What is a Fixed Unit Trust?

 

A Unit Trust is a trust in which trust assets are divided into a number of defined shares called "units". The beneficiaries subscribe for units and become entitled to trust assets in proportion to the number of units held (although noting, for CGT purposes, it is the unit itself that is the CGT asset not interest that the unitholder has in the underlying property in the unit trust). In a fixed unit trust, there is only one unit class that can be issued on establishment.

The unit trust structure is commonly used for business ventures between multiple unrelated parties. 

 

Generally, parties to a unit trust are as follows:

Trustee:

It is common practice for a "shelf company" to be set up specifically as the trustee of the trust. Unitholders appoint the Trustee, and the Trust Deed contains the Trustee’s powers. The Trustee legally owns the trust and may be held personally liable for debts incurred in their capacity as a trustee. Unitholders beneficially own the trust via the acquisition of units in the trust.

Beneficiary i.e. unitholders

As mentioned above, unitholders have fixed rights to the trust’s income and capital.

Trust Deed:

The Trust Deed outlines the Unit Trust’s purpose, the rights and obligations of the trustee and unitholders also identifies the parties involved. It outlines the relevant process involved when a unitholder, for example, wants to sell their units. 

 

 

Note: If you are not 100% comfortable in setting up a trust or you do not plan to engage your own solicitor then we recommend you add on legal review to your order. 

 

Disclaimer: You acknowledge and agree that our Services and Materials do not constitute or contain personal or general advice for the purpose of the Corporations Act 2001 (Cth) and that we, our employees and advisers do not offer any legal, accounting, tax or other professional advice or services in connection with the provision of our Services and any Materials.

 

Further Information

How to prepare an Issue of Units

How to prepare a Transfer of Units

Why aren't there different types of unit classes available on the NowInfinity webform when establishing a Fixed Unit Trust?

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