Quick answer
A trustee is the person or company that legally owns a trust's assets and runs the trust for its beneficiaries, following the trust deed. A trust isn't a separate legal entity, so when a trust business borrows, the trustee is the borrower. The trustee can be personally liable for the debt, with a right to be repaid from trust assets for liabilities properly incurred.
Key points
- A trust can't sign contracts; the trustee signs, usually 'as trustee for' the trust
- Trustees can be individuals or a company, and lenders treat each differently
- The trustee carries the debt, backed by a right of indemnity from trust assets
- Lenders confirm the right trustee is in place and has the powers it needs
Here’s the part of trust law that surprises most business owners: the trust itself owns nothing and can’t borrow a cent. The trustee does both. A trustee is the individual or company that holds legal title to the trust’s assets and manages them for the beneficiaries, within the limits the trust deed sets.
So when “the family trust” buys a delivery van or takes out a working capital loan, it’s really the trustee signing the contract and carrying the debt.
Individual trustee or company trustee?
The ATO describes the trustee’s job as holding trust property for the beneficiaries and dealing with it according to the deed, state trust law and tax law, including lodging the trust’s tax returns. Who fills that role changes how borrowing works.
| Individual trustees | Company trustee | |
|---|---|---|
| Who it is | One or more people, often the business owners | A company, usually owned and run by the owners |
| How loans are signed | “Jane and Tom Lee as trustees for the Lee Family Trust” | “Lee Holdings Pty Ltd ATF the Lee Family Trust” |
| Liability for trust debts | Personal, offset by the right of indemnity | Limited to the company, but directors usually guarantee |
| Effect of a death or falling-out | Trustee change needed, titles may have to be updated | The company continues; directors change instead |
| Lender preference | Accepted, but more admin | Common and familiar to most lenders |
Our page on the corporate trustee goes further into the company option.
Why the trustee matters to a lender
Credit teams want three things confirmed before they lend.
The right trustee is in place. If the trustee has changed since the trust began, every appointment and resignation must be documented as the deed requires. One unsigned page in that chain can stall a deal.
The trustee has the power. Borrowing, mortgaging trust property and giving guarantees all need to be permitted by the deed.
The right of indemnity is intact. A trustee that properly incurs a debt can generally be repaid from trust assets, and the lender relies on that right to reach those assets. A trustee acting outside its powers, or in breach of trust, can lose some or all of the indemnity, which weakens the lender’s position. That’s why lenders ask for warranties in the loan documents that the trustee is acting within its powers.
Because a company trustee often holds little in its own name, expect a personal guarantee from each director. Where there are several individual trustees, they’ll normally be bound by joint and several liability, so the lender can chase any one of them for the full amount.
Running a business through a trust and need funds? Send us a quick enquiry and name your trustee as it appears on your deed.
Example: two siblings, one trustee change
A brother and sister in Ballarat run a bakery through a discretionary trust. They were originally appointed as individual trustees. Two years ago, on their accountant’s advice, they replaced themselves with a new company, Wheatfield Bakeries Pty Ltd.
They now want $90k to replace an oven and expand the shopfront. The lender asks for the deed, the deed of appointment of the new trustee, an ASIC extract for the company and the trust’s last two tax returns. Everything lines up, so the loan is written to “Wheatfield Bakeries Pty Ltd as trustee for the Barrett Family Trust”, with both siblings giving director guarantees. Had the trust’s bank accounts or equipment registrations still been in their personal names, the lender would have asked them to fix that first.
Related terms
Start with the trust deed, which sets out the trustee’s powers. For the wider picture, our guide to how trusts affect business borrowing and the situation page on business loans for trusts explain distributions, serviceability and which lenders work well with trust structures. If the trust owns property, secured business loans may be the most cost-effective path.
Borrowing as a trustee doesn’t have to be complicated
We speak with trustees every week, from mum-and-dad family trusts to multi-site businesses with company trustees, and we know which lenders read deeds quickly. Telling us what you need is a minute’s work, and making the enquiry doesn’t put a mark on your credit history. Your file isn’t passed along to a string of finance companies; one of our people reviews it and phones you directly. Fill in the trustee and trust names accurately, because that one detail saves a lot of back-and-forth later.
Frequently asked questions
Is the trust or the trustee the borrower?
The trustee. A trust is a relationship, not a legal person, so it can't own property or sign a loan by itself. Loan documents name the trustee, followed by words such as 'as trustee for the Smith Family Trust'.
Am I personally liable if I'm an individual trustee?
Generally, yes. The ATO notes that trustees can be personally liable for the trust's debts, although they can be indemnified from trust property for liabilities properly incurred. If trust assets fall short, an individual trustee's own assets can be exposed.
Is a company trustee safer?
A company trustee limits liability to the company's assets, which is one reason many business trusts use one. In practice, lenders usually ask the directors for personal guarantees, so the protection is narrower than people expect when borrowing.
Can a trustee be changed during a loan?
Yes, if the deed allows it, but most loan agreements require the lender's consent first. A change of trustee also affects property titles and PPSR registrations, so tell your lender early.
What documents prove who the trustee is?
The original trust deed, any deeds of variation or appointment, and for a company trustee, an ASIC company extract. Lenders check that the chain of trustee changes is complete and properly signed.