Taxation, and estate and succession planning, are currently hot-button topics in Australian politics and family boardrooms alike.
Australia’s ageing population is triggering the need to consider the implications of this massive transfer of assets between generations, creating not only financial opportunities but also serious risks, particularly when it comes to tax.
Recognising this, the Australian Taxation Office (ATO) has stated that: “succession planning, and the tax risks associated with it, is our number one focus in 2025.”
Families should take steps now to avoid “the 2.00am problem” – that is, lying awake in the early hours of the morning and worrying whether you have done enough to manage tax exposure when transferring your assets, whether during your lifetime or on death.
What Is Estate and Succession Planning?
Estate and succession planning is about determining who will have control over assets, in addition to how assets will be passed on, to whom, and when – and involves a multitude of issues (including asset protection).
Effective planning involves regular reviews to reflect changes in family circumstances and asset structures, or both.
Given the complexity of Australia’s tax laws – and the uncertainty that comes with any tax reform proposals (e.g. the current proposal to impose an additional 15% tax on earnings on super balances exceeding $3 million) – appropriate planning must always also consider and anticipate the tax consequences.
The aim being to ensure that capital and income are preserved and unnecessary liabilities are avoided.
Why the ATO Is Paying Attention
It is no secret that baby boomers are retiring and passing on significant wealth to the next generation. Many Gen X and younger high-net-worth individuals are also looking to protect their investments and ensure the orderly transfer of assets.
However, not all families have taken the steps required to do this properly. While some have spent considerable time and effort with this process, with a view to legitimately minimising their potential tax liabilities, others have done very little – potentially exposing them to significant risk.
As the ATO’s Deputy Commissioner for Private Wealth, Ms. Louise Clarke, has recently stated: “Succession without planning may lead to unintended tax consequences.”
The ATO is monitoring closely the movement of assets and wealth within families, ensuring all tax obligations are correctly met. Estate and succession planning is thus “front and centre” on the ATO’s compliance radar.
Common Tax Triggers in Family Wealth Transfers
Finlaysons regularly advises clients on the tax consequences of estate and succession planning and related transactions. Below are just a few examples of common areas where families may encounter significant tax risk:
1. Trust and Company Restructures
Where family trusts or companies hold business assets, investment portfolios, or properties, dividing control or ownership can trigger complex tax outcomes. The ATO will examine whether CGT roll-overs have been validly applied and GST obligations have been satisfied, and the State and Territory Revenue Offices will review whether stamp duty and land tax requirements have been met.
2. Family Trusts and “Trust Splitting”
Where a trust owns a number of different assets – such as a business, a holiday home, and shares – there is often a desire to “split” the trust to allocate assets among children. Before doing so, all relevant Commonwealth and State revenue implications must be considered.
3. Pre-CGT Assets and Legacy Structures
If a family company holds assets acquired before 20 September 1985 (that are thus potentially exempt from CGT), careful structuring is needed to preserve tax-free status when ownership or control changes.
4. Unpaid Present Entitlements (UPEs) and Division 7A
UPEs arise where a trustee has allocated trust income to beneficiaries but not yet paid the income to the beneficiaries. If UPEs are not managed properly – particularly given the recent Federal Court decision in Cmmr of Taxation v Bendel (2025) – there may be deemed “unfranked” dividends under Division 7A of the Income Tax Assessment Act, triggering unexpected tax liabilities.
5. Superannuation Death Benefits
Superannuation entitlements are not automatically part of an estate and must be addressed in succession planning. Strategies to reduce tax on death benefits, and to prevent disputes about distributions, are increasingly important. The implications of proposed Division 296, which potentially will tax unrealised gains, also need to be considered.
6. Trust Deed Amendments
If changes are made to a Trust Deed – such as extending the vesting date or altering beneficiaries – care must be taken to avoid a CGT “resettlement”, which could result in a deemed disposal of all of the trust’s assets.
7. Trust Vesting and Termination
Many older trusts are approaching their vesting (termination) dates. Extending the life of a trust, without triggering CGT or stamp duty, requires specialist structuring and advice.
8. Selling or Transferring Family Businesses
Whether the intention is to sell a business or pass it to the next generation, a number of key tax questions arise, including: Can any CGT concessions, such as the CGT small business reliefs in Division 152, be accessed? And can the transaction be structured to preserve value and avoid triggering unnecessary tax?
9. Cross-Border Issues
Families increasingly have members living overseas or holding offshore assets. This raises important questions about tax residency, double taxation, and the treatment of foreign investments and inheritances under Australian law.
Don’t Wait Until 2:00am!
Tax and succession planning is no longer something to be “sorted out later”. The ATO has made it clear that wealth transfers are under active review – and families who fail to plan may face significant adverse financial and legal consequences.
At Finlaysons, we help individuals and families to structure their affairs in a way that reflects both their long-term wishes and the evolving legal and tax landscape.
Whether you are selling a business, restructuring a trust, or simply wanting to sleep more soundly knowing that your affairs are in order, Finlaysons can help you avoid the 2:00am problem!
This Alert is intended as general information only. It does not purport to be comprehensive advice or legal advice. Readers must seek professional advice before acting in relation to these matters.
Contact Finlaysons’ Tax and Succession Planning Team for advice on how to secure your legacy and manage tax risk in the era of the Great Wealth Transfer.
