Legal claims can arise unexpectedly, putting your hard-earned wealth at risk. Protecting your assets is essential whether you're a business owner, investor, or property owner in Australia. Taking proactive steps now can prevent financial loss and safeguard your future.
This guide will outline practical asset protection strategies under Australian laws. You’ll learn how to use business structures, insurance policies, and legal exemptions to shield your assets from lawsuits and creditors.
Let’s Get Straight to the Point
If you're short on time, here’s a quick summary of how to protect your assets from legal claims:
- Use Business Entities – Register a trust, company, or limited partnership to separate personal and business assets.
- Get the Right Insurance – Home, auto, professional liability, and umbrella insurance policies provide extra protection.
- Superannuation Protection – Super funds are largely protected from creditors in bankruptcy.
- Homestead Exemptions – Some states, like Queensland, offer limited home equity protection.
- Title Your Assets Properly – "Tenancy by the entirety" (if married) can shield jointly owned property.
- Consider Trusts – Discretionary and irrevocable trusts can protect family wealth from creditors.
- Annuities and Life Insurance – Check your state’s laws on whether life insurance payouts are protected from claims.
- Act Early – Transferring assets after a legal claim arises may be deemed fraudulent conveyance.
1. Use Business Entities to Limit Liability
If you own a business, structuring it correctly can protect your assets from lawsuits. Common business entities in Australia include:
- Sole Traders – High risk, as personal and business liabilities are not separate.
- Partnerships – Each partner is personally liable for debts unless it's a limited partnership (LP).
- Companies (Pty Ltd) – The best option for asset protection, as liability is limited to company assets.
- Trusts – Provide strong protection when assets are held by a trustee for beneficiaries.
Why Companies Are Safer Than Sole Traders
A Pty Ltd (Proprietary Limited) company provides liability protection. If the business is sued, your assets (like your home and savings) are not at risk unless you have provided a personal guarantee.
Using a Trust for Extra Protection
A discretionary trust (family trust) is a powerful tool in Australia. The assets belong to the trust, not you personally—so they are harder for creditors to access.
2. Protect Your Assets with Insurance
If someone is injured on your property, they may sue you for damages. A comprehensive home and contents insurance policy can cover legal claims.
- Public Liability Insurance – Essential for business owners; covers injury or damage caused to customers or third parties.
- Professional Indemnity Insurance – Protects doctors, accountants, consultants, and real estate agents from professional negligence claims.
Umbrella Insurance for Extra Protection
Umbrella insurance adds additional liability coverage beyond your home, auto, or business policies.
3. Superannuation Protection Under Australian Law
Superannuation (super) is one of Australia's safest ways to protect wealth. It is protected from creditors under the Bankruptcy Act 1966 (Cth), but certain contributions may be challenged if made just before bankruptcy.
How Superannuation Protects Your Assets
- Creditors cannot access funds inside super, even in bankruptcy.
- Regular pension payments from super may be protected, depending on state laws.
- Withdrawn super funds lose their protection and can be claimed by creditors.
Risk of Fraudulent Super Contributions
Avoid transferring large sums into super when facing financial trouble, as courts may reverse these transactions if seen as an attempt to hide assets from creditors. Consistent contributions over time are safe, but sudden lump sums before bankruptcy may be challenged.
Benefits of a Self-Managed Super Fund (SMSF)
- Gives more control over investments, including property and shares.
- Maintains the same bankruptcy protection as standard super funds.
- Requires strict ATO compliance, so professional advice is recommended.
4. Titling Assets for Maximum Protection
Tenancy by the Entirety (If Married)
- Best for married couples, as the home is treated as one legal entity, shielding it from one spouse’s personal creditors.
- Only available in some Australian states—check local laws.
- Automatically transfers to the surviving spouse upon death, avoiding probate.
Joint Tenancy vs. Tenancy in Common
Joint Tenancy
- Equal ownership; survivor inherits full property if one owner dies.
- Less protection—if one owner is sued, their share is at risk.
Tenancy in Common
- Owners hold separate, divisible shares, making them more vulnerable to creditor claims.
- No automatic transfer upon death; the share goes to the owner’s estate.
5. Trusts: The Ultimate Wealth Protection Tool
Trusts are widely used in Australia for estate planning and asset protection.
Types of Trusts in Australia
Discretionary Trusts (Family Trusts)
- Most common for asset protection.
- Trustee controls distributions, making it harder for creditors to claim assets.
- Ideal for business owners and families wanting flexibility and tax benefits.
Unit Trusts
- Best for investments and joint ventures.
- Beneficiaries own fixed units so that creditors may claim their share.
- Used in property syndicates and business partnerships.
5.1.3 Irrevocable Trusts
- Once set up, assets cannot be removed or altered.
- Offers strong legal protection but lacks flexibility.
- Suitable for long-term wealth preservation and inheritance planning.
How Trusts Protect Your Assets from Lawsuits
- Assets belong to the trust, not you, making them harder for creditors to seize.
- Discretionary trusts prevent fixed claims, reducing legal risk.
- Proper structuring can exclude trust assets from divorce settlements.
Courts may challenge trusts if set up solely to avoid creditors. Establish trusts early to ensure legal protection.
Transfer Assets Before Legal Trouble Arises
Fraudulent conveyance (or voidable transactions) occurs when a person moves assets to avoid legal obligations. Under Australian law, particularly the Bankruptcy Act 1966 (Cth) and Corporations Act 2001 (Cth), transactions that unfairly deprive creditors of access to assets can be challenged and reversed.
Examples of fraudulent conveyance include:
- Gifting property or money to family members right before declaring bankruptcy.
- Selling assets for less than their market value to a relative or friend.
- Moving large sums into superannuation shortly before financial trouble arises.
- Shifting assets into a trust or company after a lawsuit has been filed.
If a court finds that you transferred assets dishonestly, it can reverse the transaction and hold you personally liable for outstanding debts.
When Should You Transfer Assets?
The key to legally protecting your wealth is acting early, well before any financial or legal issues arise. Courts recognise that legitimate financial planning is different from fraudulent activity. Here’s how you can transfer assets legally:
- Use Trusts for Long-Term Planning – Setting up a discretionary trust years in advance can ensure your assets are not directly in your name, reducing risk.
- Contribute to Superannuation Over Time – Since superannuation is protected from creditors, making regular contributions (instead of lump-sum transfers before bankruptcy) is a safe strategy.
- Gift Assets Gradually – If you plan to gift assets to family members, do so well before any financial difficulties arise, ensuring the transfer does not appear suspicious.
- Sell Assets at Fair Market Value – If you want to restructure ownership, avoid underpricing transactions, as courts may see this as an attempt to evade creditors.
Implementing asset protection strategies well in advance reduces the risk of legal claims and financial loss. Always consult a qualified asset protection lawyer before making major transfers to ensure compliance with current Australian laws.
Conclusion
Protecting your assets is not about avoiding responsibilities but planning wisely to prevent financial loss. Whether you're a homeowner, investor, or business owner, taking action before a claim arises is the best way to ensure your wealth remains safe.
Your next steps:
- Consult an asset protection lawyer to tailor strategies for your situation.
- Review your insurance policies to fill coverage gaps.
- Check your business structure and trust options.
- Ensure superannuation and life insurance are protected under current laws.
Making these changes now reduces your risk and secures your future. Start protecting your assets today—before you need to.
The cost depends on your strategy. Setting up a trust or company can range from $1,000 to $5,000+, while insurance policies vary based on coverage. Consulting an asset protection lawyer may cost between $300 and $800 per hour, but it ensures your plan is legally sound.
Registering a Pty Ltd company usually takes one to two days, while setting up a discretionary trust may take one to two weeks. More complex structures, like irrevocable trusts, require legal consultation and can take several weeks to finalise.
No. Transferring assets after legal trouble arises can be considered fraudulent conveyance, which means a court can reverse the transaction. The best approach is setting up protective structures before potential legal claims arise.
Yes, superannuation is generally protected from creditors in bankruptcy. However, large lump-sum contributions made right before financial trouble could be questioned. Keeping wealth in super funds is Australia's safest long-term asset protection strategy.
If you're married, owning property as tenants by the entirety (where available) can protect it from creditors pursuing one spouse. Alternatively, placing your home in a trust or having a low-risk spouse as the legal owner can add extra protection. Always check state-specific laws before making changes.
