Types of Trusts
New SMSF
Features of the various Trusts
There are many types of trusts and at times tax advisors and trustees are faced with a situation where it is difficult to decide which structure will be best for the transaction. Below we have summarized the features of the various trusts that can assist you to decide a suitable structure.
| Features of our Trust Deeds | Discretionary Trust | Unit Trust | Fixed Unit Trust |
|---|---|---|---|
| Trustee has discretion to distribute profits | √ | x | x |
| Trustee has discretion to distribute capital | √ | x | x |
| Entitlement of Unit Holder (beneficiary) to income is fixed | x | √ | √ |
| Entitlement of Unit Holder (beneficiary) to capital is fixed | x | √ | √ |
| Unit holder (beneficiary) can force Trustee to dissolve the trust | x | x | √ |
| Trust is entitled to avail NSW Land Tax threshold | x | x | √ |
| Unit Holder can force the trustee to call a meeting with 2/3rd unit holding | x | x | √ |
| Trustee can carry forward Income after paying tax | √ | √ | x |
| Trustee can carry forward loss | √ | √ | √ |
| Trustee can distribute loss to Unit Holders (beneficiaries) | x | x | x |
| Trust have a perpetuity period (Not Applicable in SA) | √ | √ | √ |
| Beneficiary’s interest in the trust is represented through the units held | x | √ | √ |
| Suitable for more than one family group | x | √ | √ |
| Allowability of interest on money borrowed to invest in the trust | x | √ | √ |
| Introduction of more beneficiaries | Might lead to resettlement of trust | Can be done through issue of fresh units or transfer of units | Can be done through issue of fresh units or transfer of units |
| Redemption of units | NA | At the discretion of trustee | Unit holder can demand the redemption |
| Beneficiary’s interest classified as property | x | √ | √ |
| Degree of asset protection | High | Low | Low |
| Potential to include huge range of beneficiaries as class beneficiaries even future spouses and unborn children | √ | x | x |
Subject to other conditions
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Copp Diment & Co
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