AUSTRALIA Law and Practice Contributed by: William Moore, Frank Hinoporos, Emma Woolley and Todd Bromwich, Hall & Wilcox
6.3 Fiduciary Regulation Fiduciaries in Australia are regulated under state and federal legislation, including state Trustee Acts and the Corporations Act, which impose a statutory duty to invest trust assets prudently, considering risk, return, diversification and liquidity. Superannuation trustees are subject to “best financial interests” and “prudent person” duties under the Superannuation Industry (Supervision) Act 1993 (Cth). Australian Financial Ser - vices Licensees managing client assets must comply with competency requirements and general obligation requirements under the Corporations Act. The regu - latory framework does not prescribe specific invest - ments but requires a disciplined process balancing risk and return consistent with the trust or fund’s objectives. 6.4 Fiduciary Investment Australia applies the “prudent investor” standard to fiduciary investment decisions, requiring trustees to exercise the care, diligence and skill a prudent per - son would use in managing another’s affairs. This standard, reflected in state Trustee Acts and in equity, focuses on sound process and informed judgement rather than specific investment outcomes. Diversification is generally required, unless demon - strably inappropriate. Trusts may hold active busi - nesses if expressly authorised by the trust deed, but direct operation is uncommon due to fiduciary and liability risks. 7. Citizenship and Residency 7.1 Requirements for Domicile, Residency and Citizenship An individual will be a resident of Australia for tax purposes if they meet any one of the following four statutory tests. • Ordinary concept of “residency”: an individual is considered a resident if they reside in Australia, determined by their intention and the objective circumstances of their daily living arrangements, as established by case law. • Domicile: an individual with an Australian domicile is a resident unless the Commissioner is satisfied
Family Businesses and Corporate Structures Oppression or control disputes may lead to buyout orders, valuation adjustments or other corporate remedies designed to protect minority interests and ensure fair dealing. Across all categories, the overarching rationale is to correct wrongdoing, protect beneficiaries and pre - serve the integrity of the structures holding family wealth. 6. Roles and Responsibilities of Fiduciaries 6.1 Prevalence of Corporate Fiduciaries The use of corporate fiduciaries is well established in Australia, particularly in funds management, trus - tee and custodial structures. Most managed invest - ment schemes, superannuation funds and trust-based investment vehicles appoint a corporate trustee. These entities are subject to a heightened standard of conduct, including common law fiduciary duties and statutory obligations under the Trustee Acts and the Corporations Act 2001 (Cth) (Corporations Act). 6.2 Fiduciary Liabilities Under Australian law, a trust is not a separate legal entity. The trustee personally incurs liabilities and is only entitled to indemnity from trust assets if it acts properly, and within its power. If the trustee breaches its duties or loses its right of indemnity, creditors can pursue the trustee personally. A corporate trustee offers limited liability to its shareholders, but the com - pany itself remains fully liable, and directors may face personal exposure in limited circumstances. Australian courts will not “pierce the veil” of a trust in the corporate law sense but will look through it where equity demands (eg, sham trusts or breaches of fiduci - ary duty). Fiduciaries typically mitigate liability through exculpation clauses, professional indemnity insurance and delegation arrangements (eg, appointing licensed investment managers). These mechanisms limit but do not eliminate liability.
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