As we approach the end of the 2025 financial year, trustees of discretionary trusts must navigate increasingly complex legal expectations. One case in particular—Owies v JJE Nominees Pty Ltd [2022] VSCA 142—continues to reshape trustee obligations in a way that remains highly relevant for tax planning and trust management in 2025.
The Case: A Turning Point in Trustee Accountability
In Owies, the Victorian Court of Appeal set a significant precedent by ruling that trustees of a discretionary family trust had breached their fiduciary duties by failing to properly inform themselves before making distribution decisions. Specifically, the Court found that the trustees had not considered the personal and financial circumstances of the beneficiaries before distributing income almost exclusively to the parents, to the exclusion of their children, who were also beneficiaries.
Crucially, the Court held that the failure to make genuine, informed decisions amounted to a breach of trust. It ordered the removal of the trustees, emphasizing that mere legal discretion does not equate to unfettered authority. Trustees must be able to demonstrate that their decisions are based on a sound understanding of the beneficiaries’ circumstances and the purpose of the trust.
What Has Changed Since Owies?
While no legislation has yet been passed in direct response to Owies, the ripple effect is being felt throughout trust administration and estate planning practice. The Australian Taxation Office (ATO) has also responded with increased scrutiny of trust distributions, particularly where adult children are excluded or where distributions appear to serve tax minimisation purposes rather than genuine fiduciary considerations.
The legal takeaway is clear: trustees must not treat their discretion as absolute. They must now keep accurate records of their decision-making processes and be prepared to show that relevant factors—such as the financial needs, personal relationships, and entitlements of each beneficiary—were properly considered.
Practical Implications for EOFY 2025
With 30 June fast approaching, trustees and advisers should take proactive steps to ensure trust distributions comply with both legal and tax expectations:
- Document Decisions Thoroughly: Maintain contemporaneous records showing how and why beneficiaries were selected for distributions. Meeting minutes and decision rationales are essential.
- Review Trust Deeds: Many older deeds are silent or vague about trustee obligations. Now is the time to review and, if necessary, update trust instruments.
- Engage Beneficiaries: While not always legally required, communicating with beneficiaries about their rights and the status of the trust may prevent disputes and demonstrate good faith.
- Align with Tax Guidance: Trustees must also stay abreast of current ATO guidance, especially in light of Section 100A of the Income Tax Assessment Act 1936, which continues to be a focus in anti-avoidance enforcement.
Significance and Lessons
| Aspect | Lesson |
| Documentation | Keep contemporaneous records of information considered and reasons. |
| Trustee Training | Trustees should understand fiduciary duties and proper exercise of discretion. |
| Trust Deed Clarity | Ensure deed sets out process for exercising discretion (e.g. factors to consider). |
| Tax vs. Fiduciary Duty | Tax planning cannot override duty to beneficiaries. |
Final Thoughts
The Owies case has put fiduciary duty and trustee discretion under the legal spotlight. As financial year-end planning intensifies, it’s vital that trustees act deliberately, transparently, and in accordance with the evolving legal landscape. For clients with family trusts, the 2025 EOFY presents a timely opportunity to reinforce good governance and future-proof trust arrangements.
If you would like your deed reviewed or advice to ensure you are complying with the Owies decision, please contact us.
About the Author: This article has been authored by Steven Brown. Steven is a Perth lawyer and director and has over 20 years’ experience in legal practice and practices in commercial law, dispute resolution and estate planning.
