Half a century ago, Sir Garfield Barwick famously articulated the idea that taxpayers are entitled to arrange their affairs within the law to their best advantage. Almost 50 years earlier, he was declared bankrupt over a guarantee he had given to his younger brother.
The real lesson for today’s directors is not a licence for aggressive schemes; it’s a reminder that how you arrange your affairs is a choice, and failing to choose is still a choice. Most Australian founders and family business owners I meet still have everything – trading business, IP, guarantees, even the family home equity sitting in one undifferentiated bucket. When conditions are good, that feels efficient. When something goes wrong, it’s catastrophic.
A modern Asset Protection and Risk Management (APRM) strategy starts by drawing a bright line between active and passive assets, and then maintaining that line over time.
Active vs passive: engine vs vault
In an APRM framework, active assets are the engine. They are high-touch, performance-sensitive and constantly exposed to creditors and regulators. Think operating companies, plant and equipment, inventory, debtor book, trading IP, customer and supplier contracts, and operating real property. Their value is tied to day-to-day trading performance, and they interact with customers, staff, landlords, the ATO, and regulators regularly.
Passive assets are the vault – ring-fenced value and contractual income that you want insulated from trading shocks: the family home, core savings, investment property, long-term portfolios, clean IP and shareholder loans. These should be held in non-trading entities and accessed only through documented leases, licences, and loan agreements on proper commercial terms.
A good APRM programme frames this separation very simply: segregate “risk” assets from “safe” assets, run at-risk activities through corporate or trust structures, and keep family wealth outside those risk entities.
Done correctly, that structural discipline unlocks four major benefits.
Containing trading risk
If all your value sits in the trading entity, then every contract dispute, WHS incident or regulatory issue is an existential threat. When the engine blows, it can take the vault with it.
By contrast, when active and passive assets are clearly segregated, a bad trading year or a specific incident is more likely to be survivable. The operating platform may need to be refinanced, restructured or even sold, but long-term family wealth and core strategic assets are not automatically on the line. That’s not about “hiding” assets; it’s about aligning where risk genuinely arises with where risk is actually borne.Stronger financing and deal options
Lenders and investors view clean, ring-fenced income streams very differently from volatile trading earnings. If your passive asset vehicle has properly documented loans, leases, and security (PPSR registrations, mortgages, priority deeds), financiers can underwrite those cash flows with greater confidence.
That can mean better pricing, more flexible terms and more strategic options: refinancing the passive asset vehicle, selling down a stake in the “vault”, or using it as a stabilising anchor during a broader recapitalisation.Real options in stress and distress
In a turnaround or formal restructuring, a well-documented APRM structure provides boards with real levers to pull. You can:
- Run a sale or recapitalisation of the operating entities;
- Preserve or refinance the passive asset pool separately;
- Avoid everything collapsing into one insolvent heap simply because all value was parked in the trading company.
For family businesses, that can be the difference between a painful but controlled reset and a complete wipe-out for the next generation.
Better governance evidence for directors
From a directors’ duties perspective, an APRM programme is powerful evidence that the board has turned its mind to risk. Annual risk identification checklists, solvency resolutions, funding maps, guarantee registers, and PPSR audits all demonstrate active governance, not passive hope.
That posture matters when regulators, liquidators, or disgruntled stakeholders later reconstruct what you knew and when.
APRM is not a tax minimisation strategy
This is the crucial point. Asset protection and risk management are not tax schemes, and they do not sit comfortably alongside aggressive tax minimisation.
An APRM programme is very clear about timing and intent. Structures must be put in place as early as possible, while the company is clearly solvent, with real value flows and evidence that the purpose is commercial, not to defeat creditors. Transfers at undervalue, late-stage security, and “eve-of-litigation” restructures are precisely the kinds of steps that bankruptcy and corporate law allow courts to unwind.
If the dominant narrative around your structure is “how do we push the envelope on tax?”, it becomes harder to prove that your primary purpose was risk management and balance-sheet resilience. You might achieve a short-term tax outcome, but you may also undermine the credibility of your APRM position when it matters most.
In practice, that means accepting that the best asset protection answer is not always the most tax-efficient answer, and vice versa. The goal is sustainable, defensible arrangements that a court will recognise as commercial and genuine, not clever paperwork that collapses under scrutiny.
If you do nothing, you have a strategy by default, everything in one bucket, rising and falling with trading fortunes. If you act early and deliberately, you can design a structure that reflects where risk truly sits in your business and in your family life.
For founders, directors and family offices, the call to action is straightforward:
- Map your world into active vs passive asset classes;
- Ring-fence the vault from the engine with arm’s-length leases, licences and loans;
- Test solvency, document purpose, and keep the governance record tidy every year.
APRM won’t eliminate risk or guarantee success. But done early, deliberately and within the rules, it dramatically increases the chances that one bad cycle, one dispute or one regulatory event doesn’t take your life’s work, and your family’s future down with it.
