Are you curious about what’s happening in the world of Australian trusts? Today we’re diving into Australian Trust Statistics 2023, which might surprise you! The ATO just released their latest taxation statistics data based on information from trust tax returns.
For starters, there are 947,264 trusts! That is getting close to 1 million trusts, or 1 trust for every 26 people in Australia. It has come down since the year before with a drop of 41,535.
To give you a visual idea of how many trusts there are, consider the Melbourne Cricket Ground (MCG). Its seating capacity is about 100,000. So, to represent all the trusts in Australia, you’d need nearly 10 full stadiums.
With such a large number of trusts, it’s intriguing to delve deeper into their trust statistics and trends. In the following sections, we’ll unpack the latest ATO data, exploring the financial dynamics of these trusts and how they’re shaping Australia’s economic landscape.
What’s Covered:
The Popularity Contest: Discretionary Trusts
A striking 80% of trusts are discretionary, highlighting their popularity. Discretionary trusts’ flexibility in distributing income or capital to beneficiaries could explain their dominance. It indicates that many Australians appreciate flexible tax planning and asset protection.
Fixed unit trusts come in second place but only occupy 11% of the total number of trusts. Deceased estates and all other trust types account for the remaining 9%.
Trust Statistics – Total Number Trends
The number of trusts in Australia fluctuates over time but generally trends upwards. This shows that trusts continue to be a popular tool for managing and distributing wealth.
The Disparity in Trust Earnings
Are you wondering about the money that’s being made? Trust statistics show it’s a staggering $428 billion in total business income! That exceeds the gross domestic product (GDP) of many countries, including Singapore ($396b), Denmark ($398b), and South Africa ($419b).
The average business income is substantial at $1.1 million, yet the median income is much lower at $220,962. This indicates a wide disparity in the earnings of trusts.
In addition, while almost 20% of trusts reported losses, 6% earned $500,000 or more. Trusts reporting $500,000 or more in business income generated a whopping $203 billion. However, trusts that reported losses still accumulated a negative figure of $56 billion. This implies that while some trusts earn substantial profits, others face significant financial difficulties. This definitely shows the wide gap in trust performance.
Increasing Number of High Earning Trusts
Over the years, the number of trusts earning a net income of $100,000 or more has consistently increased. Trust statistics suggest that there’s been an uptrend in the earnings of trusts over the decade. Likely reflecting the growth in the Australian economy, rising asset values, and increased commercial activity.
There’s a consistent pattern where higher-income trusts tend to have more ‘net rent incomes’ or profits from rental properties. This income category has grown over the years across all income groups, suggesting an overall increase in property investments and/or property values.
Financial Shifts and Resilience
The increase in trusts reporting losses from 142,025 in 2010–2011 to 187,935 in 2020–2021 could reflect a more volatile business environment.
However, the resilience of mid to high-earning trusts is notable, as the number of trusts earning between $50,000 to $499,999 has remained consistent.
Notably, there has been a slight rise in trusts earning from $200,000 to $500,000 or more since 2014-15. The trust statistics suggest economic recovery and growth post-2008 crisis.
There’s a notable decrease in gross interest income across all income brackets, particularly from 2014-15 onwards. This trend, observed in the dwindling number of people earning gross interest income, may indicate a shift in investment behaviours due to lower interest rates or a move towards other forms of investments.
A Closer Look at Business Expenses in Trusts
The trust statistics on total expenses across all income brackets have generally increased over the years. Likely due to inflation, higher operating costs, growing real estate prices, wage growth, and regulatory compliance costs.
Cost of sales dominates business expenses, comprising 44.39% of the total.
Interestingly, ‘all other expenses’ account for a substantial 35.47%. Although vague, this category can include a wide range of costs, such as marketing expenses and administrative overheads, indicating the operation of trusts across diverse industries with varied operating expenses.
Depreciation accounts for 5.53% of expenses, indicating trusts’ investment in long-term assets.
Contractor and commission expenses come in at 3.80%, suggesting a portion of trusts operate in industries reliant on contractor labour or commission-based sales structures.
Surprisingly, interest expenses make up only 3.13%. Considering the significant assets and investments often associated with trusts, one might expect a higher figure. This low percentage could indicate efficient debt management within trusts.
Lastly, rent and superannuation expenses contribute 3.09% and 1.59%, respectively.
Navigating the Digital Trust Transformation
Before we delve into the finer details of trust assets, let’s examine how trust tax returns are lodged.
One standout trust statistic is that 98% of trusts lodge their tax returns electronically. Individuals can’t directly file trust tax returns online to the ATO. This task is primarily managed through tax agents. These professionals have access to digital systems that efficiently handle these tax returns.
Paper lodgements have gradually declined over the past five years, from 2.9% of total lodgements in 2016–17 to approximately 2.27% in 2020–21.
The Enduring Role of Tax Agents
Lodgements through tax agents have increased slightly from 97.96% in 2016–17 to 98.32% in 2020-21. Despite technological advancements, there’s a growing reliance on tax agents.
While only 1.68% of lodgements are done without tax agents, a small percentage of tax agents continue to use traditional methods for filing returns, evidenced by the 2.33% of paper lodgements.
The digital landscape for tax management is evolving, with user-friendly software solutions enabling individuals to lodge trust tax returns independently. As digital literacy improves and confidence in these tools grows, we might see a shift towards more self-managed trust tax returns.
While tax agents currently play a crucial role by offering their specialist knowledge and simplifying tax obligations, advancements in software should potentially reduce this dependency in the future.
The progression of this trend will be a fascinating indicator of how digital transformation will shape the future landscape of trust management in Australia.
Now, let’s explore the massive amount of assets under trust management.
What about total assets?
The trust statistics show total assets amount to a staggering $2.3 trillion. That’s $2,319,255,939,409.
How much is that?
- If every human on Earth were given an equal share of this amount, each person would receive about $293.
- Suppose you stack this amount in $100 bills. In that case, the stack will reach approximately 1,579 kilometres high, roughly twice the cruising altitude of commercial aeroplanes.
Trust Asset & Liability Trends
The total assets managed by Australian trusts have steadily increased since the 1990s, from $63.4 billion in 1990–91 to $328.8 billion in 1999–2000. This period of prolonged economic growth in Australia was characterised by steady GDP growth, stable inflation, and declining unemployment.
A remarkable jump in total assets can be observed in 2001-02, where total assets more than doubled from the previous year to $760.7 billion, likely due to solid performance in the Australian Stock Exchange (ASX) and the property market.
The total liabilities of trusts also increased, reflecting the growing scale of trust operations and potentially indicating their willingness to take on debt to leverage their investments.
Significant increases in assets and liabilities were seen from 2004-05 to 2007-08 in the trust statistics. A sudden drop in liabilities in 2007-08 could be a sign of deleveraging in response to the onset of the Global Financial Crisis (GFC).
During the GFC in 2008-09, there was a significant drop in total assets, in line with global trends. The liabilities also dropped, suggesting a reduction in the borrowing activity of trusts.
Post-GFC, from 2009-10 to 2012-13, there was a general stabilisation in the total assets and liabilities. From 2013-14 to 2016-17, assets and liabilities saw a steady increase, likely contributed by an upswing in Australia’s property market and the strong performance of the ASX.
However, in 2017-18, there was a sudden and significant decrease in assets and liabilities, possibly due to changes in the regulatory environment, shifts in market conditions, or increased tax enforcement.
In the most recent years, 2018-19 to 2020-21, the total assets and liabilities have stabilised again. Although assets are not at their peak levels before 2017-18, they have steadily increased, indicating a possible recovery or adaptation to the new market or regulatory conditions.
A Historical Perspective on Australian Trusts
Australia’s remarkable economic resilience, continual growth, and progressive legal amendments have all shaped the landscape of trusts. The trust statistics data from 1990–91 to 2020–21 tells a compelling story interwoven with Australia’s economic history and legal development.
In 1990–91, there were 107,100 trusts valued at $63.39 billion. Fast forward thirty years to 2020–21, and the number of trusts has grown dramatically to 947,264, with an impressive $2.31 trillion asset value.
However, this upward trend was not linear. Our analysis of the trust statistics shows periods of rapid growth followed by relative stability. The mid-90s to early 2000s, often referred to as the ‘Australian economic miracle,’ saw a consistent increase in the number and total assets of trusts, reflecting the nation’s unprecedented growth and stability.
The Australian mining boom from the early 2000s to 2013 significantly contributed to trust asset accumulation. This period coincided with a sharp increase in trust assets, peaking at $2.58 trillion in 2006–07, primarily driven by demand from emerging economies, notably China.
Just before the global financial crisis of 2008, total trust assets hit a record $3.8 trillion. Despite the economic turmoil that followed, the foundation of Australian trusts remained stable, showcasing the country’s economic resilience.
A rise in total assets from 2013-2017 followed, in line with the recovery from the global financial crisis and the property market boom in major cities such as Sydney and Melbourne. Low interest rates, strong population growth, and foreign investment drove trust assets.
The COVID-19 pandemic’s economic impact in 2020–21 is reflected in the trust statistics data, with a slight decline in the number of trusts and total assets. Even Australia wasn’t entirely immune to the global health crisis’s economic repercussions.
In Summary
In summary, the trust statistics show Australia’s growth and adaptation of trusts reflect the nation’s broader economic trends and investment behaviours.
From a base of $63.39 billion in 1990-91 to holding $2.3 trillion in assets in 2020-21, the importance of trusts in Australia’s financial landscape is evident.
Ready to learn more?
Now that you have learned all about Australian trust statistics, check out our guides for more information covering Trusts in Australia:
- Mastering Trust Tax Rates: An Australian Guide
- 7 Family Trust Benefits
- How Much Does it Cost to Set Up a Trust?
- Setting up a Family Trust in Australia
