Asset protection strategies in Australia: what works, what doesn't, and why timing matters

Most people think about asset protection the week after the letter of demand arrives. By then the options are thin, and some of the ones that remain will be undone by a court. The time to do it is when nothing is wrong: when you're solvent, nobody is suing you, and your relationship is fine.

This guide sets out the threats, the tools that actually work in Australian law, the structures we use, two worked examples, and the mistakes we see. It draws on the strategy work our firm has done for the 30 June 2027 tax changes. If you want the short version: insure, separate risk from wealth, keep proof you were solvent, and don't believe anything that sounds too clever.

What is asset protection, and is it legal in Australia?

Asset protection is arranging the ownership of your business and your wealth so that a single bad event can't reach everything. It's legal, and it's ordinary prudence, when it's done:

• while you're solvent, with records to prove it
• at market value, or as a genuine gift with no creditors in view
• for genuine reasons: running a business, investing, providing for family
• openly, with the tax and stamp duty paid

It stops being protection and becomes a problem when the main purpose is to keep assets away from creditors you have or can foresee. The Bankruptcy Act lets a trustee reverse those transfers, and the Family Law Act lets the court set aside dealings designed to defeat a spouse's claim. Courts look at what you knew and when, not at what the documents say.

Key point: Asset protection is a seatbelt, not an escape hatch. It has to be fastened before the accident.

What are you actually protecting against?

We sort risk into five threats. Most people only think about the first one.

Different threats need different tools. A family trust helps a lot with threat 1, much less with threat 2 if you control it, and does nothing about a director penalty notice in threat 4.

Which asset protection tools actually work?

Here are the tools, roughly in the order we reach for them.

1. Insurance and contracts

The cheapest protection. Professional indemnity, public liability, management liability and building insurance should be the first layer for most businesses. Good contracts that cap liability help too. Structures are the second line of defence, not the first.

2. A company to trade

A company is a separate legal person. Its debts are its own, so if the business fails, creditors generally can't reach your house. That protection disappears where you've signed a personal guarantee (most bank loans and many leases require one), where you're liable for insolvent trading as a director, and where the ATO issues a director penalty notice for unpaid PAYG withholding, GST or super. Run payroll and BAS on time and the last risk mostly goes away. Our guide to director penalty notices explains how they work.

3. A discretionary trust to hold wealth

In a discretionary trust, no beneficiary owns anything until the trustee decides to distribute. A beneficiary's creditors can't take what the beneficiary doesn't own. Two catches: amounts already declared and left unpaid to a beneficiary (unpaid present entitlements and loan accounts) are that beneficiary's property, and whoever controls the trust can be treated as owning it in a family law case. Our family trust explainer covers how trusts work.

4. One trustee company per trust

A trust's creditors can reach trust assets through the trustee's right to be repaid from them. If one company is trustee of both a trading trust and a property trust, the trading creditors can get at the property. Give each trust its own trustee company. It costs an extra ASIC fee a year and removes a common, avoidable leak.

5. Super, built up steadily

Money in a regulated super fund, including an SMSF, is generally protected from your creditors in bankruptcy. The exception: contributions made with the main purpose of defeating creditors can be clawed back. Regular contributions within the caps while you're solvent are the pattern that holds up. Contribution strategy is financial product advice, so a licensed adviser makes that call; we model the numbers alongside them. The ATO publishes the current contribution caps each year.

6. The home in the lower-risk spouse's name

If one spouse carries business or professional risk and the other doesn't, holding the home in the lower-risk spouse's name generally keeps it out of the risky spouse's bankruptcy (though not out of a family law property settlement), and the main residence CGT exemption still applies. Buying it that way from the start is easy. Transferring an existing home costs stamp duty in many cases and can be clawed back. Our guide to protecting the family home works through it.

7. Solvency records at the time of any transfer

If you transfer assets between family members or entities and haven't kept proper books, the law presumes you were insolvent at the time. Up-to-date financial statements, a clean ATO account and a solvency record on file at the date of transfer rebut that presumption. It's dull paperwork that can decide whether a transfer survives.

8. Legal documents that match the structure

Binding financial agreements, loan agreements with registered mortgages for money lent to adult children, wills with testamentary trusts, and up-to-date binding death benefit nominations. Your solicitor prepares these. We prepare the entity and asset schedule they need. Read more in our guides to trusts and family law and testamentary trusts.

What does a well-protected structure look like?

There's no single right answer, but this is the shape we see work most often for a family business.

Not everyone needs all of that. A consultant with no staff may need only a company and the right name on the house. The more you have to lose, and the riskier what you do, the more layers make sense. Our comparison of sole trader vs company vs trust helps with the first decision.

Worked examples

Hypothetical, rounded figures, for illustration only.

Example 1: a builder with everything in one name

Say a builder trades as a sole trader. He owns the home (worth $1.6 million, $400,000 owing) in his own name, has a $300,000 share portfolio in his name, and has signed personal guarantees for his supplier accounts. A large project goes wrong and he's left owing $900,000.

As it stands, everything is in reach. The equity in the home, the shares and the business assets are all available to his trustee in bankruptcy.

Set up properly from the start, the business trades through a company owned by a family trust, the home is held by his spouse (who works in a low-risk job), and investments sit in the trust. Supplier guarantees still bite, because guarantees are personal. But the home and the trust's portfolio aren't his property, so they're generally out of his trustee's reach, provided they were set up while he was solvent and he hasn't guaranteed debts against them. The difference comes from decisions made years earlier, not in the month the project failed.

If he moved everything now, with the debt already looming, a trustee could reverse the transfers, and the court would look straight through them.

Example 2: a surgeon with an investment property in her own name

A surgeon owns an investment property in her own name, bought in 2015 for $700,000 and now worth $1.5 million. She's insured, but a claim above her policy limit would reach the property.

Moving it into a family trust is a sale for CGT and usually for stamp duty. On these numbers the $800,000 gain, held for more than 12 months, would attract the 50% CGT discount if the transfer happens before 30 June 2027. From 1 July 2027 the discount is replaced by cost base indexation for growth after that date (that's now law). Stamp duty would be the bigger cost in most states. We'd model both, against the alternative of leaving the property where it is and relying on insurance. Sometimes the honest answer is that the cost of moving outweighs the risk. Our guide to the 30 June 2027 tax changes explains the valuation snapshot that applies if she keeps it.

What doesn't work (and what courts have struck down)

These come up in seminars and online forums. All of them fail when tested.

• Late transfers. A transfer for little or no value can be reversed by a bankruptcy trustee if you go bankrupt within five years. The window can shrink to four years for a related recipient, or two for an unrelated one, but only if the recipient can prove you were solvent at the time. If the main purpose was to defeat creditors, there's no time limit.
• Gift-and-loan-back schemes over the family home. You gift the home's equity to a trust by promissory note, the trust "lends" it back and takes a mortgage. No money changes hands. Courts have unwound arrangements like this, they're exposed to bankruptcy clawback, and a family law court can set them aside. Our firm doesn't recommend these.
• Putting everything in your spouse's name in a hurry. Fine if done years ago and at the right time. Done when trouble is near, it's a transfer for no value.
• Trusts you control completely. Good against outside creditors. In a family law dispute, a trust you control can be treated as yours.
• "Splitting" a family trust between siblings. The ATO treats a trust split as creating a new trust, which can trigger CGT on everything moved. A different arrangement, such as co-trustees, may achieve a similar practical result without that tax, but it needs careful drafting by a solicitor and tax advice.
• Paper distributions to adult children who hand the money back. That's a section 100A problem. See our guide to trust distributions and section 100A.

Why does 30 June 2027 matter for asset protection?

Under the Tax Reform No. 1 Act 2026, which is law, the 50% CGT discount ends for growth after 30 June 2027 for individuals, trusts and partnerships. It's replaced by indexation of the cost base, and a 30% minimum tax applies to individuals' post-2027 capital gains. That changes the cost of restructuring:

• If you're already in the right structure, you don't need to sell anything. Assets held on 30 June 2027 are treated as having a value at that date, growth up to then keeps the discount, and nothing is payable until you actually sell. A valuation at 30 June 2027 is the main job.
• If you're in the wrong structure, moving an asset before 30 June 2027 lets you use the 50% discount, and the small business CGT concessions if you qualify, on the transfer. After that date the same move may cost more.

Separately, the Tax Reform No. 3 Bill 2026, introduced on 14 October 2026, proposes a 30% minimum tax on discretionary trusts from 1 July 2028. That is a Bill, not law. We're modelling it, but we won't restructure anyone out of a trust on the strength of a Bill. The full list of strategies we're reviewing is in our guide to strategies before 30 June 2027.

Mistakes we see

1. No company between the business and the house. Sole traders carry unlimited liability. Once the business has staff, contracts or real risk, that's usually the first fix.
2. Personal guarantees nobody remembers signing. List them. They follow you whatever the structure.
3. Profit left sitting in the trading company for years. Cash in the trading company is exposed to trading creditors. Move it out regularly, properly documented.
4. One trustee company for every trust in the group.
5. Big unpaid entitlements owed to the business owner sitting in the trust's accounts. They're the owner's property, so they're reachable.
6. No solvency records at the date of a family transfer.
7. Lending money to adult children on a handshake. If the child separates, an undocumented gift or loan is often treated as part of their property pool.
8. Wills, nominations and trust control that don't line up. The trust passes under the deed, super under the nomination, and the rest under the will. If nobody has looked at all three together, something is probably wrong.
9. Late payroll or BAS. Director penalty notices make you personally liable for the company's unpaid withholding, GST and super.
10. Buying a scheme from a seminar. If it relies on no money changing hands, be very wary.

How BPAG helps

Asset protection is accounting, tax and legal work done together. We do the first two and brief your solicitor on the third.

• Map the risk. We list every asset, whose name it's in, every guarantee and every entity, and show you where the exposure sits.
• Model the options. CGT, stamp duty, land tax and ongoing costs, for restructuring now against staying put, so you can see what the protection actually costs.
• Keep the paperwork that makes it stand up. Our trust deed agent summarises your trust deeds and flags issues with control, variation powers and vesting dates; our state taxes agent works through the stamp duty on any transfer. A qualified accountant reviews every draft and signs off the advice. Nothing reaches you or the ATO without a person approving it.
• Run it properly every year. Accounts, trust resolutions, solvency records, BAS and payroll on time.

Legal documents (trust deeds, variations, loan agreements, mortgages, wills, binding financial agreements) are prepared by your solicitor. Super contribution and SMSF recommendations come from a licensed financial adviser. We work alongside both. If you're starting from scratch, our asset protection service and business structuring and asset protection pages explain how we run the work. Ongoing compliance for the whole group usually sits inside one fixed-price plan.

General information only, current as at 18 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.