What is a Unit Trust?

Unveiling the Structure and Advantages in Australian Business

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What is a Unit Trust?


In Australia, a Unit Trust is a distinctive business structure where trust assets are divided into units, owned by unit holders. The governing document, the unit trust deed, outlines rules and rights associated with trust assets. Unlike a discretionary trust, a unit trust offers fixed interests to unit holders in both income and capital.


Establishment and Key Players


Setting up a Unit Trust involves key entities such as a trustee, typically a shelf company established solely for this purpose, unitholders who have fixed rights to the trust’s income and capital, and a comprehensive trust deed. The trustee, appointed by unitholders, plays a pivotal role in managing the trust’s affairs. Using a corporate trustee, as opposed to an individual, ensures continuity, as the trustee company’s existence is perpetual.


Units and Trust Deed


A unit represents a proprietary interest in the trust’s income and capital, providing unitholders with specific entitlements. The trust deed outlines the purpose, powers, and process of unit transactions, ensuring a transparent framework for all parties involved.


Distinguishing Unit Trusts from Companies


While units might seem similar to company shares, they differ significantly. A unit grants a proprietary interest in the trust’s assets, unlike a share.


Tax Advantages


One of the key attractions of a Unit Trust is its income tax benefits. Unlike a company, a unit trust is not a separate taxable entity. Income and capital are distributed pre-tax, which can offer a more favorable tax structure (depending on one’s circumstances). Additionally, trust property is protected from the trustee’s creditors in case of insolvency.




In conclusion, a Unit Trust is a versatile business structure with distinct advantages. Its tax benefits can make it an attractive option for businesses seeking flexibility and tax efficiency.

For more information, please contact Warlows Legal today using the contact information below.

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