Trusts By definition, a trust is a fiduciary obligation imposed on one person (called the trustee) to hold property for a particular purpose or on behalf of other persons (called beneficiaries). Under this relationship, the trustee is required to exercise certain rights and powers for the benefit of the beneficiaries. The terms of a trust arrangement are set out in a document called the “trust deed”. The trustee is compelled by law to deal with trust property in accordance with the terms of the trust. The operation of trusts is governed by State/Territory legislation. The main parties to a trust are: • settlor • appointor • trustee • beneficiaries. The settlor is the person who establishes the trust by “settling” a sum of money (“the settled sum”) and signing the trust deed. The settlor has no further role. The appointor is the person who may be named in the trust deed as the one with the power to appoint and remove the trustee. The trustee is the person who has the legal right and obligation to act on behalf of the beneficiaries in managing the affairs of the trust. The beneficiaries are the persons for whose benefit the trust arrangement has been set up. Most prospective sponsors using a trust structure operate as “family trusts”. In a family trust, the beneficiaries are members of a family (or extended family) and the trustee is usually a limited liability company in which one or more of the beneficiaries hold shares and are directors. The trust deed stipulates how income is to be distributed among beneficiaries. A unit trust is another trust structure commonly used in business. In a unit trust, property owned by the trust is divided into units that can be bought and sold as investments. The unit owners have an equitable interest in the property (unlike shareholders of a company, who do not have any direct interest in the property owned by the company). Income is distributed on the basis of units held. A trust is simply a relationship and not a person. Therefore, a trust cannot be an employer for the purposes of regulation 5.19. An application for approval of a nominated position would need to be made by the trustee or trustees, acting on behalf of the trust. For all practical purposes, if a business is operated under a trust arrangement, the trustee (acting on behalf of the trust) must be the nominating employer. The trustee may be an individual, a partnership or a limited liability company. Relevant legislation requires the financial affairs of the trust to be separated from those of the trustee. The trustee is required to: • file a separate tax return for the trust [the trustee (when acting in its capacity as trustee) will have an ABN] • maintain a separate set of financial records covering the activities undertaken on behalf of the trust.