Private Client

In Australia, each state and territory has legislative provisions that govern private client matters.

Each jurisdiction within Australian generally has the following laws:

• Trustee Acts, which govern trusts and the rights and duties of trustees;
• Wills Acts or Succession Acts, which govern the creation and interpretation of wills;
• Administration Acts or Administration and Probate Acts, which govern probate matters and the administration of deceased estates, and which allow certain people to make a claim for provision from a deceased person’s estate;
• Guardianship and Administration Acts, which oversee the financial and personal decisions of persons who have lost capacity;
• Power of Attorney Acts, which govern the making and operation of powers of attorney;
• Family Law Acts, which govern matrimonial matters; and
• various Duties Acts and Tax Acts, which govern duties payable on the transfer of dutiable assets and various taxes associated with the transfer of assets, whether through a deceased estate or otherwise.

The laws in each state and territory vary slightly, and usually the domicile of the deceased or the location of any real property will determine which laws are applicable.

There are no special regimes that apply to specific individuals in Australia. Generally, a person’s residency status determines his or her exposure to income tax and other taxes in Australia on income derived in Australia and elsewhere.

However, surcharges may apply depending on the status of a person’s residency, such as foreign purchaser surcharge duty on the acquisition of residential property.

There are numerous bilateral, multilateral and supranational instruments in effect in Australia which are relevant in the private client sphere. Australia has over 50 double tax agreements with other countries which provide for either income tax exemptions or reduced rates.

Australia has also entered into bilateral agreements with a number of countries in relation to the exchange of information in relation to taxes.

Australia has enacted the Organisation for Economic Co-operation and Development Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI), which it signed on 7 June 2017. The MLI has been ratified, which means that it applies to ‘covered countries’ such as Belgium, Canada, France, India, Indonesia, Ireland, Japan, Korea, New Zealand, Singapore and the United Kingdom.

Other important agreements to which Australia adheres and which affect private clients include:

• the Foreign Acquisitions and Takeovers Act 1975 (Cth); and
• the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth).

There are four tests to determine whether a person is an Australian tax resident. These are outlined as follows.

Residency status: The commissioner of taxation will consider the following:

• physical presence;
• intention and purpose;
• the location of your family;
• business or employment ties;
• maintenance and location of assets; and
• social and living arrangements.

If an individual does not satisfy the residency test, he or she may still be considered an Australian tax resident if any of the statutory tests below are satisfied:

• Domicile test: The domicile test assesses an individual’s permanent residence. If the commissioner is satisfied that an individual’s permanent home is located in Australia, he or she will be liable to pay tax in Australia.
• 183-day test: If an individual spends at least 183 days per calendar year in Australia, whether continuously or not, the individual will be considered an Australian tax resident.
• Superannuation test: An individual will be considered an Australian tax resident if he or she, or his or her spouse, is a contributing member of a public sector superannuation scheme of the Commonwealth Superannuation Scheme.

If the commissioner is satisfied that an individual is an Australian tax resident, he or she may be required to pay:

• income tax;
• land tax on any real property owned by the individual, subject to exemptions for a principal place of residence;
• goods and services tax; and
• capital gains tax.

In Australia, the personal tax year is referred to as a financial year. The financial year runs from 1 July to 30 June of each year.

(a) What taxes are levied and what are the applicable rates?

Australian tax residents must pay income tax on their personal taxable income, including from employment, business interests, dividends, trust distributions, foreign income and the like.

The marginal income tax rate increases according to the level of income earned. For the 2023–2024 financial year, the marginal income tax rates are as follows.

For the 2024–2025 financial year, the proposed changes to marginal income tax rates are as follows:

• Reduce the 19% tax rate to 16%;
• Reduce the 32.5% tax rate to 30%;
• Increase the threshold above which the 37% tax rate applies from A$120,000 to A$135,000; and
• Increase the threshold above which the 45% tax rate applies from A$180,000 to A$190,000.

The above rates do not include the Medicare levy of 2%, which is payable to fund Medicare, the national healthcare provider in Australia.

High-income earners may also be liable to pay the Medicare levy surcharge (MLS), an additional levy payable by individuals who reach a certain level of income and do not have private health insurance. In this instance, the government imposes a further levy which is calculated at approximately 1% to 1.5% of the individual’s taxable income over and above the existing Medicare levy of 2%.

The MLS encourages those who can afford private health insurance to obtain appropriate health coverage for themselves and their dependants, thus reducing the financial burden on Medicare.

(b) How is the taxable base determined?

The calculation of taxable income depends on its nature.

An employee is generally taxed on all remuneration and benefits received in the relevant tax year. A company’s contributions to an employee’s superannuation scheme are generally not taxable.

Further, net profits from rental property after the deduction of qualifying expenses which were incurred wholly and exclusively for the property rental business are also added to an individual’s income for that financial year. The types of expenses that can be deducted include:

• mortgage interest;
• the costs of general maintenance and repairs to the property (provided that they are not improvements);
• utility costs;
• insurance;
• letting agent fees and management fees; and
• accountant’s fees.

(c) What are the relevant tax return requirements?

An Australian tax resident must file an income tax return on a self-assessment basis where his or her gross income exceeds the tax-free threshold of A$18,200. A non-resident earning more than A$1 of Australian-sourced income must file a return. There is no joint assessment or joint filing in Australia.

The tax return is due for filing by the following 31 October, unless an extension is available.

Once a tax return is lodged, the Australian Taxation Office (ATO) will issue an income tax assessment of the taxable income/tax loss and tax payable (if any) to the individual based on the income tax return. If there is a tax liability, it is usually payable by May before the commencement of the next financial year.

(d) What exemptions, deductions and other forms of relief are available?

In Australia, the first A$18,200 of income earned is considered tax free. Every A$1 earned over the A$18,200 is taxable. There are certain deductions and reliefs available, such as the following:

• Income from rental properties is taxed only after the deduction of costs and expenses for operating the rental property;
• There is a deduction for out-of-pocket work-related expenses; and
• There are deductions for:
• • the cost of managing tax affairs;
  • charitable donations to registered charitable organisations; and
  • interest, dividend and other investment income.

(a) What taxes are levied and what are the applicable rates?

An individual is liable to pay capital gains tax (CGT) on the profits generated upon disposal of an asset. Any CGT payable will form part of an individual’s income tax and will be assessed at the marginal income tax rates.

For the 2023–2024 financial year, the marginal income tax rates are as follows:

For the 2024–2025 financial year, the proposed changes to marginal income tax rates are as follows:

• Reduce the 19% tax rate to 16%;
• Reduce the 32.5% tax rate to 30%;
• Increase the threshold above which the 37% tax rate applies from A$120,000 to A$135,000; and
• Increase the threshold above which the 45% tax rate applies from A$180,000 to A$190,000.

Any income generated by a company is taxed at a marginal rate of 30%; and for trusts, any income accumulated (not distributed to beneficiaries) is taxed at a marginal rate of 45%.

(b) How is the taxable base determined?

CGT is calculated by first determining the cost base of the asset. The cost base is what it cost to acquire the asset, together with the costs incurred in acquiring, holding and disposing of the asset. Once the cost base has been determined, these costs are subtracted from the amount received on disposal of the asset. Capital losses can be subtracted from capital gains.

(c) What are the relevant tax return requirements?

An Australian tax resident must file an income tax return on a self-assessment basis where his or her gross income exceeds the tax-free threshold of A$18,200. A non-resident earning more than A$1 of Australian-sourced income must file a return. There is no joint assessment or joint filing in Australia.

Gross income includes any capital gains made on the disposal of an asset.

Once a tax return is lodged, the ATO will issue an income tax assessment of the taxable income/tax loss and tax payable (if any) to the individual based on the income tax return. If there is a tax liability, it is usually payable by May before the commencement of the next financial year.

(d) What exemptions, deductions and other forms of relief are available?

A 50% CGT discount is available on a capital gain if the individual owned the asset for at least 12 months and is an Australian tax resident.

Any costs in acquiring an asset are factored into the cost base calculations to determine the gain on a disposal of the asset.

Additional discounts of up to 10% are available for Australian individuals who provide affordable rental housing to people earning low to moderate incomes. On the disposal of such residential rental properties, the Australian homeowner could obtain a discount of up to 60%.

(a) What taxes are levied and what are the applicable rates?

Australia does not impose an inheritance tax or estate tax at either the federal or state level. However, certain taxes may still apply indirectly when assets are transferred or disposed of following a person's death. These taxes vary by state and depend on the nature of the assets involved and how they are managed post-death. Some common taxes that may apply include Capital Gains Tax (CGT), Superannuation Death Benefits Tax, Income Tax on inherited assets, and state-based land taxes.

While CGT and Superannuation Death Benefits Tax apply uniformly across Australia (federal level), state-based taxes differ. Below is a breakdown of key tax considerations, including an overview of the Vacant Residential Land Tax and Land Tax specific to Victoria, Australia.

Capital Gains Taxes (CGT)

As outlined above, while there is no direct inheritance tax, Capital Gains Tax (CGT) may apply when a beneficiary disposes of inherited assets. Key considerations include:

• Main Residence Exemption:
• • If the inherited asset is a main residence of the deceased and sold within two years of the deceased's date of death, it is typically exempt from CGT.
  • If sold after two years, CGT may apply depending on how the property was used.
• Other Assets (e.g., Shares, Investment Properties):
• • No CGT is triggered at the time of inheritance.
  • CGT is calculated when the beneficiary sells the asset, based on the asset's cost base (usually the market value at the date of death for post-September 1985 assets).
• Pre-1985 Assets:
• • Assets acquired by the deceased before 20 September 1985 are exempt from CGT until the beneficiary disposes of them.
  • Upon disposal, only the gain from the date of the deceased's death is subject to CGT.

Executors and beneficiaries should seek tax advice to determine whether exemptions apply and to minimise CGT liabilities.

Superannuation Death Benefits Tax

Superannuation (retirement savings) is not automatically tax-free upon death. The tax treatment depends on the relationship between the deceased and the beneficiary:

• Tax-Dependent Beneficiary (e.g., spouse, minor child):
• • Lump sum death benefits are tax-free.
• Non-Dependent Beneficiary (e.g., adult child):
• • Taxable Component (Taxed Element): Currently taxed at 15% plus the Medicare levy (2%).
  • Taxable Component (Untaxed Element): Currently taxed at 30% plus the Medicare levy (2%).

It is advisable to seek financial advice when handling superannuation death benefits to ensure compliance and tax efficiency.

Income Tax on Inherited Income-Producing Assets

During estate administration and following a distribution to beneficiaries of estate assets, income from inherited assets is subject to income tax:

• Estate Administration Period:
• • Any income (e.g., rental income from investment properties, dividends from shares) earned before asset distribution is taxed within the estate.
• After Distribution to Beneficiaries:
• • Income generated from inherited assets (such as rental income, dividends, or other earnings) is taxed at the beneficiary’s marginal tax rate.

Vacant Residential Land Tax (Victoria)

In Victoria, Australia a Vacant Residential Land Tax (VRLT) applies to certain properties that remain unoccupied for more than six months in a calendar year. This tax is designed to encourage property owners to make residential properties available for occupation.

When It Applies:

• The tax applies only to residential properties in specific council areas within Melbourne, Victoria.
• A property is considered vacant if it was unoccupied for more than six months in a calendar year.
• Short-term leases (e.g., Airbnb) generally do not count towards occupancy.

Rate:

• 1% of the property’s capital improved value (CIV) (as assessed by the council).

Exemptions:

• Properties occupied as a principal place of residence.
• Properties undergoing significant renovations or redevelopment.
• Newly acquired properties (first year exemption).

Executors of deceased estates should be mindful of VRLT obligations if a property remains unoccupied for an extended period.

Land Tax (Victoria)

Land tax is an annual tax imposed on landowners in Victoria based on the total taxable value of their landholdings, excluding exempt properties (e.g., a principal place of residence).

When It Applies:

• Land tax applies annually to landowners as of 31 December each year.
• It is assessed on the combined taxable value of all non-exempt land owned in Victoria.
• Inherited properties may be subject to land tax depending on their use and whether they qualify for exemptions.

Rates for 2024 (General Land Tax Scale):

Exemptions & Considerations:

• The deceased estate may qualify for an exemption during the administration period.
• If a beneficiary inherits the property and uses it as their principal place of residence, land tax does not apply.
• If the property is rented out, land tax will apply.

Executors should consider land tax implications when managing or distributing estate properties in Victoria.

Summary of Applicable Taxes:

Proper estate planning can help minimise unexpected tax obligations for beneficiaries by raising these matters to the attention of the will-maker during the planning process so that careful consideration can be given to the overall consequences and impact that taxes can have on the ultimate distribution of an estate.

Similarly, executors and trustees should obtain professional tax advice during estate administration to ensure compliance with their tax obligations and avoid future unexpected tax liabilities. This is particularly important to complete before the final distribution of estate assets, as any tax obligations not correctly dealt with by the executor or trustees could become the personal responsibility of the executor or trustee.

(b) How is the taxable base determined?

In Australia, while there is no inheritance tax, certain taxes like Capital Gains Tax (CGT), Superannuation Death Benefits Tax, and Income Tax may apply when inherited assets are sold or generate income. The taxable base applicable is determined differently depending on the specific type of tax:

Capital Gains Tax (CGT) – Taxable Base

The taxable base for CGT is the capital gain or loss realised when an inherited asset is sold. It is calculated as:

(a) What taxes are levied and what are the applicable rates?

Tax on investment income is based on how the investments are owned. For example, assets may be owned by an individual, a company or a trust structure.

For investments owned in a personal capacity, the investment income is added to the individual’s overall income, including employment income, and taxed at the marginal income tax rates.

The marginal income tax rate increases according to the level of income earned. For the 2023–2024 financial year, the marginal income tax rates are as follows:

For the 2024–2025 financial year, the proposed changes to marginal income tax rates are as follows:

• Reduce the 19% tax rate to 16%;
• Reduce the 32.5% tax rate to 30%;
• Increase the threshold above which the 37% tax rate applies from A$120,000 to A$135,000; and
• Increase the threshold above which the 45% tax rate applies from A$180,000 to A$190,000.

Any income generated by a company is taxed at a marginal rate of 30%; and for trusts, any income accumulated (not distributed to beneficiaries) is taxed at a marginal rate of 45%.

(b) How is the taxable base determined?

The taxable base of investment income is calculated by classifying the investment income and deducting any related expenses incurred to earn that income.

(c) What are the relevant tax return requirements?

In the case of investment income for assets owned by an individual in his or her personal capacity, the individual must allocate such income to his or her individual tax return. An Australian tax resident must file an income tax return where his or her gross income exceeds the tax-free threshold of A$18,200. A non-resident earning more than A$1 of Australian-sourced income must file a tax return. There is no joint assessment or joint filing in Australia.

The tax return is due for filing by the following 31 October, unless an extension is available.

Once a tax return is lodged, the ATO will issue an income tax assessment of the taxable income/tax loss and tax payable (if any) to the individual based on the income tax return. If there is a tax liability, it is usually payable by May before the commencement of the next financial year.

A corporation – which includes the parent company of a tax consolidated group – can lodge a tax return under a self-assessment system that allows the ATO to rely on the information stated on the return. However, the ATO conducts audits to ensure that corporations are compliant with their tax requirements. If a corporation has doubts as to its tax liability regarding a specific item, it can request the ATO to consider the matter and issue a binding private ruling.

Generally, the tax return for a corporation must be filed with the ATO by 15 January or such later date as the ATO allows. Additional time may apply where the tax return is filed by a registered tax agent.

(d) What exemptions, deductions and other forms of relief are available?

As with a person’s income, in Australia, the first A$18,200 of income earned is considered tax free. Every A$1 earned over this threshold is taxable. There are certain deductions and reliefs available, such as for:

• income from rental properties – only income earned after the deduction of costs and expenses for operating the rental property is taxed;
• other expenses, such as the costs of managing one’s tax affairs; and
• dividend and other investment income.

Further deductions and relief are available for corporations, such as:

• depreciation and depletion for the decline in value held by the taxable entity;
• start-up expenses such as incorporation costs;
• interest expenses;
• bad or forgiven debts; and
• charitable contributions.

Losses can also be carried forward indefinitely, subject to certain compliance requirements.

(a) What taxes are levied and what are the applicable rates?

Land transfer duty (also known as stamp duty), land tax, council rates and CGT are the main taxes which apply to an individual’s real property.

Stamp duty is tax payable upon the acquisition of real property. Stamp duty is calculated based on the dutiable value of the property and whether any concessions or exemptions are available. Different rates of stamp duty are generally payable by foreign residents. Concessions and/or exemptions are available in various circumstances, including:

• for eligible first-home buyers; and
• in other circumstances, such as transfers between spouses (or ex-spouses) or between trusts and beneficiaries.

An annual land tax is generally payable on the taxable value of real property. An individual’s principal place of residence is generally exempt from land tax.

Council rates are payable to the municipal council to cover the costs of local government services such as waste management. Council rates are calculated based on an assessment of capital improved value undertaken by the municipal council.

CGT is payable by the vendor upon the sale or disposal of dutiable property other than a principal place of residence.

(b) How is the taxable base determined?

Taxes and duties relating to real estate are determined on a sliding scale depending on the value of the property. CGT is determined on the gain attributed from the purchase price less any costs for the maintenance of the property. The capital gain is then allocated to the company, trust or individual’s taxable income for that financial year.

(c) What are the relevant tax return requirements?

There are no specific tax return requirements; these taxes and duties should be accounted for in the individual, trust or company’s tax lodgements for each financial year.

(d) What exemptions, deductions and other forms of relief are available?

Land transfer duty exemptions are available for first-home owners in Australia, subject to satisfying certain requirements, such as:

• the property being the individual’s primary residence; and
• the value being under a threshold amount.

Land tax is not generally paid on primary residences.

Upon the sale of a primary residence, no CGT is payable; however, on disposal of any other real estate held for more than 12 months, a 50% discount of any taxable gain is available on the disposition. CGT may be rolled over (or deferred) in certain circumstances, including:

• a transfer between spouses upon the breakdown of a marriage or relationship; or
• the loss or destruction of the asset.

(a) What taxes are levied and what are the applicable rates?

Companies are subject to a tax rate of 30% on taxable income, except for ‘base rate entities’, which are subject to a reduced tax rate of 25% for the 2020/2021 financial year and future years. Base rate entities are companies:

• which have an aggregate turnover of less than A$50 million; and
• where 80% or less of their assessable income is passive income such as royalties and rent, interest income or a net capital gain.

(b) How is the taxable base determined?

The taxable base is calculated by classifying the income generated by the company and deducting any related expenses incurred to earn that income.

(c) What are the relevant tax return requirements?

A company must lodge an annual company tax return. Generally, the lodgement and payment date for small companies is 28 February. If any prior year returns are outstanding, the due date will be 31 October.

(d) What exemptions, deductions and other forms of relief are available?

A company can claim a tax deduction on expenses incurred in carrying on its business, provided that those expenses relate to the earning of the assessable income. A company can claim for deductions if:

• the expense was used for the business; or
• the expense was used for a mix of business and personal use, in which case only the business use may be claimed and there must be records to substantiate the deduction.

(a) What taxes are levied and what are the applicable rates?

A large component of indirect tax in Australia is goods and services tax (GST). GST applies to any form of supply that is:

• made for consideration in the course or furtherance of an enterprise;
• connected with Australia; and
• provided by an entity that is either registered or required to be registered for GST.

The GST rate in Australia is 10%.

(b) How is the taxable base determined?

For all goods and services which are subject to GST, an additional 10% is applied.

(c) What are the relevant tax return requirements?

The annual payment date for GST is 31 October of each year as displayed on a business activity statement (BAS). The BAS reports GST, the company’s pay as you go (PAYG) instalments, PAYG withholding tax and other taxes. Some entities must report monthly or quarterly, depending on turnover.

(d) What exemptions, deductions and other forms of relief are available?

There are no exemptions or deductions available. GST-free (zero-rated) supplies include:

• exports (of goods and services);
• some food products;
• most medical and health products and services;
• most educational courses;
• childcare;
• religious services;
• water;
• sewerage and drainage services; and
• international transport.

Input taxed (exempt) supplies include:

• financial supplies;
• residential rent and sales of residential premises;
• upon election, long-term accommodation in commercial residential premises; and
• fundraising events conducted by charitable and not-for-profit entities.

In Australia, succession law is primarily governed by state and territory legislation, which regulates how a person's estate is distributed upon death. Each jurisdiction has its own set of laws, but they generally cover similar principles regarding wills, intestacy, and family provision claims.

Key Laws Governing Succession in Australia

Can Succession be Governed by the Laws of Another Jurisdiction?

Yes, under certain circumstances, succession can be governed by foreign laws. However, it depends on the nature of the assets and the deceased's connections to the foreign jurisdiction.

When Foreign Laws May Apply:

The following general rules apply to how certain assets are dealt with depending on the nature of the asset involved.

1. Immovable (Real) Property:
   
   • Governed by the law of the jurisdiction where the property is located.
   • Example: A property in California would be subject to California succession laws, even if the owner was an Australian resident.
2. Movable (Personal) Property:
   
   • Generally governed by the law of the deceased's domicile at the time of death.
   • Example: Bank accounts, shares, or personal belongings may be governed by Australian succession law if the deceased was domiciled in Australia.
3. Choice of Law in Wills:
   
   • Under private international law, individuals can choose to have their will governed by a particular jurisdiction, but the choice may be limited.
   • For example, an Australian resident may create a separate will under US law to govern US assets.
4. International Wills Convention (1973):
   
   • Australia is a signatory to the Convention Providing a Uniform Law on the Form of an International Will 1973 (‘the Convention’), allowing wills to be recognised across other signatory countries. All states and territories in Australia have passed legislation to give effect to the convention.
   • The convention seeks to harmonise and simplify proof of formalities for wills that have international characteristics. It does this by setting up a uniform law introducing a new form of will, known as an 'international will', which is recognised as a valid form in all countries that are party to the convention.
   • As of 31 March 2025, according to the UNIDROIT.org website (extracted 31 March 2025 - https://www.unidroit.org/instruments/international-will/status/ ), the following countries are signatories to the Convention:

   • State	Signature		RT / AS	EIF	D
     Australia	–	AS	10.09.2014	10.03.2015	–
     Belgium	17.05.1974	RT	21.04.1983	21.10.1983	–
     Bosnia-Herzegovina *	–	AS	15.08.1994	15.08.1994	–
     Canada	–	AS	24.01.1977	–	D: Art. XIV
     Croatia *	–	AS	18.05.1994	18.05.1994	–
     Cyprus	–	AS	19.10.1982	19.04.1983	–
     Ecuador	26.07.1974	RT	03.04.1979	03.10.1979	D
     France	29.11.1974	RT	01.06.1994	01.12.1994	–
     Holy See	02.11.1973	–	–	–	–
     Iran	27.10.1973	–	–	–	–
     Italy	–	AS	16.05.1991	16.11.1991	D: Arts. I, II, III
     Laos	30.10.1973	–	–	–	–
     Libya	–	AS	04.08.1977	09.02.1978	–
     Niger	–	AS	19.05.1975	09.02.1978	–
     Portugal	–	AS	19.11.1975	09.02.1978	–
     Russian Federation	17.12.1974	–	–	–	D: Art. XIII
     Sierra Leone	27.10.1973	–	–	–	–
     Slovenia	–	AS	20.08.1992	20.08.1992	–
     United Kingdom	10.10.1974	–	–	–	–
     United States of America	27.10.1973	–	–	–	–

   • Despite Australia being a party signatory to the Convention, it is important to be aware that enforceability of an international Will in foreign jurisdictions depends on local probate processes.

Conflict of Laws — Resolving Jurisdictional Issues

When assets are located in multiple jurisdictions, conflicts may arise. In such cases the following rules determine how property is to be dealt with:

• Lex Situs Rule: Real property follows the law where it is located.
• Domicile Rule: Personal property follows the law of the deceased's domicile.
• Renvoi Doctrine: Australian courts may apply renvoi, meaning they may refer back to the foreign law if the foreign law defers to another jurisdiction.

Summary

• Australian state and territory laws govern wills, intestacy, and family provision claims.
• Immovable property is governed by the jurisdiction where it is located.
• Movable property is governed by the deceased's domicile.
• International Wills and choice of law clauses may provide flexibility.
• Multiple wills can be used to manage assets across jurisdictions

When a deceased person's estate involves connections to multiple jurisdictions (e.g., assets in different countries or residency in one place but property in another),conflict of laws principles determine which jurisdiction's laws apply. In Australia, these conflicts are resolved through private international law, which includes rules on domicile, lex situs, and renvoi.

In Australia, there is no distinction between real and personal property for the purposes of conflicts of law. Rather, there is a distinction between movable and immovable property. Whether a thing is movable or immovable will be decided by the lex situs (ie, the law of the place where the property is situated).

‘Movable property’ includes chattels not attached to land and other assets that are movable, such as bank accounts and shares. ‘Immovable property’ is land and all interest in land such as title deeds and fixtures.

The general rule is that, irrespective of domicile, the law of the lex situs will determine the succession of the property within the lex situs in relation to immovables. However, with regard to movables, the law of the deceased’s domicile at the date of death will apply.

Key Principles for Resolving Conflicts of Laws

• Lex Situs (Law of the Location) — Real (Immovable) Property
• • Real property (e.g., land, houses) is always governed by the law of the country where the property is located.
  • Example:
  • • An Australian resident who owns property in California will have that property governed by California succession laws, regardless of what their Australian will states.
• Domicile — Personal (Movable) Property
• • Movable property (e.g., cash, shares, personal belongings) is governed by the law of the deceased's domicile at the time of death.
  • Domicile is the place a person treats as their permanent home.
  • Example:
  • • If a person domiciled in Australia dies, their bank accounts, shares, and personal belongings are distributed under Australian law, even if those assets are located in another country.
• Renvoi Doctrine — Referring Back to Another Jurisdiction
• • Renvoi is a legal doctrine where a court refers back to the laws of another jurisdiction if that jurisdiction's laws point back to the original jurisdiction.
  • Example:
  • • If an Australian court is handling a case regarding US property and US law points back to Australian law, the Australian court may accept the renvoi and apply Australian law.

Choice of Law — Electing Jurisdiction in a Will

• Individuals can choose which jurisdiction’s law should govern their succession for movable assets.
• This is permitted under private international law, but not all jurisdictions recognise it.
• Example:
• • An Australian resident with assets in the US may specify that Australian law applies to movable assets, but this may not be enforceable if it conflicts with mandatory local laws.

International Conventions Impacting Conflict of Laws

International Wills Convention (1973)

Australia is a signatory to the Convention Providing a Uniform Law on the Form of an International Will 1973 (‘the Convention’), which allows wills executed under this form to be recognised in other signatory countries.

All states and territories in Australia have passed legislation to give effect to the convention.

Despite Australia being a party signatory to the Convention, it is important to be aware that enforceability of an international Will in foreign jurisdictions depends on local probate processes.

Dealing with Conflicting Jurisdictions in Practice

• Multiple Wills: To avoid conflicts, individuals often create separate wills for each jurisdiction where they hold assets.
• Obtaining a Reseal: If probate is granted in Australia, a reseal of probate may be needed for assets in other jurisdictions, depending on whether that jurisdiction recognises Australian grants.
• Legal Advice in Multiple Jurisdictions: Executors may need to seek legal advice in each jurisdiction where the deceased held assets.

Summary

Australia does not have rules of forced heirship, unlike many civil law jurisdictions where a portion of the deceased's estate must go to certain heirs (such as children or spouses). Instead, Australia follows the principle of testamentary freedom, meaning individuals are generally free to distribute their assets as they wish through a will.

However, this freedom is not absolute. Australia's succession laws (as enacted in each of the states and territories) include provisions for family provision claims, allowing certain eligible persons to challenge a will and/or the laws of intestacy if they believe they have been inadequately provided for.

Testamentary Freedom vs. Family Provision Claims

Testamentary freedom refers to the right of individuals to distribute their assets as they wish through their will. However, this principle is subject to legal challenge under certain circumstances. Family provision laws allow eligible persons to contest a will if they believe they have not been adequately provided for. This right to challenge is limited, as only individuals who meet specific eligibility criteria can bring a claim under the relevant legislation.

Family Provision Claims:

• If an eligible person is left out of the will or receives insufficient provision, they can apply to the court for a family provision order.
• The court can alter the distribution of the estate if it deems the provision inadequate.

Who Can Make a Family Provision Claim - eligibility?

The eligibility criteria vary slightly across states and territories, but common categories include:

Factors the Court Considers

As outlined above, each of the states and territories have enacted legislation which outlines the eligibility and factors the court must take into account when determining a family provision claim. When determining whether to make an order or further provision, the court considers factors such as:

• Size and nature of the estate.
• Financial needs and resources of the claimant.
• Relationship between the claimant and the deceased.
• Health, age, and earning capacity of the claimant.
• Any moral obligation the deceased may have had.
• Conduct of the claimant (in some cases).

Time Limits for Making a Claim

Time limits for lodging a family provision claim vary by state:

Key Differences from Forced Heirship

Summary

• No forced heirship exists in Australia.
• Individuals have the freedom to distribute assets as they wish.
• Family provision claims offer a safeguard for eligible dependents who might have otherwise missed out on the opportunity to challenge the idea of testamentary freedom.
• The court assesses various personal and financial factors before altering a will.

Whilst Australia has no force heirship rules, a set of laws enacted in the relevant legislation each of the Australian states and territories known as ‘laws of intestacy’ apply when a person dies intestate (without a valid will) in Australia. In such cases, the estate is distributed according to the intestacy rules set out in the relevant state or territory legislation governing succession in those jurisdictions.

As succession laws are governed not at federal level, but rather, at each of the state and territory levels, each jurisdiction in Australia has its own set of rules for how an intestate estate is distributed. Despite this, the basic principles are similar across the country.

For example:

• New South Wales (NSW): Governed by the Succession Act 2006 (NSW), which provides specific formulas for dividing the estate between a surviving spouse and children.
• Victoria: Governed by the Administration and Probate Act 1958 (Vic).
• Queensland: Governed by the Succession Act 1981 (Qld), with a different formula for spousal entitlements.
• Western Australia: Governed by the Administration Act 1903 (WA), where a spouse might receive a larger share if there are no children.

Intestacy Rules in Australia

When someone dies intestate, the estate is divided according to a prescribed order of priority, based on family relationships. The key steps include:

Order of Priority for Distribution

In the absence of a will, an administrator (usually the surviving spouse or another close family member) is appointed by the court to administer the estate. This is typically done by obtaining letters of administration, which grant the authority to distribute the estate according to the intestacy rules.

Even if the deceased has died intestate, family provision claims can still be made. A family provision claim allows eligible persons to challenge the distribution of the estate if they feel that they have not been adequately provided for, regardless of whether there is a will or if the estate is being distributed according to the intestacy rules.

To prevent clogging up the courts with baseless claims, legislation has been enacted in each of the states and territories which specifies who may make such claims (known as eligible persons).

Generally, these include:

• Spouse, including de facto partners (and in some jurisdictions, former spouses).
• Children, including adopted children, stepchildren, and sometimes grandchildren.
• Dependents (e.g., someone who was financially dependent on the deceased).

Time Limits:

Family provision claims usually have a time limit (e.g., 12 months in NSW) from the date of death or the date of the grant of letters of administration (e.g., 6 months in Victoria). The court will consider the claimant's needs and the size of the estate before making an order to alter the intestate distribution.

Impact of Intestacy on Property and Assets

• Real Property (Land and Houses): The rules of intestacy apply to all types of property, including real estate. The ownership and distribution of property depend on the relationships of the surviving family members.
• Joint Assets: Jointly owned property, such as bank accounts or real estate with a spouse, may pass to the surviving joint owner automatically, as it is typically held in joint tenancy. This may reduce the size of the intestate estate that must be divided under the intestacy rules.
• Superannuation: Superannuation death benefits may be handled separately from the estate. The superannuation trustee may decide to pay the benefits to the deceased’s dependents, regardless of the intestacy rules.

Summary: How Intestacy Rules Work in Australia

1. When a person dies intestate, the estate is distributed according to state or territory intestacy laws.
2. The order of succession typically prioritises:
   
   • Spouse and children.
   • If no spouse or children, parents, siblings, or other relatives.
3. Family provision claims can still be made if an eligible person feels inadequately provided for, even under intestacy.
4. Intestacy affects estate administration — an administrator is appointed to manage the estate and follow the laws of intestacy.
5. Property distribution may also be influenced by joint ownership or superannuation regulations.

In Australia, wills and estates are governed by state and territory legislation, meaning the relevant laws differ depending on the jurisdiction in which the deceased was domiciled. The key legislation includes:

• Victoria – Wills Act 1997 (Vic) and Administration and Probate Act 1958 (Vic)
• New South Wales – Succession Act 2006 (NSW)
• Queensland – Succession Act 1981 (Qld)
• South Australia – Wills Act 1936 (SA) and Inheritance (Family Provision) Act 1972 (SA)
• Western Australia – Wills Act 1970 (WA) and Family Provision Act 1972 (WA)
• Tasmania – Wills Act 2008 (Tas) and Testator’s Family Maintenance Act 1912 (Tas)
• Northern Territory – Wills Act 2000 (NT) and Family Provision Act 1970 (NT)
• Australian Capital Territory – Wills Act 1968 (ACT) and Family Provision Act 1969 (ACT)

Each jurisdiction has its own rules regarding the formal requirements for making a valid will, estate administration, and provisions for contesting a will.

A will can be governed by the laws of another jurisdiction in certain circumstances. The key considerations include:

1. Domicile of the Deceased: Generally, the laws of the state or territory where the deceased was domiciled at the time of death will govern the administration of their estate.
2. Location of Assets: If the deceased held assets in multiple jurisdictions (including overseas), different laws may apply to the distribution of those assets.
3. Choice of Law Clause: In some cases, a will may specify that it is to be governed by the laws of a particular jurisdiction, though this may not always override the relevant succession laws where the assets are located.
4. International Considerations: If a person has assets in a foreign country, that country’s laws may impact the administration and taxation of the estate. Some countries do not recognise Australian wills, requiring a separate will in that jurisdiction.

When a deceased person's estate involves connections to multiple jurisdictions (e.g., assets in different countries or residency in one place but property in another),conflict of laws principles determine which jurisdiction's laws apply. In Australia, these conflicts are resolved through private international law, which includes rules on domicile, lex situs, and renvoi.

In Australia, there is no distinction between real and personal property for the purposes of conflicts of law. Rather, there is a distinction between movable and immovable property. Whether a thing is movable or immovable will be decided by the lex situs (ie, the law of the place where the property is situated).

‘Movable property’ includes chattels not attached to land and other assets that are movable, such as bank accounts and shares. ‘Immovable property’ is land and all interest in land such as title deeds and fixtures.

The general rule is that, irrespective of domicile, the law of the lex situs will determine the succession of the property within the lex situs in relation to immovables. However, with regard to movables, the law of the deceased’s domicile at the date of death will apply.

Key Principles for Resolving Conflicts of Laws

• Lex Situs (Law of the Location) — Real (Immovable) Property
• • Real property (e.g., land, houses) is always governed by the law of the country where the property is located.
  • Example:
  • • An Australian resident who owns property in California will have that property governed by California succession laws, regardless of what their Australian will states.
• Domicile — Personal (Movable) Property:
• • Movable property (e.g., cash, shares, personal belongings) is governed by the law of the deceased's domicile at the time of death.
  • Domicile is the place a person treats as their permanent home.
  • Example:
  • • If a person domiciled in Australia dies, their bank accounts, shares, and personal belongings are distributed under Australian law, even if those assets are located in another country.
• Renvoi Doctrine — Referring Back to Another Jurisdiction
• • Renvoi is a legal doctrine where a court refers back to the laws of another jurisdiction if that jurisdiction's laws point back to the original jurisdiction.
  • Example:
  • • If an Australian court is handling a case regarding US property and US law points back to Australian law, the Australian court may accept the renvoi and apply Australian law.

Yes, foreign wills can be recognised in Australia under certain circumstances. The process for recognising a foreign will depends on various factors, including whether the will meets Australian legal requirements and the jurisdiction where the will was made.

Key Considerations for Recognition

1. Validity Under Foreign Law – A will made in another jurisdiction may be recognised if it is valid under the laws of the country where it was executed.
2. Recognition Under Australian Law – The will must also comply with Australian succession laws, particularly regarding execution, testamentary capacity, and undue influence.
3. Conflict of Laws Principles – If a deceased person had assets in Australia and another country, different legal systems may govern different parts of the estate (e.g., immovable property such as land is usually governed by the law of the country where it is located).

Process for Recognising a Foreign Will in Australia

1. Resealing of a Foreign Grant – If probate has been granted in a foreign jurisdiction, an application can be made to the Supreme Court of an Australian state or territory to "reseal" the foreign grant of probate. This process applies to only certain recognised jurisdictions, including the UK, New Zealand, and some other Commonwealth countries.
2. Probate as a Foreign Will – If the will has not been granted probate overseas, an application for probate can be made in Australia as if the will were an Australian will. The applicant must provide evidence that the will is valid under the law of the place where it was executed.
3. Intestate Succession – If a foreign will is not recognised and no valid Australian will exists, Australian intestacy laws may apply to assets located in Australia.

Testamentary freedom is balanced against the testator’s moral responsibility to certain eligible persons such as spouses or children, to make proper provision for their adequate maintenance and support. If a testator has failed to make adequate provision for such persons, the will may be subject to challenge.

The courts also consider whether the eligible person has a need for provision or further provision from the estate.

In Australia, each state and territory has legislation governing the formal requirements for a valid will. However, the fundamental requirements are generally consistent across jurisdictions.

Key Formal Requirements for a Valid Will:

1. The Will Must Be in Writing
   
   • The will must be written, either handwritten, typed, or printed. Oral wills are not legally valid (although they may still be admitted to probate in some circumstances as an informal will).
2. The Testator Must Have Testamentary Capacity
   
   • The testator (the person making the will) must:
   • • Be at least 18 years old (exceptions apply for minors in limited circumstances).
     • Be of sound mind, memory, and understanding at the time of making the will.
     • Understand the nature and effect of the will, including the extent of their estate and the claims of potential beneficiaries.
     • Intend the document to be their Will.
3. The Will Must Be Signed by the Testator
   
   • The testator must sign the will at the end of the document.
   • If the testator cannot physically sign, they may direct someone to sign on their behalf in their presence.
4. The Will Must Be Witnessed
   
   • The testator’s signature must be witnessed by at least two people who are both:
   • • Present at the same time when the testator signs.
     • Over 18 years old.
   • Witnesses should not be beneficiaries (or the spouses of beneficiaries), as this may affect their entitlement under the will.
5. The Will Must Be Made Voluntarily
   
   • The will must be made without undue influence, coercion, or fraud.

Exceptions & Special Circumstances:

• Holographic Wills: Some jurisdictions (e.g., NSW) may accept a will that is entirely handwritten by the testator, even if it does not meet all formal witnessing requirements.
• Informal Wills: Courts may recognise an informal will (one that does not strictly comply with legislative requirements) if clear intent can be proven.
• International Wills: A will made overseas may be recognised in Australia if it meets Australian legal standards or complies with the Convention Providing a Uniform Law on the Form of an International Will 1973.

When drafting a will in Australia, a number of best practices can be adopted to mitigate the risk of a a successful challenge to the Will and can help ensure that the will is legally valid.

The following key considerations should be observed:

1. Compliance with Legal Formalities

• Ensure the will is in writing (handwritten, typed, or printed).
• The testator must be at least 18 years old (unless an exception applies).
• The will must be signed by the testator in the presence of two witnesses, who must also sign the will.
• Witnesses should not be beneficiaries or the spouse of a beneficiary.

2. Confirm Testamentary Capacity

• The testator must be of sound mind, memory, and understanding at the time of making the will.
• They must comprehend:
• • The nature and effect of the will.
  • The extent of their estate.
  • The claims of potential beneficiaries.
• If there is any doubt about the testator’s capacity (e.g., due to age, illness, or cognitive decline), obtaining a medical certificate or having a solicitor assess and record their capacity is advisable.

3. Avoiding Undue Influence & Fraud

• The testator must make the will voluntarily, without coercion or pressure from others.
• If undue influence is suspected (e.g., if a vulnerable person changes their will significantly in favor of one party), independent legal advice should be sought.

4. Clarity and Precision in Language

• Use clear and unambiguous language to avoid misinterpretation.
• Specify exactly how assets should be distributed and identify beneficiaries by full name and relationship to the testator. This will assist the executor/administrator to identify and locate the beneficiaries when administering your estate.
• Include contingency plans, such as what happens if a beneficiary predeceases the testator so as to prevent the risk of the gift failing.

5. Appointment of Executors and Trustees

• Name a trusted executor to administer the estate and carry out the testator’s wishes.
• If assets are held in trust (e.g., for minor children), appoint a trustee to manage them.
• Consider naming a backup executor in case the primary executor is unable or unwilling to act.

6. Providing for Dependents & Avoiding Family Provision Claims

• Ensure adequate provision is made for spouses, children, and other dependents to minimize the risk of family provision claims.
• If intentionally excluding a close family member, record the reason in a separate document (or include a clause in the will) to help defend against potential claims.

7. Reviewing and Updating the Will

• Regularly review the will, especially after major life events such as:
• • Marriage, divorce, or separation.
  • Birth or death of a family member.
  • Acquisition or disposal of significant assets.
• A new will should be drafted if significant changes are required, rather than making excessive amendments.

8. Storing the Will Safely

• Keep the original will in a secure location, such as:
• • With a solicitor.
  • In a safe deposit box.
  • With the Supreme Court’s will registry (where applicable).
• Inform executors and key family members where the original will is stored.

Finally, obtaining legal advice. Meeting with a legal practitioner specialising in the area of Wills and estates will enable the testator to obtain legal advice regarding their testamentary wishes specific to their circumstances. Having this legal advice prior to making a will may assist to mitigate the risk of disgruntled beneficiaries and legal challenges to the will.

In Australia, a will cannot be amended after the death of the testator. However, there are certain circumstances where modifications or alterations may be possible under Australian law:

1. Rectification of a Will: Courts in various Australian states and territories have the power to rectify a will if it does not reflect the testator’s true intentions due to clerical error or misunderstanding of instructions. Applications for rectification typically need to be made within a certain timeframe after probate is granted (e.g., six months in some jurisdictions).
2. Informal Wills: If a document does not meet the formal requirements of a valid will but was intended to function as one (or as an amendment to an existing will), courts may recognise it as a will under dispensing provisions in the relevant state or territory legislation.
3. Family Provision Claims: If a will fails to provide adequate provision for an eligible person (such as a spouse, child, or dependent), they may apply to the Supreme Court in their state or territory for a family provision order. This does not amend the will itself but can alter how the estate is distributed.
4. Deeds of Family Arrangement: Beneficiaries can mutually agree to vary the distribution of an estate through a Deed of Family Arrangement, provided all affected parties (including any legal representatives for minors or incapacitated individuals) consent.

When considering whether to, in effect, amend a will (whether by consent or family provision claim), it is important to consider the impacts of the amendment on the beneficiaries. These may include triggering taxes, where tax may otherwise not have been payable, or welfare gifting provisions. We recommend that the executor and beneficiaries intending to enter into a deed of family arrangement obtain independent legal advice before agreeing to any proposed altered distribution.

Each state and territory has its own legislation enabling eligible applicants to make a claim for provision or further provision from a deceased estate. Generally, for an application to succeed, the following elements must be satisfied.

Eligible applicant: The following persons are generally considered to be eligible applicants Australia wide:

• a spouse or domestic partner of the deceased at time of death;
• a child, including a stepchild, of the deceased; and
• a person who was wholly or partially dependent on the deceased, to the extent the deceased had a moral obligation to provide for that person in the will.

Relevant considerations: A claim must generally be made within six months of grant of representation being issued by the court or 12 months of the date of death, depending on the state or territory in which the deceased was domiciled. When assessing the validity of a claim, the court will consider various factors, including:

• the terms of the deceased’s will (if any);
• evidence of why the deceased drafted the will in a certain way; and
• any evidence as to the deceased’s intentions in relation to provision for the applicant.

The court may also consider other factors, such as:

• the size of the estate;
• the relationship between the deceased and the applicant;
• the applicant’s personal and financial circumstances;
• the circumstances of the other beneficiaries; and
• any other circumstances that the court sees fit.

Australian courts place a strong focus on whether the deceased had a moral obligation and the adequacy of any provision made. They also consider whether the applicant has a need for provision from the estate.

When a person dies without a valid will (intestate), their estate is distributed according to the intestacy laws of the state or territory where they resided. While the rules vary slightly across jurisdictions, they generally prioritise spouses, children, and other close relatives.

Each Australian state and territory has its own intestacy laws governing how an estate is distributed when a person dies without a valid will:

• Victoria – Administration and Probate Act 1958 (Vic)
• New South Wales – Succession Act 2006 (NSW)
• Queensland – Succession Act 1981 (Qld)
• South Australia – Administration and Probate Act 1919 (SA)
• Western Australia – Administration Act 1903 (WA)
• Tasmania – Intestacy Act 2010 (Tas)
• Australian Capital Territory – Administration and Probate Act 1929 (ACT)
• Northern Territory – Administration and Probate Act 1969 (NT)

These laws set out the hierarchy of beneficiaries and how an estate is distributed in the absence of a will.

Who Inherits Under Intestacy Laws?

• Spouse and No Children → The spouse inherits the entire estate.
• Spouse and Children (from that spouse) → The spouse inherits the entire estate.
• Spouse and Children (from a different relationship) → The estate is usually split between the spouse and children.
• No Spouse, but Children → The children inherit the estate in equal shares.
• No Spouse or Children → The estate passes to parents, then siblings, then more distant relatives (grandparents, aunts/uncles, cousins).
• No Surviving Relatives → The estate passes to the state or territory government.

Intestacy distributions can be challenged through a family provision claim if an eligible person believes they have not received adequate provision. The eligibility criteria to challenge an intestate estate is contained in the relevant legislation enacted in each of the estate and territory legislation that deals with succession laws (outlined above). Generally, however the legislation is similar in that in allows spouses, children, de facto partners, dependants and other close relatives to bring a challenge provided that they are specified as eligible persons for the purposes of bringing such a claim.

It is important to note that strict time limits in which to commence such a claim are outlined in each of the legislation.

Family Provision Claim Time Limits by State and Territory

In some circumstances the courts may grant an extension of time to file a family provision claim, however this will be dependent on the particular circumstances of the case and an approval for an extension is not guaranteed. Factors such as the reason for the delay, the strength of the claim, and prejudice to the estate or other beneficiaries will be considered.

In Australia, trusts and equivalent instruments (such as deeds of trust or family trusts) are primarily governed by the following laws:’

1. Common Law and Equity: Trusts in Australia are rooted in equity, a branch of the law developed by the courts of chancery. The principles of trust law are generally based on judicial decisions made over centuries. These principles apply universally across Australian states and territories.
2. Trusts Legislation: Various states and territories in Australia have specific trusts legislation that outlines the duties and powers of trustees, the creation of trusts, and the administration of trust assets. Each state and territory has enacted the following acts that deal with trusts:
   
   • Trustee Act 1925 (NSW)
   • Trustee Act 1958 (Vic)
   • Trusts Act 1973 (Qld)
   • Trustee Act 1962 (WA)
   • Trustee Act 1898 (Tas)
   • Trustee Act 1997 (ACT)
3. Taxation Laws: Trusts are also subject to taxation laws, including:
   
   • Income Tax Assessment Act 1997 (Cth)
   • Goods and Services Tax (GST) Act 1999 (Cth)
   These laws govern how trusts are taxed, including the taxation of distributions and income derived from trust assets.
4. Family Trusts: The operation of family trusts is also governed by Family Trust Election (FTE) rules under the Income Tax Assessment Act 1997 (Cth) and related regulations. This is crucial for taxation purposes, particularly in determining the tax treatment of family trusts and their beneficiaries.

Can Trusts Be Governed by the Laws of Another Jurisdiction?

Yes, a trust can be governed by the laws of another jurisdiction. This is typically done by expressly choosing the governing law in the trust deed or instrument. This is known as a "choice of law" clause.

For example:

• A trust could be created under Australian law but specify that the laws of another country will govern the administration of the trust.
• This is commonly done for asset protection or taxation reasons, or if a foreign trustee is involved.

However, the location of the trust’s assets (the trust's residence) and the location of the trustees may affect how the trust is taxed, and certain jurisdictions may limit the ability of a trust to be governed by foreign law if it operates within their jurisdiction.

The Choice of Law must be explicitly stated, and there may be implications in terms of the tax treatment and legal recognition of the trust depending on the chosen jurisdiction.

In Australia, conflicts of laws relating to trusts are resolved by applying private international law (conflict of laws) principles, which determine the appropriate governing law and jurisdiction.

When determining conflicts of laws relevant to trusts, the following principles are relevant:

1. Governing Law of the Trust

• Australian courts generally uphold the express choice of law made by the settlor in the trust instrument.
• If no choice of law is specified, the court determines the governing law based on closest and most real connection to the trust, considering factors such as:
• • Location of trust assets
  • Place of trust administration
  • Residence of trustees or beneficiaries

2. Recognition of Foreign Trusts

• Australia recognises foreign trusts under the Convention on the Law Applicable to Trusts and on Their Recognition (1985) (Hague Trusts Convention). This convention was adopted by the Hague Conference on Private International Law (HCCH) and establishes rules for determining the governing law of trusts and their recognition across jurisdictions. While Australia has not ratified the convention, its principles influence Australian trust law in cross-border cases. though it has not ratified the convention.
• Trusts governed by foreign laws may be enforced in Australia unless they violate public policy.

3. Jurisdictional Disputes

• Australian courts assess jurisdictional issues based on forum conveniens (the most appropriate forum for the dispute).
• If parallel proceedings exist in another jurisdiction, an Australian court may:
• • Stay proceedings if another jurisdiction is more suitable.
  • Issue anti-suit injunctions to prevent foreign litigation in certain cases.

4. Conflict with Mandatory Australian Laws

• Even if a trust is governed by foreign law, Australian courts may refuse to enforce terms that:
• • Contravene mandatory Australian laws (e.g., taxation, property, superannuation laws).
  • Violate Australian public policy (e.g., attempts to circumvent family law or insolvency provisions).

5. Tax and Regulatory Considerations

• Australian tax law applies to trusts with Australian resident trustees or beneficiaries, regardless of the trust’s governing law.
• Foreign trusts with Australian connections may face local reporting and tax obligations.

In Australia, trusts are widely used for estate planning, asset protection, investment, and business purposes. The creation and administration of trusts follow well-established legal principles derived from common law, equity, and statutory provisions.

Private clients in Australia have access to a range of legal structures for managing assets, business interests, and estate planning. Each structure has its own advantages and disadvantages, depending on factors like taxation, liability, and control.

Types of Trusts

The main types of trusts in Australia include:

1. Discretionary (Family) Trusts: Trustees have discretion over distributions to beneficiaries, commonly used for family wealth management and tax planning.

• Advantages:
• • Tax flexibility: Trustees can allocate income to beneficiaries with lower tax rates.
  • Asset protection: Beneficiaries do not own assets directly, safeguarding them from creditors and family law disputes.
  • Estate planning benefits: Can continue beyond the settlor’s lifetime.
• Disadvantages:
• • Complexity & cost: Requires a trust deed and ongoing administration.
  • Trust losses cannot be distributed: Losses remain within the trust and cannot offset beneficiaries' income.
  • Limited lending options: Banks may require personal guarantees when financing trust-held assets.

2. Unit Trusts: Beneficiaries hold fixed units in the trust, commonly used in investments and business structures.

• Advantages:
• • Fixed entitlements: Each unit holder has a set proportion of income and capital.
  • Easier capital raising: Suitable for business partnerships and investment ventures.
• Disadvantages:
• Less flexibility: Fixed distributions limit tax planning opportunities.
• Asset protection risk: A bankrupt unit holder's interest may be transferred to creditors.

3. Fixed Trusts: Beneficiaries have a predetermined entitlement to income and capital, with no trustee discretion over distributions.

• Advantages:
• • Predictability: Beneficiaries are assured of their exact share of income and capital.
  • Tax transparency: Fixed distributions allow beneficiaries to plan their tax obligations.
  • Investment & lending benefits: Fixed entitlements facilitate securing loans and investments.
  • Lower tax scrutiny: The Australian Taxation Office is less likely to challenge fixed trusts compared to discretionary trusts.
• Disadvantages:
• • Limited flexibility: Distributions cannot be adjusted for tax planning or changing needs.
  • Reduced asset protection: Fixed entitlements can be claimed by creditors in bankruptcy proceedings.
  • Potential tax inefficiencies: Beneficiaries are taxed on their share, even if not received.
  • Not ideal for family planning: Cannot optimize distributions for lower-taxed family members.

4. Bare Trusts: The trustee holds assets on behalf of a beneficiary who has an absolute right to both income and capital. The trustee has no discretion and acts purely as a legal owner.

• Advantages:
• • Simple & low-cost: Minimal legal and administrative requirements.
  • Complete beneficiary control: Assets can be demanded by the beneficiary at any time.
  • Tax transparency: Assets are taxed directly in the beneficiary’s name.
  • Useful for minors & nominees: Common for holding assets until a minor turns 18 or in nominee arrangements.
• Disadvantages:
• • No asset protection: Assets are legally owned by the beneficiary, making them vulnerable to creditors, divorce settlements, or bankruptcy claims.
  • Irreversible structure: Once established, a bare trust cannot be altered.
  • Limited estate planning benefits: Lacks long-term asset control compared to discretionary or testamentary trusts.
  • Tax disadvantages for minors: Unearned income for beneficiaries under 18 may be subject to penalty tax rates.

5. Testamentary Trusts: Created through a will and activated upon the testator’s death.

• Advantages:
• • Tax efficiency for minors: Children under 18 are taxed at adult rates instead of penalty rates.
  • Asset protection: Shields inherited wealth from financially irresponsible beneficiaries.
• Disadvantages:
• • Complexity & cost: Requires detailed estate planning and ongoing administration.
  • Legal challenges: Can be contested under family provision laws.

6. Charitable Trusts: Established for charitable purposes and subject to specific legal and regulatory requirements.

Yes, Australia recognises foreign trusts, including those governed by the laws of another jurisdiction. As noted above, although Australia has not ratified the Convention on the Law Applicable to Trusts and on Their Recognition (1985) ((Hague Trusts Convention (1985)), its principles influence Australian law, and courts generally uphold validly created foreign trusts unless they conflict with mandatory Australian laws or public policy.

The process for recognising a foreign trust is generally dealt with in the following way:

1. Determining the Governing Law: Australian courts generally respect the governing law chosen in the trust instrument. If no law is specified, the court determines the governing la based on factors such as:
   
   1. The place where the trust is administered.
   2. The location of trust assets.
   3. The residency of trustees or beneficiaries.
2. Recognition for Legal Purposes: Foreign trusts may need to be recognised for difference legal purposes, including:
   
   1. Legal effect: Court will enforce trust terms unless they violate Australian Laws.
   2. Taxation: The Australian Taxation Office (ATO) applies resident-based taxation rules, meaning a foreign trut with Australuan resident beneficiaries may be subject to local tax obligations.
   3. Property & Succession Law – Foreign trusts holding Australian assets may be subject to local property laws and forced heirship considerations.
3. Compliance with Australian Laws: Even if a trust is foreign, Australian laws may apply, particularly in areas such as:
   
   1. Taxation: Australian: Australian beneficiaries of a foeign trust may be taxed on their distributions.
   2. Foreign Investment Review Board (FIRB): If a foreign trust acquires Australian real estate, FIRB approval may be required.
   3. Family Law & Bankruptcy: Courts may override foreign trust structures in divorce or insolvency cases if they are seen as an attempt to shield assets.

In Australia, trusts are widely used for estate planning, asset protection, investment, and business purposes. The creation and administration of trusts follow well-established legal principles derived from common law, equity, and statutory provisions.

A trust is created when a settlor (or grantor) transfers assets to a trustee, who holds and manages them for the benefit of beneficiaries according to the terms of the trust deed.

For a trust to be valid, it must satisfy the ‘three certainties’:

1. Certainty of intention: There must be a clear intent to create a trust (usually in a written trust deed);
2. Certainty of subject matter: There must be clearly defined trust property (assets held in trust); and
3. Certainty of objects: There must be clearly identified or identifiable beneficiaries.

Formalities for Trust Creation

• A trust deed is usually required, except for some informal trusts (e.g., resulting or constructive trusts).
• Trusts involving real property must comply with the Statute of Frauds, requiring them to be in writing.
• A settlor (often a legal or accounting professional) typically establishes the trust by transferring a nominal amount (e.g., $10).

Administration of Trusts: The trustee is legally responsible for managing the trust in accordance with the trust deed, relevant Trustee Acts (which vary by state and territory), and fiduciary duties. These duties include acting in the best interests of beneficiaries and avoiding conflicts of interests.

Trust administration involves several key responsibilities. Trustees must prudently invest and manage trust property, ensuring assets are protected and used appropriately. They are responsible for distributing income or capital to beneficiaries as outlined in the trust deed. Accurate accounts and records must be maintained for tax and legal compliance, and trustees are required to file annual tax returns. Depending on the nature of the trust, distributions may be taxed at either the beneficiary or trustee level. Trustees must also adhere to state and federal regulations, particularly if the trust involves superannuation funds or charitable purposes.

A trustee is personally liable for trust debts unless indemnified by trust assets. To mitigate personal risk, corporate trustees are often used, providing limited liability protection. If a trustee engages in misconduct or breaches their duties, courts have the authority to remove them.

Duration and Termination of Trusts: In Australia, most trusts must vest (end) within 80 years, in accordance with the ‘Rule Against Perpetuities’, with the exception of charitable trusts, which can exist indefinitely. Trusts can be terminated in several ways. A trust naturally concludes when its purpose has been fulfilled, and all assets have been distributed. Some trust deeds include specific provisions detailing conditions for termination. Additionally, courts may order the dissolution of a trust if it is being mismanaged or has become impractical to maintain.

Trustees in Australia are subject to a range of legal duties designed to ensure the proper management of trust assets and the protection of beneficiaries’ interests. These duties arise from common law, legislation, and the terms of the trust deed.

Trustees have a fiduciary duty to act in good faith and in the best interests of the beneficiaries. They must exercise their powers for proper purposes and avoid conflicts of interest. If a trustee has any personal or conflicting interest, they must disclose it and, in some cases, seek approval before proceeding with any related transactions.

A trustee is required to exercise reasonable care, skill, and diligence in managing trust assets. This includes prudently investing trust funds, considering diversification, and ensuring compliance with the investment powers outlined in the trust deed and legislation. Failure to exercise due diligence may result in legal liability.

Trustees must administer the trust in accordance with its terms. They are bound by the trust deed and must follow its provisions regarding asset distribution, income allocation, and other administrative obligations. They cannot act beyond their granted authority or alter the terms of the trust without legal justification.

Another key duty is the duty to act impartially among beneficiaries. Trustees must balance the interests of different beneficiaries fairly and avoid favouring one group over another unless explicitly allowed under the trust deed.

Trustees are also responsible for maintaining proper records and accounts. They must keep accurate financial records, provide reports to beneficiaries as required, and ensure timely tax compliance, including filing trust tax returns.

In certain circumstances, trustees must seek professional advice if they lack expertise in trust management, investment strategies, or legal compliance. Failing to do so could be considered a breach of duty if it results in financial loss to the trust or its beneficiaries.

If a trustee fails to uphold these legal duties, they may be held personally liable for losses incurred by the trust. Courts have the authority to remove a trustee who breaches their obligations or mismanages the trust.

The taxation of trusts in Australia is governed by the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997. Trusts are generally treated as flow-through entities for tax purposes, meaning the tax liability is passed to beneficiaries rather than being paid at the trust level, except in certain circumstances.

For beneficiaries, trust income is typically taxed at their individual marginal tax rates. If a beneficiary is presently entitled to trust income, they must include their share in their tax return and pay tax accordingly. Minors, however, are subject to special tax rates on unearned income, which can be significantly higher than adult rates.

For trustees, if income is not distributed to beneficiaries, the trustee is liable to pay tax on undistributed amounts at the highest marginal tax rate. This encourages the timely distribution of income to beneficiaries. Trustees are also responsible for withholding tax on distributions to non-resident beneficiaries.

For settlors, there are generally no ongoing tax obligations, but they must ensure the trust is structured properly to avoid unintended tax consequences, such as triggering capital gains tax (CGT) liabilities when assets are transferred into the trust.

Capital Gains Tax (CGT) applies to trusts when assets are sold or transferred, with gains flowing to beneficiaries unless retained by the trust. Special rules apply to discretionary trusts, which may affect the ability to use CGT discounts.

Franking Credits from dividends received by the trust can be distributed to beneficiaries, provided they are entitled to trust income. However, anti-avoidance rules prevent misuse of franking credits.

Taxation of Special Trusts varies based on their nature. Superannuation funds and charitable trusts are subject to unique tax rules, often benefiting from lower tax rates or exemptions.

Failure to comply with tax obligations can lead to penalties, interest charges, and audits by the Australian Taxation Office (ATO). Trustees are advised to seek professional tax advice to ensure compliance and tax efficiency.

The reporting requirements for trusts in Australia are essential to ensure compliance with taxation and legal obligations. Trustees are required to file an annual tax return with the Australian Taxation Office (ATO), reporting the trust's income, expenses, distributions, and any capital gains. The tax return must be filed on time to avoid penalties. If the trust generates income, this must be disclosed, and any tax payable must be reported.

Trustees must also provide distribution statements to beneficiaries, outlining the income or capital distributed during the year. Beneficiaries use this information to report their share of the trust’s income on their individual tax returns, and trustees must ensure the statements are provided accurately and promptly.

For family or discretionary trusts, trustees must report on the entitlement of beneficiaries to trust income, as this is critical for tax purposes. Additionally, if the trust is engaged in business activities or is a corporate trustee, there may be additional reporting obligations, such as providing financial statements and complying with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.

Trusts with non-resident beneficiaries must comply with withholding tax obligations and may need to submit further documentation to the ATO, including foreign income declarations.

Trustees must stay informed about their reporting obligations to ensure timely and accurate submissions, avoiding penalties and ensuring compliance with Australian tax and legal standards.

When creating and administering trusts in Australia, it is crucial to follow best practices to ensure compliance, protect beneficiaries' interests, and promote effective trust management. Below are some key best practices:

1. Clear and Detailed Trust Deed: A well-drafted trust deed is fundamental to the proper functioning of a trust and is important to ensure that the trust deed complies with applicable laws and aligns with the settlor’s intentions is essential.. It should clearly define the terms of the trust, including the roles and responsibilities of the trustee, the powers of the trustee, the beneficiaries, and the procedures for distributions. It should also outline how the trust can be amended or terminated if needed.
2. Proper Selection of Trustees: Choosing the right trustee(s) is vital. Trustees should be individuals or entities with the necessary skills, knowledge, and integrity to manage the trust properly. A trustee's fiduciary duties require them to act in the best interests of the beneficiaries, so selecting someone with the ability to fulfill these responsibilities is critical. If personal liability is a concern, corporate trustees may be a better option for limited liability protection.
3. Regular Reviews and Monitoring: Trusts should be regularly reviewed to ensure they continue to meet the goals of the settlor and adapt to any changes in the law or beneficiaries' circumstances. This includes periodic reviews of the trust’s financial performance, asset allocation, and distribution strategies. Trustees should also assess whether the trust deed still reflects the settlor’s intentions and if any updates are needed due to changes in tax laws or beneficiary circumstances.
4. Compliance with Legal and Tax Obligations: Trustees must stay informed about their tax and legal responsibilities, including filing accurate and timely tax returns, maintaining proper records, and ensuring compliance with relevant regulations. This includes ensuring that beneficiaries are provided with the necessary documentation, such as distribution statements, for their tax returns. Trustees should also remain updated on any changes to taxation laws that may affect the trust, such as changes to capital gains tax or the tax treatment of distributions.
5. Transparency and Communication with Beneficiaries: Regular communication with beneficiaries is a key element of good trust administration. Trustees should ensure beneficiaries are informed about their entitlements, the trust’s financial performance, and any significant decisions affecting the trust. Transparency helps manage expectations and prevent misunderstandings or disputes.
6. Avoiding Conflicts of Interest: Trustees must always act in the best interests of the beneficiaries and avoid any situation that may result in a conflict of interest. This includes making decisions based on the trust’s best interests, rather than personal gain or preferences. Trustees should disclose any potential conflicts and, where necessary, seek advice to ensure decisions are made impartially.
7. Adequate Documentation and Record-Keeping: Trustees should maintain accurate and comprehensive records of all trust activities, including financial transactions, distributions, decisions made, and any professional advice sought. Proper documentation ensures compliance with legal and tax reporting obligations and can provide a defence against any future disputes or audits.
8. Risk Management: Trustees should be proactive in managing risks related to the trust’s assets, including investments. This involves ensuring that investments align with the trust’s purpose and risk tolerance. Trustees should also have appropriate insurance in place to cover potential liabilities and risks associated with trust management.
9. Professional Advice: Trustees should seek professional legal, tax, and financial advice when necessary. Trust administration often involves complex legal and tax issues, so relying on experienced professionals can help ensure the trust is properly managed, remains tax-efficient, and avoids costly mistakes.
10. Protecting Trust Assets: Trustees have a duty to protect and preserve the trust's assets. This includes ensuring that assets are properly safeguarded against risks, including creditor claims or claims from family members in the event of a divorce or other disputes. Trustees should also consider the long-term protection of trust assets, including utilizing structures such as corporate trustees, insurance, and other strategies to shield the trust from risks.

By adopting these best practices, trustees can effectively manage the trust and ensure that it serves its intended purpose, while maintaining legal and tax compliance and protecting the interests of the beneficiaries. It is especially critical as this area of law is often subject to legal and regulatory changes.

The private client landscape in Australia is characterised by a growing complexity in wealth management, as high-net-worth individuals (HNWIs) seek more tailored solutions for wealth protection, estate planning, and tax optimisation.

Several key trends are currently shaping this landscape in Australia:

1. Increased Use of Family Trusts: Family trusts, particularly discretionary trusts, continue to be a popular structure for wealth management and succession planning. These trusts offer flexibility in distributing income among family members, providing significant tax planning opportunities, asset protection, and control over how wealth is passed down. However, the complexity and cost of setting up and managing these trusts have led some clients to consider alternative structures.
2. Focus on Tax Efficiency and Succession Planning: With the Australian tax regime placing a premium on tax efficiency, clients are increasingly focused on optimizing their tax positions. This includes using trusts to manage income distribution, as well as strategies to minimize capital gains tax (CGT) liability on asset sales. Succession planning is also a significant priority, with many HNWIs seeking advice on how to transfer wealth across generations while minimizing estate taxes and ensuring smooth transitions.
3. Growing Popularity of Self-Managed Superannuation Funds (SMSFs): SMSFs continue to be a prominent tool for wealth accumulation and retirement planning, offering greater control over investment decisions and flexibility compared to traditional superannuation funds. However, they also require a high degree of expertise to manage effectively, and their regulatory framework continues to evolve to ensure compliance with superannuation law.
4. Asset Protection and Divorce Planning: Asset protection remains a key concern, especially in the context of family law disputes. Trust structures are often employed to shield assets from creditors or ex-spouses in the event of divorce or legal claims. Increasingly, individuals are using prenuptial or postnuptial agreements as part of a broader strategy for managing the risk of asset division in case of marital breakdown.
5. Impact of Regulatory Changes on Trusts and Estates: Australian regulators are increasingly scrutinising the use of trusts and other private wealth structures. The Australian Taxation Office (ATO) has increased their focus on combatting tax avoidance and is closely monitoring the distribution of trust income. This has prompted some families to reassess their trust structures and tax strategies.
6. Rise of Philanthropy and Charitable Giving: There is a growing trend among wealthy Australians to engage in philanthropy, either through direct charitable donations or by establishing charitable trusts. This aligns with a broader cultural shift toward corporate social responsibility and individual contributions to societal well-being. Many private clients are now considering how they can align their wealth management strategies with social and environmental goals.

Anticipated Developments in the Next 12 Months

Several key developments are anticipated in the coming year, including potential legislative reforms and changes in tax policy:

1. Changes to Trust Taxation and Compliance Requirements: There are indications that the Australian Taxation Office (ATO) will continue to focus on the taxation of trusts, particularly around income distribution and the tax treatment of beneficiaries. The ATO has been increasingly scrutinising discretionary trusts, which are commonly used for tax minimisation, as they allow trustees to distribute income to beneficiaries in lower tax brackets. In the next 12 months, there could be further regulatory changes to tighten the rules around how income distributions are made. Specifically, we may see more detailed reporting requirements to ensure that distributions are reasonable and align with the terms of the trust deed. This will likely lead to greater enforcement of tax compliance, particularly for high-net-worth individuals using trusts for tax planning purposes.
2. Continued Evolution of Digital Asset Regulations: With the growth of digital assets such as cryptocurrencies, NFTs, and other blockchain-based investments, there is increasing recognition that current laws may not adequately address these assets in the context of estate planning and trust management. Over the next 12 months, we can expect regulatory updates from the Australian government and ATO regarding the taxation, transfer, and management of digital assets within trusts. These changes will likely address how digital wallets, private keys, and other related assets are handled within estate plans and trust structures, ensuring that these assets are treated consistently with traditional forms of wealth for taxation and reporting purposes.
3. Stricter Anti-Money Laundering (AML) and Know Your Customer (KYC) Obligations for Trustees: As part of global efforts to combat financial crime, there is expected to be tightening of anti-money laundering (AML) and know-your-customer (KYC) obligations for trustees and wealth managers in Australia. Trustees and professionals managing family trusts, unit trusts, and discretionary trusts may face additional due diligence and reporting obligations, particularly when dealing with complex international structures or high-net-worth clients. This could lead to more stringent documentation requirements, making it crucial for trustees to conduct thorough checks on the sources of wealth, especially where trusts hold large or international assets. This will be part of broader AML and counterterrorism financing reforms expected in the next year.
4. Reforms to Superannuation and Wealth Accumulation: The superannuation system in Australia is also expected to undergo changes in the near future. There is speculation that taxation of superannuation for high-balance funds may be adjusted in order to target wealthier Australians. In the next 12 months, we could see proposals for limits on tax concessions for superannuation balances over a certain threshold, which would impact how high-net-worth individuals plan their retirement savings. Trusts that incorporate superannuation funds may face compliance changes related to new tax rules and strategies for wealth accumulation, influencing retirement planning strategies for high-net-worth individuals

In summary, the Australian private client landscape is likely to see continued developments in regulatory oversight, wealth transfer strategies, and tax policy reforms. As these trends unfold, private clients, wealth managers, and trustees will need to stay informed and adaptable to navigate these changes effectively.

Effective private client wealth management in Australia requires a strategic, informed, and personalised approach to ensure long-term financial security, tax efficiency, and family legacy preservation. Some top tips for successful wealth management in Australia, as well as potential sticking points to be mindful of include:

Top Tips for Effective Private Client Wealth Management:

1. Comprehensive Estate and Succession Planning: It is crucial for private clients to have a robust estate plan in place that reflects their wishes and ensures the smooth transition of wealth across generations. This includes:
   
   • Wills and Trusts: Structuring your estate with a combination of wills, discretionary trusts, and testamentary trusts can offer asset protection, tax planning benefits, and control over wealth distribution.
   • Testamentary Trusts: These are particularly beneficial for minors and vulnerable beneficiaries, as they can be structured to provide tax efficiency and protection for family members.
   • Advance Care Directives and Powers of Attorney: These ensure your wishes are respected in the event of incapacity, providing clarity and preventing disputes.
2. Tax Efficiency through Trust Structures: Trusts play a central role in private client wealth management in Australia, offering flexibility in income distribution and asset protection.
   
   • Discretionary Trusts: These are often used for tax minimisation, allowing trustees to allocate income to beneficiaries in lower tax brackets.
   • Unit Trusts: Beneficial for business owners or investors looking to raise capital while offering fixed entitlements.
   • Be mindful of the ATO’s increasing scrutiny on trusts and ensure that all distributions are compliant with tax laws.
3. Diversified Investment Strategy: To build and protect wealth, it is important to adopt a diversified investment portfolio. This should be based on a mix of asset classes (equities, bonds, property, etc.) and tailored to the client's risk tolerance, investment horizon, and financial goals.
   
   • Real Estate: Investment in Australian property continues to be popular, but changes in tax laws (such as capital gains tax reforms) should be considered.
   • Global Diversification: Private clients should look to diversify their investments internationally to manage risk and take advantage of growth opportunities outside of Australia.
4. Philanthropy and Charitable Giving: Incorporating philanthropic goals into wealth management is increasingly common, especially for high-net-worth individuals looking to give back to society.
   
   • Charitable Trusts: These allow clients to maintain control over their charitable donations, manage their philanthropic giving in a tax-efficient manner, and ensure their legacy lives on.
   • Consider the tax benefits of giving and the impact your donations will have in the communities you care about.
5. Consideration of Family Dynamics and Governance: Effective private wealth management is not only about numbers but also about ensuring that family members are aligned on values, expectations, and governance structures.
   
   • Family Trusts: A well-structured family trust can help manage family wealth, provide governance, and protect assets across generations.
   • Family Governance: Implementing a family governance framework (such as a family constitution or advisory board) can help resolve conflicts, maintain family harmony, and ensure alignment on key decisions.
6. Regular Reviews and Adaptation to Changing Circumstances: Wealth management is an ongoing process that requires regular reviews. As tax laws, investment markets, family circumstances, and other factors evolve, so should your wealth management strategy.
   
   • Annual Reviews: Regularly reassess your trust structures, estate planning documents, and investment portfolios to ensure they remain fit for purpose.
   • Adapting to Legislative Changes: Stay informed about changes in Australian taxation laws, superannuation regulations, and estate planning reforms that could impact your wealth management strategies.

Potential Sticking Points to Be Aware Of:

1. Complexity of Trust Structures: While trusts are an effective wealth management tool, they can be complex and require careful administration to ensure compliance with Australian tax laws. Trustees must be vigilant in their duties, as mismanagement could result in legal or tax consequences.
   
   • ATO Scrutiny: Trusts, particularly discretionary trusts, are under increasing scrutiny from the ATO for tax minimisation and may face tighter reporting requirements in the future.
   • Family Disputes: Trusts can sometimes cause family disputes, particularly if the beneficiaries feel unfairly treated or if the terms of the trust are unclear.
2. Superannuation and Retirement Planning: Navigating superannuation laws can be tricky, especially as changes to the superannuation tax environment continue to emerge.
   
   • High Balance Superannuation Accounts: The government may implement tax changes for individuals with large superannuation balances. Wealthy clients should be proactive in structuring their super to mitigate potential tax risks.
   • Superannuation Contribution Rules: Staying compliant with super contribution caps and ensuring that contributions are tax-effective is crucial for long-term retirement planning.
3. Estate Planning and Family Law Implications: Family law and divorce settlements can create challenges when it comes to asset division, particularly when assets are held in trust structures.
   
4. • Family Law Scrutiny: The courts may treat assets held in discretionary trusts as part of the “family property” in divorce settlements, despite attempts to shield them. Family law reform could increase scrutiny in this area.
   • Testamentary Disputes: Wills and estate planning documents can be contested under family provision laws, particularly if they fail to account for all potential beneficiaries or if a family member feels inadequately provided for.
5. Regulatory and Compliance Changes: The regulatory landscape is always evolving, and private clients must stay informed about changes to taxation, anti-money laundering (AML) laws, and financial services regulations.
   
   • Increased Compliance Costs: With more stringent reporting and due diligence obligations, compliance costs for high-net-worth individuals may rise. This includes additional fees for legal, accounting, and advisory services.
   • Taxation Changes: The government’s focus on closing tax loopholes could lead to changes that impact the way private clients structure their wealth, especially for trusts and family structures.
6. Family Dynamics and Succession Challenges: Managing family wealth across multiple generations is challenging. Family members may have differing attitudes toward wealth, risk, and governance, leading to potential conflicts.
   
   • Communication: Regular family meetings and open communication are essential to ensure alignment on values and expectations regarding wealth preservation and distribution.
   • Succession Planning: Clear succession plans and governance structures need to be established to ensure a smooth transfer of wealth and prevent disputes.

Effective private client wealth management in Australia requires a holistic, adaptable approach that combines strategic planning, risk management, and legal compliance. By leveraging the right structures, such as trusts and superannuation, and staying informed of regulatory changes, clients can optimise their wealth while protecting it for future generations. However, it’s important to be aware of the potential challenges and sticking points, especially in areas like trust administration, taxation, family dynamics, and legal reform. Regular consultation with legal, financial, and tax professionals is essential to ensure that strategies are updated and remain aligned with evolving laws and personal goals.