The Trusts Act 2025 (Qld) (New Act) received Royal Assent on 19 May 2025 and will commence on a day to be fixed by proclamation.
Once it commences, the New Act will repeal and replace the existing Trusts Act 1973 (Qld) (Current Act).
The New Act makes important changes in Queensland to the regulation of trusts, and the rights and obligations of trustees and beneficiaries.
Trusts – particularly discretionary trusts and testamentary trusts – are commonly used as a form of asset protection, and as a valuable estate planning and business succession tool. They can provide flexibility, create certain tax advantages and serve as a family business or investment vehicle.
It is therefore important for trustees and beneficiaries to be aware of what has changed under the New Act, and how it impacts them.
What has changed?
The New Act aims to modernise and simplify trusts law in Queensland, replacing and repealing various provisions in the Current Act that have become obsolete and that do not reflect modern commercial practice.
While the changes are broad, the key focus of this alert is on the enhanced rights and obligations of trustees and beneficiaries introduced by the New Act.
Trustees’ eligibility and replacement
The Current Act does not limit who can be a trustee. In contrast, section 13 of the New Act expressly excludes minors, insolvent individuals and companies and those disqualified by court order from being able to act as a trustee.
The New Act also broadens the circumstances where a trustee can be replaced, including where the trustee has become insolvent. Importantly, where there is only one remaining trustee, and that person dies, his or her legal personal representative now has the power under section 21 of the New Act to appoint a new trustee (if there is no appointor under the trust, or the appointor does not act to appoint a replacement). Further, under section 22, a sole trustee with impaired capacity can be replaced by their attorney or administrator without the need for a court application, overturning the current position.
These changes introduce more flexibility in an estates and succession context, and can reduce the time, expense and uncertainty that often occurs when a trustee dies or has impaired capacity (which, to date, has often required court intervention).
Trustees’ powers
Section 82 of the New Act confers on trustees all the powers of an absolute owner with respect to trust property, subject to the express terms in the trust deed.
This is an important expansion of trustees’ powers. Under the Current Act, trustees have a very narrow and at times restrictive set of express powers, many of which are expressed in outdated terms or subject to specific limits – such as the power to lease or sublease property only for specified terms, and limitations on the sale of securities and the allocation of trust expenditure between income and capital. This has resulted in trustees needing to “fit” an exercise of power within restrictive wording no longer aligned with commercial reality. The broader terms of the New Act provide for greater flexibility, while also still enabling the trust deed to tailor a trustee’s powers to the unique business or family circumstances at hand where desired.
Section 85 of the New Act also removes the $10,000 limit on the amount a trustee is permitted to spend on the improvement or development of trust property without court approval, and there is now a greater ability for a trustee to delegate powers, including in relation to investment decisions. These changes again enhance flexibility, and minimise the need for court involvement on more routine trust administration issues.
Trustees’ duties
Part 5 of the New Act introduces new minimum statutory duties for trustees, including:
- a general duty to exercise care, diligence and skill in administering trusts;
- a duty to act honestly and in good faith; and
- a duty to act for the benefit of the beneficiaries (or the purpose of the trust, in the case of a charitable trust).
The New Act also introduces a minimum standard of care for a trustee in complying with the duty of care, diligence and skill. Notably, section 62 requires a trustee to act with the degree of care expected of a “prudent person of business” in exercising all powers conferred on it. Under the Existing Act, this standard only expressly applies to investment decisions.
Professional trustees who manage the affairs of other persons or non-professional trustees who hold themselves out as having special knowledge or experience in administering trusts are required to exercise higher standards of care under sections 60-61 of the New Act.
While many have assumed that the New Act merely codifies the general law position, this is not quite the case. At general law, it is possible to “attenuate” a trustee’s general duties, so that a trustee can be excused by the trust deed from liability for breaches of trust unless the trustee has acted intentionally, or has been reckless, negligent or fraudulent.
Under the New Act, however, the general standard of care in administering a trust applies despite a contrary intention in the trust deed. This may expand the circumstances in which a trustee may be found to be personally liable for a breach of trust, even where the trustee has merely been careless.
Enhancements to beneficiaries’ rights
The New Act expands trustees’ powers to apply income and capital of the trust in favour of minor beneficiaries. Sections 128 and 130 of the New Act also increase the amount that can be used from capital of the trust to provide for the maintenance, education or advancement of a beneficiary from $2,000 to $100,000 (to be adjusted annually in accordance with the CPI), or one-half of the capital.
A significant change is introduced by sections 64 to 65 of the New Act, which provide, for the first time in Queensland, an express statutory right for beneficiaries to inspect and copy trust records – which must be retained by trustees for a minimum of 3 years – unless a request to do so is unreasonable in the circumstances. This cuts through complexities that can arise when beneficiaries seek to rely on their general law access rights, and provides a simple measure for beneficiaries to verify information concerning the trust, and to enhance transparency and accountability on the part of a trustee.
Further enhancing the scope of beneficiaries’ rights, the New Act now permits beneficiaries to directly issue proceedings against a third party that has wrongfully received trust property (rather than needing to exhaust remedies against the trustee first), and to also apply to the court to review and reduce excessive amounts of remuneration and commissions charged by a trustee. Again, these reforms increase accountability for trustees, and give greater certainty to beneficiaries in seeking to enforce their rights.
Takeaways
There has been rapid growth in the use of trusts in Australia in recent years. The latest ATO statistics indicate that over 1 million discretionary trusts now exist in Australia, almost twice the number from a decade ago. Fixed and unit trusts, as well as testamentary trusts, are also important in implementing business, investment and estate planning goals.
Given their widespread use, and their role in advancing major business and personal wealth objectives, it is critical for trustees and beneficiaries to be aware of the changes under the New Act, and how those changes may impact on their rights, their responsibilities and ultimately their businesses.
Our team at K2 Law is highly experienced in all aspects of trusts law and practice, including the use of trusts in complex business structuring, and succession and estate planning matters.
Please get in touch with James Barritt or Peter Kumnick if you would like to discuss in further detail how the New Act impacts you, and your business and personal goals.
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