What is a Unit Trust?

Unit trusts are a type of trust that usually entitles the unitholders to a fixed interest to income or capital. Unit holders may have a proprietary interest in the assets or income of the trust. The beneficiaries of the trust may be entitled to the trust’s income proportional to the number of units that individual or entity holds. Some reasons to establish a unit trust may include:

• Fixed Interest – Unit holders have a fixed interest in income or capital. Generally, the Trustee of a fixed unit trust must distribute all income for the financial year to the unitholders.
• Tax Benefits - A unit trust is generally not taxed, but rather the unit holders are taxed on their share of the income. Unit trusts may also benefit from a capital gains tax concession – if applicable, the trust may be entitled to a 50% discount on the disposal of assets. In addition, there are also some tax deductions available for businesses that are run using a trust.
• Succession Planning – A unit trust can operate for as long as is specified in the trust deed, up to 80 years. This enables long-term planning for the welfare of the beneficiaries. In addition, raising capital to expand your business is relatively easy as new units can be issued or sold.

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