In this final part of our trust finance series, we explore the real forces behind a trust’s structure — the beneficiaries, the appointor, and how control and compliance shape loan outcomes.
From identifying beneficiaries to understanding appointor powers and trustee structures, we uncover how the inner workings of a trust can either enable or derail finance applications.
Transparency, consistency, and documentation remain your best tools when presenting a trust structure to a lender. Let’s break down what you need to know.
Please note: This article provides general information only and does not constitute legal, tax, or financial advice. You should contact us for advice suited to your individual circumstances before acting on any information contained herein.
What Is a Beneficiary in Trust Finance?
In the context of trust finance, beneficiaries are the people or entities entitled to benefit from the trust’s income or assets. In Australia, they can include:
- Individuals
- Companies
- Other trusts
- Charities or not-for-profits
- A class of people (e.g. “children of the settlor”)
Some trust deeds name beneficiaries directly, while others define them as a class. This lack of precision can complicate things — especially for lenders and regulators, who require clear identification for tax and anti-money laundering (AML) purposes.
Blind Trusts and Beneficiary Disclosure in Trust Finance
Blind trusts do exist. These are trusts where the beneficiaries don’t know what the trust owns or how it operates. They’re typically used to avoid conflicts of interest (e.g., for politicians or public figures).
However, blind trusts do not bypass AML rules.
In Australia, AUSTRAC and the global Financial Action Task Force (FATF) require financial institutions to identify and verify the ultimate beneficial owners of a trust — even if they’re not publicly named. Failure to disclose this information can cause a finance application to be rejected or flagged for review.
➡️ Source: AUSTRAC – Meeting your beneficial owner obligations
Appointors: The Hidden Controllers
The appointor is the often-overlooked power behind a trust. While trustees manage the trust, the appointor can hire and fire them — meaning they control who controls.
- Do they need beneficiary permission to remove a trustee? No. In most deeds, the appointor has sole authority to replace the trustee.
- Can this create finance risk? Yes. A stable trustee can be replaced mid-loan term, potentially altering the risk profile.
💡 Tip: Disclose the appointor to the lender. If you’re unsure of their rights, have your trust deed reviewed by a lawyer before applying for finance.
Can a Trust Have More Than One Trustee?
Yes. A trust may appoint multiple trustees — usually with joint decision-making. This structure can strengthen oversight but also introduces complexity:
- All trustees must agree on financial transactions
- Disagreements may delay decisions
- All trustees may be jointly liable for breaches
Lenders may request documentation confirming all trustees consent to the loan terms.
Can a Trustee Manage More Than One Trust?
Also yes — and this is common in family or investment structures. A corporate trustee may act for several trusts.
However, this arrangement brings risks:
- Risk contamination: Problems in one trust (e.g. litigation or insolvency) shouldn’t impact others — but poor record-keeping can blur the lines.
- Finance complexity: Lenders must know which trust is borrowing, which assets secure the loan, and whether the trustee has capacity to act.
🔍 If a trustee manages multiple trusts, ensure each trust has separate accounting, records, and tax lodgements. Cross-contamination undermines lender confidence.
Trust Taxation: Who Pays What?
In trust finance, tax treatment can make or break borrowing power.
Here’s the key:
- Trustees can distribute income to beneficiaries without paying it
- Beneficiaries must pay tax on their share — even if they never received the money
If the trust doesn’t distribute profits by 30 June, the trustee may pay tax at the top marginal rate (47%). This is costly and often avoidable.
What Tax Rate Applies?
- If the trustee is an individual, tax applies at their marginal rate
- If income is distributed to a company, the company tax rate applies (either 25% or 30%)
- The trust itself doesn’t pay tax, unless profits are not distributed
This is why it’s critical to understand who the income is distributed to on paper — especially when the funds are retained in the trust. Undisclosed tax liabilities can reduce borrowing capacity.
Remember that paper distribution of profits, i.e. without the cash, will create a liability to the beneficiary in the trust accounts. Lenders will review the trust deed to determine how to treat these liabilities.
Foreign Trustees and Asset Ownership in Australia
A foreign person or company can act as trustee of an Australian trust. However, this brings added scrutiny from:
- The ATO
- The Foreign Investment Review Board (FIRB)
- Lenders and banks
Key issues include:
- Landholder duty for real estate
- Capital gains tax
- Wealth transfer risks
Foreign trustee structures may trigger requests for legal opinions, tax rulings, and declarations from offshore entities. These hurdles often delay or derail finance applications.
Preparing for Trust Finance: What Lenders Want
Here’s how to present your trust for a smoother finance application:
✅ Use the full legal title: e.g. “ABC Pty Ltd as trustee for the XYZ Trust”
✅ Disclose all beneficiaries, even if they are classes
✅ Identify the appointor and their powers
✅ Confirm who pays tax — the trust or a beneficiary?
✅ Declare if the trustee manages multiple trusts
✅ Be upfront about any foreign connections
Final Thoughts
Trusts are powerful tools for business, family wealth, and asset protection. But without clarity and compliance, they can become roadblocks — especially in trust finance.
Whether you’re applying for finance, restructuring, or managing distributions, ensure your trust is structured to meet lender expectations.
What’s Next?
Arranging Trust Finance can be complex unless you find good help. At Convergent Capital Corp, we have finance consultants who understand trust structures and lender requirements.
Contact us today to protect your assets and improve your finance outcomes. Click here to book a confidential consultation.
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