In Short
- A trust does not have an ACN because it is not a company, though the corporate trustee holding the ACN may.
- A trust needs an ABN only if it carries on business; if so, the ABN is registered in the trust’s name, not the trustee’s personal name.
- A trust should have its own TFN, issued when it registers for an ABN, and that TFN stays with the trust even if the trustee changes.
Tips for Businesses
Check whether your trust is actually conducting business before registering for an ABN. If you’re transferring assets or entering contracts through the trust, apply for both an ABN and TFN. Update your documentation to list the trust name and clearly reference its ABN or TFN.
Trusts are a fairly standard structure that you can use to operate a business, own assets, and distribute income. In a trust arrangement, the person or company who operates as the ‘trustee’ is under a legal obligation to control the trust’s assets for the benefit of others, the ‘beneficiaries’. Although trusts can serve similar purposes as companies, they are different structures, and the law regulates them differently. This article explains whether trusts require an Australian Company Number (ACN), an Australian Business Number (ABN), and a Tax File Number (TFN).
What is a Trust?
A trust is a legal relationship in which one party, the trustee, holds and manages assets for the benefit of others, the beneficiaries. The trust is established by a settlor who transfers assets into the trust in accordance with the terms set out in a trust deed, which serves as the governing document outlining how the trust operates, who the beneficiaries are, and the powers of the trustee. Importantly, a trust is not a separate legal entity like a company; it cannot own property or enter into contracts in its own name.
Instead, the trustee holds legal ownership of the trust assets and has the authority and responsibility to manage them in accordance with the trust deed and applicable laws. The beneficiaries hold equitable interest in the trust assets, meaning they are entitled to benefit from them as specified in the trust deed, but they do not have legal ownership. This separation between legal ownership (held by the trustee) and beneficial ownership (held by beneficiaries) is the fundamental characteristic that defines a trust and distinguishes it from other business and investment structures.
Types of Trusts
There are two main types of trusts, including unit trusts and discretionary trusts. Both trusts can be used for:
- trading;
- operating a business; or
- investment purposes.
Trading Trusts
Trading trusts conduct active business operations, such as:
- running a retail store;
- providing professional services; or
- manufacturing products.
The trustee actively engages in:
- commercial activities;
- employs staff;
- purchases inventory; and
- generates income through business operations.
Trading trusts involve greater risk due to ongoing commercial activities and contractual obligations.
Continue reading this article below the formInvestment Trusts
Investment trusts, on the other hand, hold investments such as:
- shares;
- property; and
- other financial assets.
The trustee’s role focuses on managing and preserving wealth rather than conducting active business.
Investment trusts typically generate income through:
- dividends;
- rent;
- interest; or
- capital gains rather than trading activities.
These structures generally entail lower operational risks and are often used for wealth protection and estate planning.
Does a Trust Require an Australian Company Number (ACN)?
In short, trusts do not require an ACN. An ACN is a unique nine-digit number issued by ASIC when the company is incorporated that identifies an Australian company, much like a licence plate identifies a car. Companies should use their ACNs alongside their company name in any legal documents in order to identify the company clearly.
Trusts do not require an ACN because they operate differently from companies. They cannot have an ACN because a trust is not a separate legal entity. However, an ACN becomes relevant to a trust when a company acts as the trustee. Many trusts use a corporate trustee, a company specifically established to act as trustee, rather than appointing an individual as trustee. In these situations, the corporate trustee will have its own ACN.
Example
Imagine that an individual named Philip Burke inherits a substantial sum of money and decides to invest it in commercial property. His accountant advises him to set up a discretionary trust and appoint a corporate trustee to limit personal liability.
Philip’s accountant incorporates Burke Investments Pty Ltd with ASIC. ASIC assigns the company an ACN of 123 456 789. Philip’s lawyer then sets up The Burke Investment Trust and appoints Burke Investments Pty Ltd as the trustee.
When signing property contracts, the purchaser is identified as:
Burke Investments Pty Ltd (ACN 123 456 789) ATF The Burke Investment Trust
So while the trust itself does not have an ACN, its corporate trustee does.
The letters ‘ATF’ stand for ‘as trustee for’ and make it clear that the company is entering into the contract in its capacity as trustee for the trust.
Does a Trust have an Australian Business Number (ABN)?
Your trust only needs an ABN if you use it to trade and to operate a business. This requirement applies in the same way that a company only requires an ABN for the same purpose.
This means that if you use your trust for shareholding in a company, it will not require an ABN.
Example
Andrea Ellis operates a jewellery business in Terrigal called Central Coast Carats as a sole trader, with a registered ABN of 98 765 432 101. She then decides to start a lawn mowing business through a trust. Andrea sets up The Ellis Trading Trust and becomes the trustee.
Because the trust operates a business, it is required to hold an ABN. Andrea registers the trust for an ABN and receives the following: ABN 12 345 678 910.
Legal documents will reflect this as Andrea Ellis, ATF The Ellis Trading Trust t/as Terrigal Lawns (ABN 12 345 678 910).
Does a Trust have a Tax File Number (TFN)?
A trust should have its own TFN, as it will need one to lodge annual tax returns. Upon registering for an ABN, a TFN will automatically be issued. If an individual is a trustee of a trust, they do not use their own personal TFN as trustee. Instead, they use a separate TFN that was registered in the trust’s name. If the trustee changes to another person in the future, that person will continue to use the same TFN for the trust. It is vital to understand that the ABN must be registered to the trust and not the trustee entity.
If you have a corporate trustee for a trust, the same process applies. The trust still uses the same TFN despite the trustee being a company. Again, if the trustee changes to another company in the future, the new company will continue to use the same TFN for the trust.
Example
Imagine that an individual named Sarah Wilde is employed as a nurse. Additionally, Sarah receives pay slips from her employer that cite her own personal TFN. Together with her husband, James, Sarah decides to set up a family trust to own their share portfolio and distribute dividend income among them and their three children. Sarah is appointed as trustee of the trust.
Sarah registers a new TFN for The Wilde Family Trust and cites this TFN when lodging income tax returns for the trust.
Ten years later, Sarah and James decide to appoint one of their children, Thomas, to replace Sarah as trustee for the trust. Thomas continues to use the same TFN that Sarah registered for the trust when lodging income tax returns for the trust.
If you are a company director, complying with directors’ duties are core to adhering to corporate governance laws.
This guide will help you understand the directors’ duties that apply to you within the Australian corporate law framework.
Key Takeaways
Trusts can be used to run a business, own assets, and distribute income. A trust does not have an ACN. However, if the trust has a corporate trustee, the corporate trustee will have its own ACN. A trust only needs an ABN if it is conducting business. If it does, then the trust registers an ABN. A trust should have its own TFN, which is automatically issued upon registration of an ABN.
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Frequently Asked Questions
Trusts cannot have an ACN as they are not a company. However, an ACN may still be relevant if a trust has a corporate trustee.
A trust has an ABN if you use it to operate a business. But, rather than the trust itself having the ABN, the ABN is actually attached to the trustee of the trust in their capacity as trustee.
A trust should have its own TFN. This requirement is like an ABN for a trust. Specifically, it means that the TFN is registered by the trustee of the trust in their capacity as trustee.
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