Revocable Trusts in Australia: 2025 Guide & Policy Updates

As Australians increasingly look for smarter ways to manage, protect, and pass on their wealth, revocable trusts are cropping up in more estate planning conversations. While traditionally more common in the United States, interest in revocable trusts is rising down under, especially as 2025 ushers in new regulatory clarity and financial planning priorities.

What Is a Revocable Trust and How Does It Work?

A revocable trust—sometimes called a living trust—is a legal structure where you (the grantor) transfer assets into a trust that you can change or dissolve at any time during your lifetime. You retain control as the trustee, but designate beneficiaries who will receive the assets upon your death. Unlike a will, a revocable trust can help bypass probate, offer privacy, and provide flexibility if your circumstances change.

• Flexibility: You can amend, add or remove assets, or even revoke the trust entirely.
• Control: You act as the trustee, managing assets as you wish while alive.
• Probate avoidance: Assets in the trust typically skip the court process, expediting inheritance for your beneficiaries.

However, a revocable trust does not shield assets from creditors or offer the same tax benefits as some irrevocable structures.

2025 Policy Updates and the Australian Context

While revocable trusts are more established in the US, Australia’s legal and tax framework has unique nuances. In 2025, the Australian Taxation Office (ATO) clarified guidance on the tax treatment of trusts, including revocable (and hybrid) trust structures, emphasising transparency and record-keeping obligations. Key points include:

• Taxation: Income generated by the trust is usually taxed at the beneficiary’s marginal rate, not at the trust level. However, the ATO now requires more robust annual reporting and beneficiary disclosure.
• Asset protection: Unlike discretionary trusts, revocable trusts do not provide significant protection from creditors, especially since you retain control and can dissolve the trust at any time.
• Centrelink considerations: Centrelink treats assets in a revocable trust as your own for means testing, so don’t expect to sidestep pension or benefit rules.

These updates mean Australians considering revocable trusts should be clear on their goals: privacy and probate avoidance, rather than tax minimisation or asset protection.

When Does a Revocable Trust Make Sense?

Revocable trusts aren’t for everyone, but they can shine in certain scenarios:

• Complex family arrangements: If you have blended families or wish to stagger inheritances, a trust allows for detailed instructions beyond a simple will.
• Expedited asset transfer: Real estate or investments held in a trust can transfer to beneficiaries faster than assets tied up in probate courts.
• Privacy: Unlike wills, trusts generally aren’t part of the public record.

Consider a case study: Jane, a Sydney retiree, set up a revocable trust in 2024 to hold her investment property and managed fund portfolio. In 2025, when her circumstances changed, she easily updated the trust’s terms, ensuring her grandchildren would receive their share in stages, not all at once. Upon her passing, her assets bypassed probate, reducing delays and family friction.

Still, for many Australians, a traditional will or a discretionary family trust may be more suitable, especially if asset protection or tax planning is the top priority.

Revocable Trusts vs. Other Estate Planning Tools

With so many options, here’s how revocable trusts stack up:

• Wills: Simpler and cost-effective for straightforward estates, but subject to probate and public scrutiny.
• Discretionary trusts: Offer greater asset protection and tax planning opportunities but less flexibility and can’t be revoked at will.
• Irrevocable trusts: Provide tax and asset protection benefits but require relinquishing control permanently.

For families valuing flexibility, privacy, and quick asset transfer, a revocable trust can be a savvy addition to the estate planning toolkit—especially as 2025’s compliance landscape becomes more defined.