor’s qualifications.

3. Legal Advice and Updates: Changes in tax law or your personal circumstances may require you to update the trust deed, which could cost another $500 to $2,000 depending on the extent of the changes.

4. Taxation Costs: Trusts are required to lodge an annual tax return. Professional fees for this can range from $300 to $2,000 based on the complexity of the trust’s income sources and investments.

Hidden Costs and Considerations

Trusteeship: One thing many people overlook is the cost of appointing a professional trustee if you don't want to manage the trust yourself. Professional trustees charge 1% to 2% of the trust's total assets annually. For large trusts, this can add up quickly.

Complex Structures: If your trust forms part of a more extensive estate or financial planning structure, you may need to incorporate additional entities such as companies or self-managed super funds (SMSFs). Each entity adds its own layer of complexity—and cost. Setting up these additional entities can cost $2,000 to $5,000 each, with similar ongoing fees for administration and tax returns.

Why You Shouldn't Cut Corners

Many people are tempted to use online templates or cheap DIY trust packages. While these might save you a few thousand dollars in the short term, they could end up costing you much more in the long run. Poorly drafted trust deeds can lead to disputes among beneficiaries, increased tax liabilities, or even the collapse of the trust structure altogether. It's almost always worth investing in expert legal and financial advice when setting up a trust.

Key Takeaways

• The cost of setting up a trust in Australia ranges from $1,500 to $6,000, depending on the type of trust and the complexity of your situation.
• Ongoing maintenance fees can be significant, especially if you hire professional trustees or accountants, ranging from $1,000 to $5,000 annually.
• Hidden costs, like auditing, legal updates, and trusteeship, can add up quickly, especially for larger or more complex trusts.
• Cutting corners by using cheap DIY services may lead to more significant costs down the line due to errors or legal complications.

In conclusion, while setting up a trust in Australia involves substantial upfront and ongoing costs, the long-term benefits—particularly in terms of asset protection and tax efficiency—are often well worth it. Be sure to consult qualified professionals to ensure your trust is set up correctly and remains compliant with the law.