In Australian law, a unit trust is a type of trust where the beneficial interest in the trust is divided into units.
Each unit represents a specific proportion of the trust's assets and income. Unit trusts are commonly used for investment purposes, such as property or managed funds.
A unit trust is established by a trust deed, which outlines the terms and conditions of the trust. The trust is managed by a trustee who holds legal ownership of the trust assets and is responsible for the administration and management of the trust.
Unit holders are the individuals or entities that hold units in the trust. They are considered the beneficial owners of the trust and are entitled to a share of the trust's income and capital based on the number of units they hold.
The trust generates income from its investments, such as rental income from properties or dividends from shares. This income is distributed to unit holders in proportion to their unit holdings. For example, if a unit holder owns 10% of the units, they will receive 10% of the trust's income.
The trust incurs expenses, such as property maintenance costs or fund management fees. These expenses are deducted from the trust's income before being distributed to unit holders.
The trustee has the discretion to determine how the income and capital of the trust are distributed among unit holders. The distribution can be based on the number of units held or may be adjusted based on the trustee's discretion.
Unit trusts are treated as separate entities for tax purposes, similar to discretionary trusts. The trust must lodge its own tax return and pay tax on any assessable income. The income is then distributed to unit holders, who are taxed on their share of the trust's income at their individual tax rates.
It is important to note that unit trusts are subject to specific laws and regulations, including the Corporations Act 2001 and the Income Tax Assessment Act 1936. It is advisable to seek professional advice from a tax accountant or a legal expert to ensure compliance with all applicable laws and to understand the specific implications of a unit trust structure.