Anja Pich is a commercial lawyer and the Managing Lawyer at Lawpath. She practises across all areas of commercial law and advises businesses of every size, from first-time founders to established companies, on their legal, regulatory and commercial needs.
An irrevocable trust is a trust that the person who set it up can’t cancel, take back or rewrite on a whim once the deed is signed and assets go in. In Australia, almost every trust already works this way by default, so the real question is who controls it after it’s set up and what the deed lets them change.
If you’ve landed here after reading a US article, take a breath. Much of what you’ve read about irrevocable trusts (estate tax savings, “living trusts”, grantor rules) simply doesn’t apply here. Here’s how they actually work in Australia, and what to sort out before you sign anything.
- Most Australian trusts are irrevocable already. A standard discretionary (family) trust deed gives the settlor no power to cancel it or take the assets back.
- Australia has no estate or inheritance tax. The big US selling point of an irrevocable trust, keeping assets out of a “taxable estate”, doesn’t exist here.
- Control sits with the appointor, not the settlor. Whoever can hire and fire the trustee effectively runs the trust, so pick that person carefully.
- Moving existing assets in costs money. Transferring land or shares into a trust can trigger transfer duty and capital gains tax, separate from any duty on the deed.
- “Irrevocable” doesn’t mean untouchable. Bankruptcy clawback rules and the Family Court can still reach trust assets in the wrong circumstances.
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What is an irrevocable trust in Australia?
Start with the word itself. “Irrevocable” means it can’t be revoked, or called back. Applied to a trust, it means the settlor (the person who creates the trust by giving the trustee a small starting sum) has no power to cancel the arrangement or reclaim the property later.
Here’s the bit most guides skip. Australian lawyers rarely use “irrevocable trust” as a label at all. Our trust deeds are drafted on the assumption that the settlor walks away once the trust is settled. So a discretionary trust deed, a unit trust or a testamentary trust is, in practice, an irrevocable trust.
The term comes from the United States, where people choose between revocable and irrevocable trusts as a core estate-planning decision. That’s why searches like “irrevocable trust Australia” keep climbing. People read American advice, then try to find the local version.
How does an irrevocable trust work?
Every Australian trust runs off its trust deed. The deed names the parties, sets the trustee’s powers, says who can benefit and spells out what can be changed later and by whom. If the deed doesn’t give someone a power, they don’t have it.
There are four key parties to a trust, and getting their roles straight clears up most of the confusion:
- Settlor: creates the trust with a nominal amount (often $10 or $20), then steps away. In practice this is frequently the lawyer or accountant, and the settlor should never be a beneficiary. More on why below.
- Trustee: the legal owner of the trust assets. An individual or a company. The trustee signs contracts, holds bank accounts and decides distributions, all within the deed’s rules.
- Appointor (sometimes called the principal or guardian): holds the power to remove and replace the trustee. This is the real seat of control.
- Beneficiaries: the people or entities who can receive income or capital. In a discretionary trust they have no fixed share, only a right to be considered.
So when someone says “I can’t control an irrevocable trust”, that’s only half true. The settlor can’t. But a parent who is both director of the trustee company and the appointor controls almost everything, day to day and long term. Being irrevocable limits the settlor. It doesn’t stop the people running the trust from running it.
Where this goes wrong is succession. Founders spend hours picking beneficiaries and minutes picking the appointor. Then the appointor dies or loses capacity, the deed has no clear successor, and the family ends up in court to work out who can replace the trustee.
Revocable vs irrevocable trust: what’s the difference in Australia?
A revocable trust is one the settlor can cancel or redirect back to themselves. Legally you can create one here. Tax-wise, it’s a trap.
Section 102 of the Income Tax Assessment Act 1936 targets two situations: where the settlor keeps a power to revoke or alter the trust so the income or property comes back to them, and where trust income goes to the settlor’s own children under 18. In either case, the ATO can tax the trustee on that income as if it were the settlor’s own. Every tax benefit of the trust disappears.
That’s why Australian deeds are drafted to be irrevocable, and why your accountant insists the settlor can’t be you. Here’s how the two compare in practice:
| Feature | Irrevocable trust (the Australian norm) | Revocable trust |
|---|---|---|
| Can the settlor cancel it? | No | Yes |
| Can the settlor take assets back? | No | Yes |
| Tax treatment | Income taxed in beneficiaries’ hands when they’re presently entitled | Section 102 can tax income as the settlor’s own |
| Asset protection | Stronger, subject to clawback and family law | Weak, because the settlor can reach the assets |
| Who controls it after setup? | Trustee and appointor, under the deed | Settlor |
| How common here? | Standard for family, unit and testamentary trusts | Rare, and usually a drafting mistake |
Is there an irrevocable living trust in Australia?
Not as a separate product. A “living trust” is American shorthand for a trust set up while you’re alive (lawyers call it an inter vivos trust), often used in the US to sidestep probate. In Australia, any family or unit trust you set up during your lifetime is already a living trust in that sense.
The probate angle doesn’t translate neatly either. Assets held by a trustee aren’t part of your personal estate when you die, so they don’t pass under your will. That’s real. But control of the trust does pass, and it passes under the deed’s appointor succession clause. If you want a trust to replace parts of your will, that clause matters more than anything else in the deed.
Terms like “grantor trust” and “non-grantor irrevocable trust” are US tax categories. They have no meaning under Australian tax law. If an overseas adviser has used them with you, get local advice before you replicate their structure here.
And the estate tax point? Australia abolished federal estate duty in 1979. There’s no inheritance tax to plan around, so any article promising an irrevocable trust will “minimise estate taxes” here is describing a problem you don’t have.
When does an irrevocable trust make sense, and when should you rethink it?
Most founders don’t need a special “irrevocable” structure. They need the right kind of ordinary Australian trust, set up properly. Here’s how to think about which one.
A family trust for a business (the “irrevocable business trust”)
If you’re running a business or holding shares in a company, a discretionary trust with a corporate trustee is the most common setup we see. It gives you flexibility over who gets income each year and keeps business assets out of your personal name. Our guide on how to set up a family trust walks through the basics.
A testamentary trust for your estate
A testamentary trust is created by your will and only comes into existence when you die. (It isn’t the same thing as a will, which the old version of this article got wrong.) You can change your will as often as you like while you’re alive. The trust becomes fixed on death.
One genuine tax advantage here: income a testamentary trust earns from assets of the deceased estate can be distributed to children under 18 and taxed at adult rates. Through an ordinary family trust, a minor’s unearned income above $416 a year attracts penalty rates.
A locked-down protective trust
Some families want a trust that nobody can easily redirect. Think of a trust for a child with a disability or a beneficiary with a gambling problem. Here the deed is drafted tightly: a closed beneficiary class, an independent appointor and narrow variation powers. This is the closest Australian equivalent to the US-style irrevocable trust.
When to rethink it
Hold off if you’ll need the money back, if you’re already in a dispute with a creditor, or if the only reason is “my accountant said so”. That last one comes up more than you’d expect. A trust that holds nothing and distributes nothing is just an extra tax return each year.
How to set up an irrevocable trust in Australia
Setting one up is quicker than most people fear. A standard family trust can be established in days, and the steps are the same whatever you call it:
- Write down the job you want the trust to do. Hold a business? Protect assets from future claims? Provide for kids after you’re gone? The answer shapes every clause.
- Choose the trustee. A company trustee costs more up front (ASIC registration plus annual review fees) but keeps trust liabilities separate from you personally and survives a change of directors without retitling assets.
- Pick the appointor and their successor. Name a backup, and say what happens if the appointor dies or loses capacity.
- Get the deed drafted. Check the beneficiary class, the variation power, the vesting date and the governing state law.
- Settle and sign it properly. The settlor pays the settled sum to the trustee, and everyone signs as a deed. Some states charge duty on the deed itself, so get it stamped where required.
- Register the trust. Apply for a tax file number, an ABN if the trust will carry on an enterprise, and GST registration if turnover will pass the threshold. Open a bank account in the trustee’s name “as trustee for” the trust.
- Fund it carefully. Before moving existing assets in, get duty and capital gains tax advice (see the next section). Loans to the trust should be documented so they aren’t treated as gifts.
- Make distribution resolutions on time every year. Most deeds require the trustee to resolve how income is distributed by 30 June. Miss it and the default beneficiaries (or the trustee, at the top tax rate) cop the income.
Keep a simple trust binder from day one: the signed and stamped deed, the trustee’s consent, ASIC records for a company trustee, loan agreements and every annual distribution minute. When something needs changing in ten years, this is the first thing a lawyer will ask for.
What does it cost to move assets into an irrevocable trust?
Most founders assume the only cost is setting up and stamping the deed. Then they find out that moving the investment property in is a whole separate transaction.
Transferring land you already own to a trustee is a change of ownership. In most states that attracts transfer duty, calculated on market value, just like a sale. Shares in a private company can attract duty too, especially where the company holds land.
Capital gains tax follows the same logic. Moving an asset into an existing trust is a CGT event, so you’re taxed as if you sold it at market value, even though no cash changed hands. If the asset has grown in value, that bill can be large.
A few other costs catch people out:
- Land tax: some states, Victoria in particular, apply lower thresholds or extra charges to land held in trusts.
- Main residence exemption: your family home held by a trust loses the CGT main residence exemption. Most advisers will tell you to keep it out.
- Centrelink: giving assets away to a trust counts as gifting. Anything above $10,000 in a financial year (or $30,000 over five years) is still counted in your assets test for five years.
The cheapest fix is timing. Buying an asset in the trust’s name from the start costs one round of duty. Buying it personally and moving it later costs two.
Who pays tax on an irrevocable trust?
Here’s another place the old article was wrong. In most cases the trustee doesn’t pay tax on the trust’s income. Beneficiaries who are presently entitled to a share of the income pay tax on it at their own rates.
The trustee only pays when no beneficiary is entitled (for example, a missed 30 June resolution), which is taxed at the top marginal rate. It also pays on behalf of beneficiaries who can’t be taxed in their own right, like minors.
One more thing to know in 2026: the ATO is actively reviewing distributions where one family member is named as the beneficiary but someone else gets the cash. Its ruling TR 2022/4 explains how section 100A applies. If an adult child “receives” a distribution that quietly flows back to mum and dad, that’s the pattern the ATO is looking for. For the detail, read our guide on tax on trust distributions.
Can you change or end an irrevocable trust?
Yes, more often than the name suggests. “Irrevocable” stops the settlor pulling the plug. It doesn’t freeze the deed forever. There are four routes.
1. The deed’s own variation power. Most modern deeds let the trustee, with the appointor’s consent, amend the deed. You record the change with a deed of variation. The catch: you can only change what the power allows, and a change that’s too fundamental risks being treated as a new trust (a “resettlement”), with fresh duty and CGT consequences.
2. Replacing the trustee. The appointor can remove the trustee and appoint a new one, documented with a change of trustee deed. Remember to retitle assets into the new trustee’s name afterwards. Signing the deed alone doesn’t move legal title to land or shares.
3. All beneficiaries agreeing. Under a principle from an old English case, Saunders v Vautier, adult beneficiaries with full capacity who between them are entitled to everything can end a fixed trust and take the property. For a discretionary trust this rarely works in practice, because the beneficiary class includes people not yet born.
4. The court. State trustee legislation gives courts limited power to approve changes, mostly around administration and investment. This is slow and expensive, so treat it as a last resort.
Every trust has an end date
No Australian trust lasts forever (South Australia aside, where the rule against perpetuities has been abolished). Every deed sets a vesting date, when the assets must be distributed. In most states the maximum is 80 years. Queensland lifted its limit to 125 years for trusts governed by Queensland law from 1 August 2025.
Older family trusts set up in the 1970s and 1980s are now approaching their vesting dates. If yours is one of them, look at it now, not in the final year, because vesting can trigger CGT across the whole asset pool.
Does an irrevocable trust protect your assets?
It can, and that’s a big reason people set one up. If you don’t own the assets, your personal creditors have trouble reaching them. But the protection has limits, and some of the advice online overstates it badly.
Creditors and bankruptcy
The Bankruptcy Act 1966 lets a bankruptcy trustee claw back assets you gave away. Transfers for less than market value within five years before bankruptcy can be undone under section 120. Transfers made to defeat creditors can be undone under section 121, with no time limit at all.
In plain terms: a trust set up years before any trouble, while you were solvent, protects well. A trust set up after the letter of demand arrives protects very little and can create new problems.
Divorce and separation
Some articles say assets in an irrevocable trust are out of reach in a divorce. That’s misleading. In Kennon v Spry (2008), the High Court held that assets of a family trust could be counted as property of the marriage where one spouse effectively controlled the trust.
If you’re the appointor, the trustee’s director and a beneficiary, the Family Court will look straight through the structure. A binding financial agreement does more to protect pre-relationship assets than a trust on its own.
What we see in Lawpath consultations about trusts
Lawpath lawyers handle trust setups, variations and trustee changes every week. A few patterns come up again and again.
The surprise duty bill. A common enquiry goes like this: a couple wants a family trust and plans to move land they already own into it. They’ve budgeted for the deed and maybe a small amount of duty on it. What they haven’t budgeted for is transfer duty and CGT on moving the land itself. Our lawyers raise this on the first call because it changes whether the move makes sense at all.
The trust set up too late. A consistent pattern is people asking for a trust after a creditor has already started chasing them, sometimes with caveats on property or bankruptcy proceedings underway. Lawyers flag this one before anything is quoted. Moving assets into a trust at that point invites clawback and can make a bad situation worse.
“My accountant told me to.” More often than expected, a client knows they want a trust but can’t say who the appointor should be, whether they need a company trustee, or what the trust will actually hold. A short advice consult first saves money, because the structure gets designed around a real purpose.
Variations start with the old deed. When someone wants to rename a trust, add a beneficiary or extend the vesting date, the first job is reading the existing deed’s amendment clause. Some older deeds don’t allow the change the client wants, and no amount of drafting fixes that.
Settlor confusion. Founders often list themselves as settlor because it feels like “their” trust. Lawyers routinely step in as an independent settlor instead, which keeps the trust clear of section 102.
Irrevocable trust FAQs
Does Australia have irrevocable trusts?
Yes, though we rarely call them that. Standard Australian family, unit and testamentary trusts are irrevocable by design, because the settlor can’t cancel the trust or take the assets back. A revocable trust is unusual here and can be taxed as the settlor’s own income.
Can an irrevocable trust be changed?
Often, yes. If the deed has a variation power, the trustee (usually with the appointor’s consent) can amend it using a deed of variation. The appointor can also replace the trustee. Changes outside the deed’s powers need every beneficiary’s agreement or a court order.
Who pays tax on an irrevocable trust in Australia?
Mostly the beneficiaries. Each beneficiary presently entitled to trust income pays tax on their share at their own rate. The trustee pays at the top marginal rate on income nobody is entitled to, and on behalf of minors and others under a legal disability.
Is a family trust revocable or irrevocable?
Irrevocable. A standard family (discretionary) trust gives the settlor no power to revoke it. Control sits with the trustee and the appointor, and the deed can still allow amendments within limits.
Can I be a beneficiary of a trust I set up?
Not as the settlor. If the settlor can benefit, section 102 of the Income Tax Assessment Act 1936 can tax the income as theirs. That’s why a lawyer or accountant usually acts as settlor. You can still be the trustee, appointor and a beneficiary.
Does an irrevocable trust avoid inheritance tax in Australia?
There’s nothing to avoid. Australia has had no federal estate or inheritance tax since 1979. Assets in a trust sit outside your personal estate, which can help with control and family provision claims, but CGT and duty still apply when assets move.
Can an irrevocable trust protect assets in a divorce?
Only partly. Since Kennon v Spry, the Family Court can treat trust assets as property of the relationship where a spouse controls the trust. A binding financial agreement is the stronger tool for protecting assets you bring into a relationship.
How long can an irrevocable trust last?
Up to 80 years in most states and territories. Queensland allows 125 years for trusts governed by Queensland law from 1 August 2025, and South Australia has no fixed limit. The exact end date is set by the vesting clause in your deed.
What is an irrevocable living trust?
It’s a US term for a trust set up during your lifetime that you can’t cancel. Australian law doesn’t have a separate category for it. Any family or unit trust you create while alive does the same job, with control passing under the deed rather than your will.
Ready to set up your trust?
If this all feels like a lot, you’re not behind. Most people only start thinking about trusts when a business takes off, a property purchase is coming up or a child is born. That’s exactly the right time. The decisions that matter most fit on one page: what the trust is for, who the trustee is, and who holds the appointor role after you.
Get those right and the rest is paperwork. If your situation is more complex, such as moving existing assets in or planning for a blended family, an estate planning lawyer can design the structure with you for a fixed fee.
Start your Discretionary Trust Deed today and have your trust ready to settle in minutes.
