Income Taxes

In Australia, income tax and capital gains tax are imposed at the federal level. The Australian income year runs from July 1st to June 30th of the following year. Income tax is calculated on an individual’s assessable income, which generally includes all forms of income, such as salary, business income, returns on investments and capital gains, minus any allowable deductions. Australian residents are subject to income tax on their worldwide income, meaning income from both Australian and foreign sources is taxed. In contrast, non-residents are only taxed on income that has an Australian source.

Individuals are subject to progressive marginal tax rates, meaning higher levels of income are taxed at higher rates. The top marginal rate is currently 47%, which includes the Medicare levy (a form of public health insurance levy) of 2%. Australian tax residents benefit from a tax-free threshold, which for the financial year ending 30 June 2026 was set at AUD18,200. Non-residents are taxed at higher marginal rates and do not benefit from the tax-free threshold.

Currently, trusts are generally taxed on a flow-through basis, with income taxed in the hands of beneficiaries when distributed (either by conferral of an entitlement to the income, or by payments to the beneficiaries). However, the Australian government is introducing a 30% minimum tax on discretionary trusts from 1 July 2028, which will be subject to a transition period of three years to allow time for affected trusts to restructure. Individuals and other non-corporate beneficiaries will receive non-refundable tax credits for the tax payable by the trustee for the trust. Companies are taxed at a flat rate of 25% for base rate entities and 30% for other companies.

Capital gains tax (CGT) is not a separate tax but a set of rules forming part of the income tax regime. When a CGT event occurs (such as the sale, gifting or transfer of an asset), the disposing entity is taxed on any resulting capital gain. Capital losses may offset current and future year capital gains, but not other income. From 1 July 2027, capital gains will be subject to a minimum 30% tax, and the 50% CGT discount will be replaced with cost base indexation.

There are no estate, inheritance or gift taxes at the federal level. However, specific tax rules apply the CGT regime to deceased estates, which can affect the timing and calculation of capital gains on assets held by the estate, particularly in cases involving non-resident or tax-exempt beneficiaries.

Tax Administration

The Australian Taxation Office (ATO) administers the tax system, which operates on a self-assessment basis. The ATO has power to review and audit returns, and the general limitation period for amending assessments is two or four years (depending on the entity), unless there has been fraud or evasion, in which case the amendment period is unlimited.

Employers must withhold income tax from employees’ salaries and wages under the Pay As You Go Withholding (PAYGW) system. Remitting these amounts directly to the ATO throughout the year increases tax compliance and reduces the risk of large end-of-year tax liabilities.

Superannuation

Superannuation funds are taxed at a concessional rate – generally 15% on contributions and earnings, with some exceptions. Employers are required to make compulsory superannuation contributions for employees, currently at a minimum rate of 12% of Ordinary Time Earnings (OTE), subject to a statutory cap for high-income earners.

State Taxes

Australian states and territories impose a range of additional taxes that operate alongside the federal tax system. State-based taxes include:

• land tax, which is levied annually on the unimproved value of land and is subject to varying thresholds and exemptions depending on the jurisdiction;
• transfer duty (or stamp duty), which is charged on transactions such as the transfer of real property, or on transfers of interests in certain landholding entities;
• landholder duty, which is a set of rules that form part of the stamp duty regime, but charged; and
• payroll tax, which applies to employers whose total payroll exceeds a specified threshold, with rates and thresholds differing between states.

Various states and territories charge additional “surcharge” land tax or transfer duty on foreign persons, foreign-owned entities, or trusts that may include foreign persons as beneficiaries.

Consumption/Value-Added Taxes

Goods and Services Tax (GST) is charged at 10% on most goods and services. GST is generally not relevant to private wealth structures unless they are carrying on an enterprise, which may include one-off land development projects.

As noted in 1.1 Tax Regimes, Australia does not impose estate, inheritance or gift taxes at the federal level. However, certain transactions, such as gifts or asset transfers, may still have tax consequences, particularly under the CGT regime.

The CGT regime contains rules that are designed to defer CGT on death. In most cases, when assets pass to beneficiaries, there is no immediate CGT liability. Instead, the beneficiary inherits the deceased’s cost base and CGT only arises on later disposal.

Where a beneficiary is a tax-exempt entity (such as a charity) or a non-resident receiving non-taxable Australian property (TAP) assets, the capital gain must be recognised in the deceased’s final tax return before the asset passes.

The superannuation regime provides preferential tax treatment in respect of retirement savings accumulated over one’s working life, and certain amounts can be exempt to support income in retirement. Superannuation is a highly complex and technical area of law, and non-compliance with superannuation regulation can give rise to substantial penalties. Specialist advice should be sought.

Trusts and Income Distribution

Trusts, and in particular discretionary (family) trusts, are sometimes used to distribute income among beneficiaries, which can result in a lower overall tax liability for a family group. However, there are strict anti-avoidance rules that limit distributions to minors, require family trust elections in some circumstances, and restrict distributions outside a defined family group. The ATO may review arrangements where financial benefits do not correspond with legal entitlements, and arrangements that do not comply with legislative requirements may attract adverse tax consequences. As noted in 1.1 Tax Regimes, from 1 July 2028, the proposed 30% minimum tax on discretionary trusts is expected to reduce the tax advantages traditionally associated with these structures.

CGT Assets

The tax treatment of capital gains remains important when structuring investments and planning disposals. As outlined in 1.1 Tax Regimes, the 50% CGT discount is being replaced with an inflation-indexation model and a minimum 30% tax on capital gains from 1 July 2027. The main residence exemption remains available, and small business owners may be eligible for a range of CGT concessions.

CGT Rollovers

CGT rollover relief allows the deferral of capital gains in certain circumstances, such as corporate reorganisations, asset transfers within wholly owned groups, business restructures and certain life events, such as marriage or relationship breakdowns. Where rollover relief applies, the gain is deferred until a later CGT event occurs that does not qualify for an exemption or further rollover.

Careful pre-immigration and departure planning can significantly reduce Australian tax exposure, as the tax treatment of tax residents and non-residents differs substantially.

Foreign and temporary residents are generally not taxed on foreign-sourced income. Most CGT assets owned by the foreign resident at the time they become an Australian tax resident are deemed to be acquired at their market value at the time residency commences. Accordingly, the timing of asset acquisitions, disposals and residency changes should be reviewed before relocation to Australia, and it may be necessary to obtain asset valuations.

Ceasing Australian tax residency can trigger the “deemed disposal” of certain assets, resulting in CGT consequences. Becoming non-resident also means higher marginal tax rates on Australian-sourced income and loss of the tax-free threshold and CGT concessions. The timing of asset disposals relative to residency changes can materially affect the overall tax outcome.

Separate rules apply for determining the tax residency of companies and trusts, which look to, among other things, the tax residency of the individuals who own and control them. If an individual plans to relocate between countries, it is crucial that they consider the impacts on their companies and trusts.

Non-residents who own Australian real estate are subject to specific tax requirements.

Rental Income

Non-resident individuals are taxed on Australian-sourced rental income at higher non-resident marginal rates, and do not benefit from the tax-free threshold.

CGT

Non-residents are liable for CGT on disposal of TAP, which broadly includes Australian real property and 10%+ interests in entities whose assets are mostly TAP. Non-residents are not subject to CGT on non-TAP assets. Legislative reform is currently proposed to broaden the definition of TAP.

The main residence exemption is generally not available to non-residents for property sold after 30 June 2020, with some exceptions.

Non-residents are also not entitled to the 50% CGT discount that is available to Australian residents for assets held for more than 12 months.

Foreign Resident Capital Gains Withholding

When a non-resident sells Australian real property, the purchaser is required to withhold 15% of the market value (unless a variation is obtained) and remit it to the ATO. The actual CGT liability is determined when the non-resident lodges an Australian tax return, and any excess withholding is refunded.

State and Territory Surcharges

Several Australian states and territories impose additional land tax and transfer duty surcharges on foreign owners. Rates and rules vary between jurisdictions.

Australia’s tax landscape is currently undergoing significant reform following the 2026–27 Federal Budget. As detailed in 1.1 Tax Regime, from 1 July 2027, net capital gains will be subject to a 30% minimum tax, with cost base indexation replacing the CGT discount, and from 1 July 2028, trustees of discretionary trusts will pay a minimum tax of 30%. These measures will have a material impact on tax and estate planning for high net worth individuals and families. Given the potentially significant federal and state tax implications of any restructuring, including income tax, CGT, stamp duty and land tax consequences, tax advice should be sought to ensure any restructuring is undertaken in a tax-efficient and compliant manner.

More broadly, Australia’s tax laws are subject to regular legislative change in areas such as superannuation, property and international tax. There have been proposed changes to residency rules (not yet enacted), increased scrutiny of trust distributions, and tightening of CGT and superannuation concessions. It is necessary to monitor legislative developments and seek regular advice.

Australia participates in international tax transparency initiatives. It is a signatory to the Common Reporting Standard (CRS) and implements the US Foreign Account Tax Compliance Act (FATCA), allowing the ATO to share financial account information of foreign tax residents with tax authorities in other countries. Australia is also moving towards greater transparency, with the government announcing in 2025 it will establish a public Commonwealth-operated register of company beneficial ownership, with implementation currently proposed for 2027/2028. There are also rules requiring the disclosure of certain tax arrangements, and the tax system contains anti-avoidance provisions to address cross-border and other arrangements that may otherwise result in unintended tax outcomes.

Australia is culturally diverse, which means that people approach succession planning with a wide range of motivations and expectations. Many families share common goals of preserving wealth, reducing tax exposure and minimising dispute risks. Increasing rates of divorce and remarriage are leading to more complex family structures.

Housing affordability remains a major challenge, and financial assistance from parents (the “Bank of Mum and Dad”) is increasingly common. Recognition of risks, particularly in relationship breakdowns, has seen growing reliance on family trusts, binding financial agreements and loan agreements to safeguard family wealth.

Cross-border families and businesses must navigate a complex and evolving network of tax and regulatory frameworks. This leads to challenges when transferring wealth to family members who may be affected by tax laws, rules of inheritance and treaties in multiple jurisdictions, or when assets are accumulated globally.

Collaborative cross-border advice is essential to ensure that tax and succession planning strategies are aligned across multiple jurisdictions, taking into account:

• compliance with Australian and foreign tax and succession laws;
• potential conflict-of-laws issues;
• compliance and reporting requirements in different jurisdictions;
• the recognition and treatment of Australian documents and structures in other jurisdictions, including testamentary trusts and powers of attorneys;
• local probate processes; and
• applicable double taxation and information-sharing agreements.

A tailored succession planning strategy is crucial and needs to consider the type, location and governing laws of assets held overseas and the residency of beneficiaries. Best practice approach is generally to have separate Wills in each relevant jurisdiction to streamline local probate processes and ensure compliance with local tax and succession laws.

Similarly, it is important to have the equivalent of an enduring power of attorney (which deals with financial decisions in cases of mental incapacity) in each relevant jurisdiction, as state-based enduring powers of attorney in Australia will not be recognised overseas.

Australia does not have forced heirship laws, but these rules may still be relevant for Australian residents who hold assets in jurisdictions where such laws apply. In those cases, the law of the country where the property is situated may determine how that property passes.

The following applies for those domiciled in the states and territories of Australia.

• Testamentary freedom is a fundamental and central principle referring to a person’s right to decide how to distribute their assets after they die.
• If a person dies without a valid Will, their estate is distributed according to the rules of intestacy set out in the relevant state-based succession legislation, which effectively allocates assets to family members based on their relationship to the deceased.
• However, eligible persons (such as, but not limited to, spouses, de facto partners, children and other dependents) can make a family provision claim if they believe the Will or rules of intestacy fail to make adequate provision for their proper maintenance and support.

In Australia, the categorisation of property and the way in which it is owned or registered generally holds little relevance for the purposes of family law. Under the Family Law Act 1975 (Cth) (Family Law Act), the term property is defined broadly to capture a wide range of assets and interests that may form part of a couple’s financial circumstances.

When a relationship breaks down, property division is assessed through a four-step process, which takes into account each party assets, liabilities, superannuation and financial resources. In certain situations, particular assets may be excluded, depending on how and when they were acquired.

The four-step process includes:

• identifying and valuing the “property pool”;
• assessing contributions, both financial and non-financial, made by each party throughout the relationship;
• considering future needs, such as income disparity, health, age, and care of children; and
• determining whether the proposed outcome is just and equitable in all the circumstances.

The most effective way to protect assets from potential family law claims is a binding financial agreement, properly prepared and executed under the Family Law Act. These can be entered into before, during or after a marriage or de facto relationship.

For a binding financial agreement to be valid and enforceable in Australia:

• both parties must obtain independent legal advice prior to signing the agreement, and each lawyer must provide a certificate of advice, which is then annexed to the document;
• the agreement must be in writing and signed by both parties; and
• it must strictly comply with the formal requirements set out in the Family Law Act.

A crucial element in the effectiveness of a binding financial agreement is full and frank financial disclosure by both parties: failure to disclose relevant financial information can result in the agreement being challenged and potentially set aside by a court.

CGT applies when a CGT event occurs, typically involving the disposal of a CGT asset (which includes most forms of property, tangible or intangible, unless specifically exempt).

During a person’s lifetime, the capital gain or loss is calculated based on capital proceeds from the disposal or, where not at arm’s length, the market value of the asset minus acquisition costs. On death, assets generally pass to beneficiaries without immediate CGT consequences. For assets acquired on or after after 20 September 1985, the beneficiary inherits the deceased’s original cost base. Assets acquired before 20 September 1985 are exempt as a pre-CGT asset. If the beneficiary later sells pre-CGT assets, CGT may apply on the increase in value since the date of death.

As noted in 1.1 Tax Regimes, Australia does not impose gift or inheritance taxes. Parents can give financial benefits to their children without a “gift tax” applying.

Transferring assets is not commonly completely tax-free, but there are planning mechanisms available to help transfer assets to younger generations more tax effectively, such as:

• establishing a discretionary trust and having younger generations as beneficiaries of the trust, so that they can receive income and capital and eventually gain control of the trust;
• establishing a testamentary trust under a Will, which has tax advantages for beneficiaries, particularly minors;
• passing superannuation to tax dependents; and
• timing gifts to factor in CGT considerations (see 2.5 Transfer of Property).

Digital accounts (such as social media, email, online banking, gaming, subscription services and cloud storage) allow users to access and manage digital assets, including intellectual property, domain names, code, cryptocurrency and shares, digital photos, eBooks, music, online businesses, NFTs, documents and health records, and personal financial content stored on government department systems.

There is no specific legislation in Australia covering digital assets in succession, and terms of service vary widely between platforms. Without clear planning, access to digital accounts and assets can be blocked, causing distress, disputes and financial loss.

Tips for addressing digital wealth as part of succession planning in Australia include the following.

• Storage: determine where the digital wealth is stored (locally or in the cloud) to help decide whether to gift the device and/or account details.
• Inventory: create a secure, up-to-date list of digital assets and accounts, including log-in details and passwords. This should not be set out in a Will (which becomes a public document) but stored securely, such as in a home safe or using an online password manager.
• Secure third parties: for valuable digital assets such as cryptocurrency, consider third-party providers who can securely store details and release information on death or incapacity.
• Update your Will and power of attorney: these documents should include clear definitions of digital assets and digital accounts, and powers allowing executors and attorneys to deal with them.
• Review regularly: keep your digital inventory and legal documents current as assets and accounts change.
• Understand policies and terms of service: ensure an understanding of the relevant policies and terms of service, to determine what instructions can validly be given.
• Leave instructions: provide clear instructions for attorneys or executors regarding wishes for how digital assets are dealt with.

Types of Trusts

In Australia, trusts and similar entities are widely used for tax and estate planning, to protect assets, manage succession and optimise tax outcomes. The primary types of trusts included in an estate plan include the following.

• Discretionary trusts are often described in Australia as “family trusts”, and provide the trustee with a high degree of discretion in controlling the property held by the trust and the amount of income paid by the trust to the beneficiaries.
• Trading trusts are established to hold the property of a business for the benefit of the business owners, while the trustee company operates the business.
• Unit trusts are often used for pooled investments, especially among unrelated parties. Unlike a discretionary trust, income of a unit trust is distributed according to the number and/or type of units held by beneficiaries.
• Testamentary trusts are created by the terms of a Will, through which the deceased’s estate passes to a trust for the benefit of the beneficiaries, providing asset protection, tax planning flexibility, protection for vulnerable beneficiaries and succession mechanisms.
• Special disability trusts are established for the benefit of a severely disabled family member, attracting means-test concessions for the recipient and exemptions for the contributors.
• Superannuation proceeds testamentary trusts are established, either inter vivos or by Will, to hold superannuation death benefits, and are designed to ensure these funds are distributed in a tax-effective and protected manner for “death benefit dependants” under Australian superannuation and tax law.
• Charitable trusts are established for charitable purposes. These are popular due to their relative ease of establishment and the benefits of charitable registration (ie, status tax exemptions).

Recent developments have not changed the fundamental nature of trusts, but they highlight the importance of compliance with complex tax rules to avoid unintended tax outcomes, and the need for trustees of discretionary trusts and testamentary trusts to go through a thorough process to give real and genuine consideration to all beneficiaries of these structures.

Trusts are recognised and respected in Australia as an established structure for estate planning and asset protection, governed by the relevant Trustee Acts in each Australian jurisdiction.

Trusts have a broad application across Australia and are commonly used for:

• succession planning purposes, particularly given the rise of second/third marriages and blended families;
• protection from creditors – trust assets are held by the trustee and may not be available to third-party creditors of a beneficiary; and
• family law advantages – trusts may provide some protection for assets in family law disputes (depending on the circumstances).

Unlike companies, trusts are not legal persons; they are fiduciary relationships where the trustee holds legal title to manage assets, while beneficiaries hold equitable title. This separation is a core protective function.

While a trust is not a separate legal entity, it is recognised by the ATO for tax purposes and has strict legal and tax obligations that must be followed.

Australian residents who are beneficiaries of foreign trusts are taxed on distributions, including capital gains and income. If an Australian resident acts as trustee or appointor of a foreign trust, the trust may be deemed an Australian resident trust, subjecting its worldwide income to Australian tax. Where a person holds dual roles (eg, settlor and beneficiary), attribution rules and anti-avoidance provisions may apply. Careful structuring and ongoing review is essential.

Section 99B

Distributions of capital from foreign trusts to Australian resident beneficiaries may be taxable, unless the distribution is sourced from the original trust corpus or another exclusion applies. Whether a distribution is from corpus is largely a question of evidence and may require detailed records to demonstrate the source of the funds. If the distribution is not clearly from the original capital of the trust, it may be treated as income and subject to Australian tax in the hands of the beneficiary.

Transferor Trust Rules

The transferor trust rules are designed to ensure that Australian residents cannot use offshore trusts to accumulate income without paying Australian tax. If an Australian resident has transferred assets or value to a foreign trust, they may be taxed on the trust’s income as it is earned, even if the income is not distributed to them. These rules apply more broadly to trusts in low-tax countries and more narrowly to trusts in countries with tax systems similar to Australia. Exemptions exist for certain family trusts, deceased estates and older trusts where the Australian resident has not had control since before 1989. The rules are focused on income that would otherwise not be taxed in Australia; they are complex and require careful attention to structuring, compliance and record-keeping.

While the concept of a US-style “irrevocable trust” is less common in Australia, discretionary trusts provide a similar function of asset protection and tax planning through their flexible structure.

In Australia, the key roles of the trust are typically as follows.

• The settlor provides the settled sum to establish the trust. The settlor is typically excluded from benefiting under the trust (to avoid adverse tax consequences).
• The trustee makes the day-to-day decisions regarding the trust, including how trust funds are distributed.
• The appointor can appoint and remove the trustee, and is therefore a key control role within the trust deed.
• Primary Beneficiary: the trust has a class of general beneficiaries determined by their relationship to the Primary Beneficiary (including spouse, children, grandchildren and related entities).

Modern Australian trusts are typically drafted to provide a strong degree of flexibility via over-riding powers of appointment and extensive administrative powers (including powers to delegate, apply capital, alter the trust period and vary administrative powers). Assigning some or all these powers to those in fiduciary roles (ie, independent trustees or appointors, guided by a memorandum of wishes) can be effective in ensuring the trust remains adaptable.

In Australia, it is common for family businesses to be held through corporate structures, which offer asset protection through the establishment of a separate legal entity, shielding a business owner’s personal assets from business debt and liability. Unit trust structures may also be used, particularly for holding interests in real property.

Shares in these companies (or units in a unit trust) are commonly held in a discretionary family trust, which is the most popular asset protection method. These structures separate legal from beneficial ownership, with family members receiving income or capital distributions at the trustee’s discretion.

This provides protection against creditor claims and flexibility in distributing business profits, and quarantines family wealth from trading risks. A corporate trustee is typically used, offering asset protection and perpetual succession.

While trusts provide strong asset protection benefits, they do not provide absolute protection. It is possible to unwind arrangements that attempt to defeat creditors or circumvent family law obligations. Nonetheless, for most family business owners, a discretionary trust structure remains the standard and most effective asset protection tool.

Business succession planning in Australia requires a tailored approach and the adoption of a number of strategies to achieve optimal outcomes.

Where an individual holds business assets in their personal name, testamentary trusts established through their Will are the most popular succession planning strategy, offering asset protection (against creditor and some family law claims), protection of vulnerable beneficiaries and some tax flexibility.

Where assets are held through family trusts, it is necessary to consider passing control to the next generation. This can be done by simple trust succession nomination or through more complex family agreements dealing with decision making, distributions, exit and dispute resolution.

Bespoke succession planning constitutions are also increasingly common, allowing for the automatic appointment of successor directors and tailored provisions for ongoing decision-making.

Finally, where interests are held with third parties, “buy-sell agreements” should be entered into, requiring the forced sale or purchase of a business owner’s interest on death or incapacity of a key individual. These are frequently funded by life and total permanent disability (TPD) insurance.

In Australia, CGT may be charged on a taxpayer disposing of a capital asset. Transfer duty is charged by Australian states and territories on taxpayers acquiring an interest in land or in certain landholding entities.

For CGT purposes, any capital gain is calculated by reference to the consideration received, which may be substituted with market value in certain circumstances (including sales for nil consideration and transactions not at arm’s length).

For duty purposes, the dutiable value is the greater of the consideration provided and the unencumbered market value of the land. The fair market value is generally based on an arm’s length valuation.

For estate transfers under a Will, a duty exemption or concession may apply. If the transfer is not in conformity with the Will or involves variations agreed to by family members, duty may be assessed at general rates on the dutiable value of all or part of the interest.

Wealth disputes in Australia are rising significantly, driven by a combination of demographic, economic and social factors, including:

• the unprecedented intergenerational wealth transfer in which trillions of dollars are expected to pass from the Baby Boomer generation over the next 20 years – where estates grow in value, so do the financial incentives to litigate;
• increasing family complexity – blended families, second marriages, stepchildren and estranged family members create competing expectations and heightened risk of family provision claims;
• economic pressures such as cost-of-living stress and housing affordability, which are also driving more adult children to contest estates;
• not having a valid up-to-date Will, particularly where circumstances have changed (such as separation, which is treated differently to divorce), leading to confusion and costly litigation;
• longer life expectancy and cognitive decline, which lead to incapacity issues and allegations that the testator did not have the required decision-making capacity to make a Will due to their old age or illness;
• a rise in cases of (alleged) elder abuse, often stemming from informal arrangements, such as transferring property to a child or granting access to bank accounts without legal advice; and
• in the trusts space, there is a rise in complex trust disputes involving issues such as the legal treatment of testamentary promises in the context of equitable estoppel.

In Australia, compensation mechanisms in wealth disputes, whether involving estates, trusts, foundations or family-controlled entities, focus on restorative and equitable outcomes rather than punitive damages.

Estate Disputes

Courts commonly adjust distributions through family provision orders to ensure proper maintenance and support of eligible dependants or to set aside invalid Wills and require the repayment of misused assets.

Trust Disputes

These disputes typically result in equitable remedies such as compensation for breach of trust, account of profits, constructive trusts or the removal of trustees, all aimed at restoring the trust to the position it should have been in.

Foundations and Charitable Structures

Foundations and charitable structures may face orders to repay misapplied funds, governance interventions or regulatory sanctions to ensure compliance with donor intent and public purpose.

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 preserve the integrity of the structures holding family wealth.

The use of corporate fiduciaries is well established in Australia, particularly in funds management, trustee and custodial structures. Most managed investment 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).

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 company 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 fiduciary 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.

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 Services Licensees managing client assets must comply with competency requirements and general obligation requirements under the Corporations Act. The regulatory framework does not prescribe specific investments but requires a disciplined process balancing risk and return consistent with the trust or fund’s objectives.

Australia applies the “prudent investor” standard to fiduciary investment decisions, requiring trustees to exercise the care, diligence and skill a prudent person 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 demonstrably inappropriate. Trusts may hold active businesses if expressly authorised by the trust deed, but direct operation is uncommon due to fiduciary and liability risks.

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 that their permanent place of abode is outside Australia. Domicile is generally based on the place of birth or ancestry, while permanent place of abode is assessed by examining actual living arrangements.
• Physical presence in Australia: an individual is a resident if they are physically present in Australia for more than half the income year (183 days), unless it is established that their usual place of abode is outside Australia and they do not intend to reside in Australia.
• Public Sector Superannuation: the individual is a member, or spouse or child of a member, of the Public Sector Superannuation Scheme or the Commonwealth Superannuation Scheme.

Australian citizenship does not automatically confer tax residency; rather, residency depends largely on the individual’s circumstances and intentions. In 2021, the federal government announced proposed changes to Australia’s individual tax residency rules. The proposed new rules, which are not yet enacted, would introduce a “bright line” test, under which individual residency can be determined with reference to prescribed and objective factors.

For trusts, residency is generally established if the trustee is an Australian resident or if the central management and control of the trust is in Australia. For companies, residency is determined if the company is incorporated in Australia, or if it carries on business in Australia and has its central management and control in Australia, or if voting power is held by Australian residents.

These residency rules are important as they determine whether the worldwide income of the individual, trust or company is subject to Australian income tax.

Tax Implications of Commencing and Ceasing Australian Residency

As discussed in 1.4 Pre-Immigration and Exit Planning, when an individual, company or trust becomes an Australian tax resident, certain assets may have their cost base reset to market value for CGT purposes. This means that only gains or losses arising after the start of residency are subject to Australian tax, subject to specific rules applying (such as for TAP assets or pre-CGT assets).

Conversely, ceasing Australian tax residency can trigger a deemed disposal of assets, resulting in a CGT event. The application of these rules differs, depending on the type of entity that owns the asset.

There are no expeditious means for obtaining Australian citizenship. The most common pathways to Australian citizenship are by descent or by conferral. Citizenship by conferral is the standard route for most applicants and requires an individual to be a permanent resident and meet specific eligibility criteria before applying. Citizenship by descent may be available if an individual was born outside Australia and at least one of their parents was an Australian citizen at the time of said individual’s birth.

According to the Department of Home Affairs, the latest processing times are as follows:

• for Australian citizenship by conferral, 90% of applications are processed within ten months;
• for Australian citizenship by descent, 90% of applications are processed within six months; and
• for Evidence of Australian citizenship, 90% of applications are processed within 17 days.

However, in practice, processing is closer to six months for citizenship by conferral, and two months for citizenship by descent.

A number of planning options are available, depending on the level of disability and the care and assistance required.

For beneficiaries who are in receipt of means-tested government support (such as a disability support pension), consideration should be given to a Special Disability Trust (SDT). An SDT is established for the primary purpose of funding the care and accommodation needs of the principal beneficiary; this can include medical and dental expenses, private health fund memberships and property maintenance. There is also a discretionary spending amount of AUD15,250 as of 1 July 2026, indexed each financial year. The principal beneficiary must satisfy the definition of being severely disabled, in which case the SDT can receive a property for use by the principal beneficiary as their main residence, together with assets to the value of AUD862,750 (as of 1 July 2026, indexed each financial year), without affecting the disability support pension. Higher amounts can be contributed to the SDT, but this will reduce the disability support pension amount.

Where government support is not a factor, or if more flexibility is required, discretionary trusts with bespoke provisions are an alternative option. These can be established through a Will on death (testamentary) or during a lifetime (inter vivos). Common considerations include appointing the appropriate controllers (trustees and appointors) to make decisions and regulate trust distributions, and placing limitations on capital and income distributions (such as dollar amounts or limiting them for certain purposes, such as health, education, care and maintenance). Further guidance for the controllers can be provided through a non-binding letter of wishes. Concessional tax treatment can also be obtained in certain circumstances, including minors receiving around AUD22,800 of tax-free income from a testamentary trust.

The concept of a guardian can apply to a minor, and to an adult who is unable to make decisions for themselves (for example, due to an injury or disability).

For minors, a guardian is often appointed through a Will. If the parents die, this appointment can be formalised through the Family Court or Children’s Court. Strong weight will be given to an appointment under a Will, but the court’s decision will ultimately be guided by what is in the best interests of the child.

For adults, a guardian is appointed through an administrative tribunal to make medical and healthcare decisions. A separate administrator may be appointed for financial and legal decisions. Appointments are subject to ongoing review, which may include a requirement to submit accounts to the tribunal.

In court disputes, the minor or incapacitated adult is represented by their litigation guardian or tutor. This title varies between jurisdictions, and is usually the parent, attorney under a power of attorney or the administrator appointed by a tribunal.

Each Australian state and territory has its own legislative framework governing incapacity planning, with differences in terminology, scope of authority, execution requirements and delegable decisions. The following legal mechanisms are available.

• In respect of financial and legal matters, most states and territories allow for a person to make an “Enduring Power of Attorney”, appointing someone to act on their financial and legal matters. In the Northern Territory, the applicable document is called an “Advance Personal Plan”. An Enduring Power of Attorney differs from an ordinary power of attorney as the appointment survives the donor’s incapacity.
• In respect of personal and healthcare matters, the donor can appoint someone for personal and health decisions. The mechanism differs between jurisdictions (eg, “Enduring Power of Guardianship”, “Appointment of Enduring Guardian”, “Enduring Power of Attorney” or “Appointment of a Medical Treatment Decision-Maker”).
• A person may also make a directive about their own future medical treatment (eg, refusing certain treatments). Depending on the jurisdiction, such directives may be legally binding or provide authoritative guidance. These are known as “Advance Health Directives”, “Advance Care Directives” or “Advance Care Statements”.

In practice, these documents are commonly recommended as part of comprehensive estate planning. Additional incapacity considerations include the following:

• if a person holds a control role under a discretionary trust (for example, as appointor, principal, guardian or protector), it may be appropriate to nominate a successor to that role in the event of incapacity; and
• if a person is the sole director and sole shareholder of a company, it may be appropriate to address incapacity in the company’s constitution and succession planning documents, to facilitate ongoing management of the company should the individual lose capacity.

Laws relating to capacity and decision-making have changed in recent years, with increased focus on the wishes of the individual and ensuring their involvement in decision-making processes.

Longevity and age-related cognitive issues are driving increased attention to care and accommodation decisions. This has led to changes in power of attorney legislation to provide for assisted decision-making, advanced care directives and voluntary assisted dying laws in most states and territories.

Increased awareness of elder abuse has led to penalty and compensation provisions in power of attorney legislation, making it easier to take action against an attorney who abuses their position, including criminal penalties.

Under the Family Law Act, a child may have up to two legal parents, and only those recognised as legal parents hold parental responsibility. The legal recognition of parentage determines a child’s rights in succession, nationality and child support.

Children Born Outside of Marriage

The distinction in succession law between children born within marriage and those born outside it was abolished through legislative reforms in the mid-1970s. Today, children born out of wedlock are treated equally under the law and hold the same rights to inherit from their parents’ estates, regardless of the marital status of the parents at the time of birth.

If a parent dies intestate, children born outside of marriage are entitled to a share of the estate under the relevant jurisdiction’s intestacy laws. The laws of most Australian states and territories provide that a reference to a child or children in a Will includes ex-nuptial children, provided the person in question is their natural parent.

However, practitioners should be mindful of the commencement dates of the relevant statutes and the date of birth of the child when determining whether a child born outside the marriage would be recognised under a Will. For example, in the state of New South Wales, Section 6 of the Status of Children Act 1996 (NSW) specifies that the legislation applies to dispositions made on or after 1 July 1977. This means that if a Will was created before 1 July 1977 and refers to “children” without further clarification, the law at that time may have excluded children born outside of marriage from benefiting.

Adopted Children

Adoption confers full legal parentage on the adoptive parents, severing the legal ties between the child and their biological parents. An adopted child has the same inheritance rights as a naturally born child of the adoptive parents, including inclusion in any class of beneficiaries defined by reference to children. Conversely, the adopted child no longer retains inheritance rights from their birth parents.

Children Born by Artificial Insemination

Legislation across Australia recognises children conceived through artificial insemination or other assisted reproductive technologies as the legal children of the consenting parents.

If a child is born through an artificial conception procedure, and the woman and her spouse consented, the child is deemed to be their child for all legal purposes, including inheritance rights under intestacy laws and eligibility for gifts in Wills or family provision claims.

An anonymous sperm donor does not have parentage rights to a child born as a consequence of their donation, and the child born does not have claims on the donor’s estate.

Surrogacy Arrangements

Surrogacy is permitted in Australia on an altruistic (non-commercial) basis. The surrogate is the legal parent at birth. To transfer legal parentage, the intended parents must obtain a parentage order from the court, which is generally only granted if the arrangement complies with the relevant state or territory rules. Once granted, a parentage order confers the same legal effect as adoption, including inheritance rights.

Legal parentage is usually not recognised for parents who engage in commercial surrogacy or otherwise do not comply with the relevant state or territory rules, although in rare circumstances courts may exercise discretion to transfer parentage.

Australia recognises same-sex civil partnerships, de facto relationships and, since 9 December 2017, same-sex marriages.

Marriage is defined as “the voluntary union of two people to the exclusion of all others”. Same-sex married couples have the same legal status and rights as other married couples.

A de facto relationship generally involves two individuals who are not married or related by blood, but who live together in a genuine domestic arrangement. Civil partnerships, which are formally registered under state or territory law, offer many of the same legal rights and obligations as marriage, particularly in areas such as property and succession.

While marriage is between two people only, a person can be in a de facto relationship concurrently with a marriage or with more than one person.

Individuals in same-sex marriages, de facto relationships or civil partnerships are entitled to name their partner as a beneficiary in their Will, and may also appoint them under legal instruments such as powers of attorney or statutory health directives. Australian succession law treats de facto partners and civil partners as spouses, granting them the same entitlements as those of married couples in matters of inheritance and estate administration.

Complexities may arise where a Will has not been revised following the end of a de facto relationship. Unlike divorce, the termination of a de facto relationship does not automatically revoke provisions in a Will, so a former partner may remain a named beneficiary unless the Will is updated.

De facto relationship and civil partnerships have many of the same legal rights and obligation as marriage under Australian law, particularly in areas such as property and succession. As discussed in 9.2 Same-Sex Marriage, Australian succession law treats de facto partners and civil partners as spouses.

However, parties to a de facto relationship need to provide evidence establishing the relationship’s existence, which can present practical difficulties where domestic arrangements are less traditional (such as maintaining separate residences).

Succession legislation generally provides that a Will made before marriage is revoked upon marriage, but this does not extend to de facto relationships or civil partnerships. Similarly, unlike divorce, the breakdown of a de facto relationship does not automatically affect the operation of a Will. Consequently, a former de facto partner may remain a beneficiary or continue to hold an appointment under the Will unless it is updated.

Individuals in de facto relationships or civil partnerships are entitled to nominate their partner as a beneficiary in their Will, and may also appoint them under legal instruments such as powers of attorney or statutory health directives.

Australian tax law contains specific provisions that address and support charitable giving. Donations to organisations endorsed as Deductible Gift Recipients (DGRs) are generally tax-deductible, provided substantiation and minimum threshold requirements are met. This enables individuals and businesses to reduce their taxable income by the amount of any cash donated, or the value of any property donated (subject to valuation rules). In estate planning, gifts to DGR charities made under a Will are not subject to CGT, making charitable bequests an effective way to support philanthropic causes while managing tax outcomes for an estate.

A range of structures are available to facilitate charitable giving, each with its own regulatory and tax requirements. In December 2025, the government announced reforms under which Private Ancillary Funds (PAFs) and Public Ancillary Funds (Public AFs) will be renamed “giving funds”, and the minimum annual distribution rate for both will be aligned at 6% of net assets (replacing 5% for PAFs and 4% for Public AFs).

Charitable Trust (Including PAF)

A PAF is a family-controlled charitable trust for long-term philanthropy, offering maximum flexibility, tax deductibility and strategic giving without public fundraising. Disadvantages include strict compliance obligations, mandatory minimum distributions, and the need for at least one “responsible person” on the board.

Public AF

A Public AF collects donations from the public and distributes them to DGR1 charities. It offers strong tax incentives (tax-deductible donations, tax-exempt earnings) and is ideal for organisations wanting to run public fundraising campaigns, but has heavy regulatory and reporting requirements, and requires a majority of “responsible persons” on the board. 

Public Benevolent Institution (PBI)

A PBI is a charity established to relieve poverty, sickness, disability or significant disadvantage. PBIs have access to the most favourable tax concessions (DGR1 status, FBT exemptions, payroll tax concessions) but are tightly regulated, require a clear benevolent purpose, and cannot be used for general philanthropic grant-making.