Family Limited Partnerships (FLP) in Australia: 2025 Wealth Structuring Guide

Australian families are increasingly searching for smarter ways to protect their wealth, minimise tax, and ensure a smooth transition of assets across generations. In 2025, Family Limited Partnerships (FLPs) are emerging as a flexible solution for families with significant assets or businesses. But what exactly is an FLP, and how can it work within the Australian legal and tax landscape?

What Is a Family Limited Partnership?

A Family Limited Partnership (FLP) is a business structure where family members pool assets—such as property, shares, or a family business—into a partnership. In this arrangement, there are two types of partners:

• General Partners: Typically the parents or senior generation, who manage the partnership and make day-to-day decisions.

• Limited Partners: Usually the children or younger family members, who have ownership interests but limited control over operations.

FLPs are designed to help families retain control over their assets, ease the succession process, and take advantage of potential tax efficiencies. While the FLP structure is more established in the US, Australia’s partnership and trust laws allow for similar arrangements, with increasing interest in 2025 due to heightened intergenerational wealth transfer and recent legislative updates.

How FLPs Work in Australia in 2025

Unlike traditional partnerships, an FLP is typically used for holding investments rather than running a trading business. Here’s how the structure operates in the Australian context:

• Asset Protection: By centralising ownership under the FLP, assets can be shielded from individual family member liabilities or claims (such as divorce or bankruptcy).

• Succession Planning: General partners can gradually transfer limited partnership interests to children, allowing a phased approach to succession while maintaining control during the parents’ lifetime.

• Tax Planning: Income generated by the partnership can be distributed among family members, potentially lowering the family’s overall tax liability. However, the ATO’s 2022 and 2024 anti-avoidance measures mean FLP arrangements must have genuine commercial purpose and be carefully structured to avoid Part IVA issues.

In 2025, several states have clarified the stamp duty treatment of FLPs, particularly for primary production land and family farms, making it easier to transfer assets into and out of FLPs without prohibitive tax consequences.

Key Benefits and Considerations

Benefits:

• Control Retention: Senior family members can keep control over key decisions, while younger members gain a financial stake.

• Flexibility: FLPs can own a range of assets—property, shares, business interests—and distributions can be tailored to family needs.

• Estate Planning Efficiency: Passing on partnership interests is generally simpler and more private than transferring individual assets through a will.

• Asset Protection: Consolidating assets in an FLP can shield them from individual lawsuits or family disputes.

Considerations:

• Complexity: Setting up and running an FLP involves legal, tax, and compliance costs. Families should ensure the structure suits their circumstances and is regularly reviewed.

• Tax Scrutiny: The ATO continues to monitor partnership structures for tax avoidance, particularly after 2024’s updates to family trust distribution rules. All arrangements must have commercial substance.

• Inter-family Disputes: Clear partnership agreements are critical to manage expectations and avoid future conflict among family members.

Real-World Examples and 2025 Policy Updates

Case Study: The Nguyen family, owners of a commercial property portfolio in Sydney, transferred their holdings into an FLP in 2024. The parents remained general partners, while their three adult children became limited partners. This structure allowed the family to:

• Distribute rental income tax-effectively among family members.

• Plan for succession without triggering capital gains tax or stamp duty, thanks to NSW’s updated FLP concessions for family businesses.

• Keep decision-making centralised with the parents until all children were ready to participate fully.

2025 Updates: Recent changes in Queensland and Victoria have clarified the application of landholder duty and broadened the types of family enterprises eligible for FLP concessions. The ATO’s 2025 guidance also emphasises the need for genuine commercial arrangements, not just tax minimisation. Families using FLPs are now advised to document business purposes, investment strategies, and active management to withstand scrutiny.

Is an FLP Right for Your Family?

Family Limited Partnerships are a powerful tool for Australian families looking to manage intergenerational wealth, protect key assets, and plan for the future. However, they require careful planning and ongoing management. In 2025, with new tax and duty rules, FLPs are more accessible and flexible than ever—but only when set up with clear commercial intent and robust legal documentation.