The Prime Minister's immediate response was telling: "It's important to let me firstly say, I don't have a family trust," he told 3AW morning presenter Neil Mitchell. "I've always had a very conservative approach to taxation."

He went to describe trusts as a "legitimate form of business structure". Yet he had revealed a personal discomfort about a growing force in the Australian economy: family trusts.

Mr Turnbull and Treasurer Scott Morrison are currently scrambling for ways to reduce national deficit ahead of the the May budget.

They've made their task tougher by cutting company tax, and they're struggling to lift revenue. Even so, there's no mention of trusts, of clawing back the unpaid taxes alluded to on radio. Mr Turnbull acknowledged to Mitchell there were no plans for trust reform. Given the potential windfalls to public coffers, failure to look to this way is puzzling.

Unpublished tax office data provided to Fairfax Media reveals there are 643,000 discretionary trusts in Australia almost twice the number in the late 1990s. They hold assets of almost $600 billion. They're one of the big three in Australia tax minimisation, along with superannuation and negative gearing.

The tax industry says the growth trend in trusts is sharpening as superannuation and negative gearing come under heavy political pressure. "Both super and negative gearing seem to be in the firing line one way or another," says tax institute senior tax counsel, Bob Deutsch. "That leaves you with the third leg of the tripod which is discretionary trusts. It's an area that will be more and more in focus."

Tax law experts say trusts are costing the government perhaps $2 billion a year in foregone revenue. Transparency campaigners say the veil of secrecy around trusts in Australia is shielding tax rip offs, corruption, money laundering, even terrorism.

This week neither Turnbull nor Scott Morrison would explain to Fairfax Media why trusts aren't on their budget agenda. Across government there's scant discussion or even data about trusts, including the level of tax paid, or not.

Why doesn't anyone talk about this we asked a seasoned federal bureaucrat. "Ah," said the public servant with a knowing laugh. "That's because you're on sacred ground."

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Trusts have always been a bit like that, mysterious and ethereal; that's their point.

Their legal roots date back to William the Conqueror in the years after his invasion of England in 1066.

Some say they were founded by noblemen to frustrate property grabs by their new king. One version of this story this is that Crusaders set them up so that family and friends could manage their lands while they were fighting abroad.

The idea was to ensure no one in particular owned particular properties. That way, they could not be seized.

Trusts have since evolved in Australia to focus on tax.

Trusts are an old concept, says business author and former tax official Rod Caldwell, "manipulated beyond recognition to be used as a tax minimisation vehicle".

Technically, a trust is an agreement created by a deed which is like a will. The key players are the trustee, typically a parent or business owner, and the beneficiaries, in family trusts, often adult children. In theory the trustee manages the trust assets and income on behalf of the beneficiaries.

No one actually owns the assets, which might be a property portfolio, a farm or a factory. In Australia, asset protection remains - as it was 1000 years ago - an important trust benefit.

Our courts are regularly bogged down in cases of creditors and estranged spouses or children wrestling ghostly foes (trusts) for outstanding debts or a share of family assets or unpaid trust income. The high-profile dispute between mining tycoon Gina Rinehart and her children is one such case.

But the real power of trusts, the magic, is that they don't actually pay tax. Trust income is only taxed when it is distributed to beneficiaries. "It (use of a trust) does open some of those (tax) opportunities more than a traditional company does," Australian Tax Office deputy commissioner Michael Cranston says in an exclusive interview with Fairfax Media.

Discretionary trusts - the most common form of trust - are especially rich in tax perks. Most family trusts are discretionary.

They allow breadwinners on high tax rates to split their income and distribute it to family members on low or no incomes, and low tax rates - adult kids at university for example.

The distribution of income can be varied each year. So, if a child leaves university and gets a well paid job their share can be transferred to little brother starting university, or a retired grandmother.

So, a discretionary family trust allows a rich miner or manufacturer - with the right tax agent - to minimise or even extinguish their tax bill by promising money to his kids and his parents. The money doesn't even have to change hands, only the tax bill.

Capital gains discounts are also able to be maximised through income splitting/streaming.

All too good to be true? Yes, but it is true, as the Australian Tax Office acknowledges: "At the margins a trust can still stream income to tax preferred beneficiaries...you might avoid tax at the top marginal rate because some or your beneficiaries aren't in that bracket," says deputy tax commissioner Cranston.

And while the data is limited, such tax perks do appear to be enjoyed primarily by the wealthy. The claim is often made that cracking down on trusts would hurt farmers and small businesses most of all. Mr Turnbull reiterated this view on 3AW on Friday.

Yet farming businesses account for fewer than 5 per cent of all trusts. There are more than twice as many in construction for instance

Australian Bureau of Statistics figures for 2014/15 indicate that households in the lowest 80 per cent of earners average less than $20,000 in trust assets. Households in the top 20 per cent average almost $90,000.(These figures take in other private trusts including fixed trusts)

When he launched the last, ultimately doomed, bid at trust reform in 1998, then Howard government treasurer Peter Costello summed it up this way: "Wealthier individuals with access to legal and accounting advice can target particular investments and structures to take advantage of differences in tax treatment. The rest of the community subsidises the wealthy taxpayer."

Just how big that subsidy is remains a vexed question, another trust riddle. The tax office is unable to say how much tax is paid on trust income. Surprisingly, it says it doesn't have the data to make a reliable estimate.

What we do know from obscure tax office figures is that discretionary trusts generate almost $80 billion in profit, a number so big (it is correct) that even tax experts query it.

In the late 1990s, when Peter Costello proposed to tax family trusts like companies, experts estimated a revenue boost of $900 million, or $1.45 billion in 2016 dollars. The Australian Council of Social Service proposes a similar solution today, and estimates about $1.5 billion in extra revenue.

Others argue that the taxing trusts, like companies, is flawed because it fails to address the core problem of income splitting. University of New South Wales trust tax law specialist Dale Boccabella, says a more rational and potentially lucrative alternative - for public coffers at least - is to align the taxing of trusts with social security's treatment of them.

When the breadwinner behind a family trust applies for a pension, for instance, social security means tests the applicant by looking through the trust to the real source of the assets and income, not to children/beneficiaries. Boccabella says the tax office should do the same.

How much would this approach generate in revenue? Hard to say. Boccabella says a minimum $2 billion a year based a conservative estimate of 200,000 trusts (less than one third of the total) currently saving $10,000 each per year through tax perks. He acknowledges the return could be much more.

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Pressure to rein in trusts is also coming from authorities and campaigners concerned about transparency, or lack of it.

The opacity of trusts has long been a headache for police, integrity bodies and journalists. It is increasingly an obstacle for international authorities battling money laundering and terrorism.

Tax office deputy commissioner Cranston says trusts sometimes make it difficult to globally track the owners of assets. "A trust in Australia might have a controller in Jersey which is in turn controlled by another trust in Panama, and on it goes. 'So it can be difficult to find who owns what," says the deputy commissioner.

This week Transparency International launched a report warning that the Australian real estate market is particularly exposed to money laundering by overseas buyers who exploit the cover of trusts and shelf companies.

Transparency's Australian chief executive officer Serena Lillywhite says the "veil of secrecy" around trusts makes it difficult to identify the real (beneficial) owners involved in dubious property purchases. "It's an easy way to hide millions of dollars," she says.

Companies are required to put searchable information about directors, shareholders and company finances (for larger firms) in the public domain. There is no equivalent for trusts and no register of trusts. Transparency International is calling for a public register of beneficial ownership, including of trusts.

Some countries have tightened regulation including the United Kingdom which created a national register in 2015. Australia has been slower to act.

The lack of transparency around trusts is also frustrating for researchers and policy makers keen to grapple with trusts, and the revenue that reform might generate. Reform, however, is on the horizon for neither of the major parties.

Previous attempts to end preferential tax treatment of trusts have come to grief. Costello's Howard-era proposal was in part a sweetener to Australian voters and minor parties whose support the government needed for its regressive GST package.

The Labor opposition backed the idea of trust reform but taunted Costello, saying too many conservative MPs benefited from their own trust perks to back him.

Sure enough, after years of negotiations, Costello withdrew the trust legislation in 2001, apparently bowing to resistance from the farm and finance lobbies and his own National and Liberal colleagues. He declined invitations for an interview for this story.

And Labor? In 2006 then union chief and parliamentary hopeful Bill Shorten, railed against the rich and their tax tricks. "They use their high-priced accountants, they set up their family trusts and family companies and they're not paying the same tax as you and I," he told the ABC.

Then, as he oversaw a review of trust rules as assistant treasurer in 2011, Shorten had a change of heart.

That same year, Coalition shadow treasurer Joe Hockey told a gathering of accountants that the tax treatment of trusts had "no logic" and "provided incentives to arrange business affairs to minimise tax rather than focus on business activity".

Hockey was howled down by his own colleagues, and by Shorten. He dropped the issue immediately and never raised it again.

Shorten ruled out serious reform. "We accept that trusts are legitimate business vehicles for farmers and the like," he said.

Instead, under Labor, the tax office established a trust taskforce to crack down on the most serious tax evasion. But a large, legal, tax avoidance industry survives unscathed.

By 2016, Costello, Hockey and Turnbull had all publicly acknowledged that Australia has a trust tax problem. In 2017 both major parties are still silent on the issue.

Costello knew why as early as 1997: the tax effectiveness and secrecy of trusts make them irresistible to Australia's rich and powerful.

"It's the big end of town that benefit most," says former tax officer and author, Rod Caldwell. "Those who can afford high end lawyers do very well out of trusts." This fact makes meddling with them political dynamite, especially for Labor, which fears the full wrath of Australia's wealthy if it dared to go there.

Both the Coalition and Labor are also spooked by the embrace of family trusts by the wider community, a trend encouraged by a powerful lobby with a billions of dollars in fees stake - tax agents.

The danger is that, like negative gearing, the more widespread is the adoption of trusts, the bigger the political risk of addressing it.

Then there is the parliament The current crop of Coalition MPs appear to have more trusts than any party room before them. Malcolm Turnbull doesn't have one, but the majority of his Coalition colleagues do, including Treasurer Scott Morrison (he says his trust is dormant) Foreign Minister Julie Bishop and Finance Services Minister, Kelly O'Dwyer.

Fairfax Media approached the Prime MInister and all his ministerial colleagues with trusts for comment. At press time none had responded.

"It's not surprising they (the MPs) are reluctant about reform and legislating to rein in trusts," says Caldwell. "You're asking them to legislate against their own hip pocket interests."

Yet, like negative gearing and capital gains exemption on the family home, the inescapable inequities, and the billions in foregone government revenue, will continue to surface as issues.

And, says Boccabella, if politicians are serious about basic principles of tax equity, and the budget deficit, change must come.

"Some people will always look for ways to minimise tax, he says. Close one method and they will look for another. The best way to tackle tax rorts and loopholes is to close them all."

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