Unit trust deeds: a quick guide
Unit trusts split ownership into defined proportions. Here's when they fit and how the deed works.
A unit trust splits beneficial ownership of trust assets into defined units, similar to shares in a company. Each unit holder is entitled to a fixed proportion of income and capital. Unit trusts are common for joint ventures, property syndicates, and any structure where multiple unrelated parties contribute capital.
How units work
The trustee issues units to investors. Each unit represents a defined proportion of the trust’s value. Income flows pro-rata to unit holders. On wind-up, capital flows pro-rata. Transfers of units typically work like share transfers.
When to use a unit trust
Joint property investments where investors want defined proportions. Family group structures where parents want to bring children in at a specific percentage. Investment vehicles where multiple unrelated parties contribute. Some superannuation strategies.
Tax treatment
Unit trusts are generally treated as flow-through entities for income tax (income flows to unit holders). CGT applies on disposal of units. GST registration may be required depending on activities. Stamp duty rules apply on unit transfers in some states.
Discretionary vs unit trust deeds
The deed structures are very different. Discretionary deeds focus on the trustee’s powers and beneficiary class. Unit trust deeds focus on the unit register, redemption mechanics, and unit holder rights. Hybrid trusts combine both but have lost favour with the ATO.
Summary
Unit trusts split ownership into defined proportions. Here’s when they fit and how the deed works.
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Disclaimer: This article is general information only and does not constitute legal advice. Estate planning is deeply personal - every family's circumstances are different. For advice specific to your situation, please contact Rosewood Succession Solicitors.