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Enabling unit trust investments

To enable unit trust investments, Cleardocs provides two types of Australian unit trusts, "fixed" and "non-fixed":

• this page explains the differences between the two — but it focuses on the "fixed" unit trust;
• all unit trusts that Cleardocs sold before 28 Jan 2010 were "fixed". After 28 Jan 2010 Cleardocs provided both types;
• if you need a Unit Trust — non-fixed, then click here to order it from Cleardocs.

NSW Land Tax? The Cleardocs Unit Trust — fixed now includes an option you can choose to help reduce land tax on any real estate the trust holds in New South Wales. (If the trust is "non-fixed", then that option is not available under the law.)

What does the document package for a Unit Trust — fixed include?

The document package for an Australian Unit Trust — fixed includes:

• Consent to act as the Trustees (and related minutes if trustee is a company)
• Certificate(s) of Unit Holding
• Register of Units
• the Trust Deed
• an Establishment Kit telling you what to do next.

The whole process takes about 5-10 minutes depending on the number of unit holders. Once you've answered the questions on the Cleardocs system and paid, you can download the documents to set up a Unit Trust - fixed.

All documents for our Unit Trust - fixed are signed-off by our lawyers at Maddocks.

Setting up a Unit Trust — fixed

You can create all the documents you need to set up a Unit Trust — fixed for Australia. You can choose whether the trustee is to be a corporation or an individual. You should get legal advice about this. We cannot give that advice.

The trustee(s) and unit holder(s) named in the trust deed should be aware that the unit trust will be a fixed trust for tax and duty purposes.

What is the difference between a Unit Trust that is "fixed" and one that is "non-fixed"?

The differences between the two types of unit trust are:

• The Unit Trust — Fixed product contains one class of ordinary unitholders, with the same rights to capital and income distributions of the trust in proportion to their unitholdings.
• The Unit Trust — non-fixed gives you the ability to create two classes of unitholders:
  1. ordinary unitholders, with rights to capital and income distributions of the trust in proportion to their unitholdings; and
  2. income unitholders who may, at the trustee's absolute discretion, receive distributions of income of the trust.

See the second paragraph at the top of the page for a comment on the NSW Land tax position for each type of trust.

Why does it matter if a trust is "fixed" or "non-fixed"?

If the trust is "non-fixed" then no unitholder or class of unitholders has a fixed (proportional) entitlement to income of the trust. This has important implications — for example, unitholders cannot claim a tax deduction on borrowing costs associated with their unitholding.

See the second paragraph at the top of the page for a comment on the NSW Land tax position for each type of trust.

Which type of unit trust suits you or your client?

If you are not sure which type of unit trust suits you, or your client, then you need to speak with your lawyer or accountant. We can arrange for you to speak with our lawyers at Maddocks, but this is not part of the free legal helpline, so the firm will charge you for its time.

What information do you need to order a Unit Trust — fixed from Cleardocs?

You can download our checklist of the information required to order a Unit Trust — fixed here.

The Unit Trust - fixed structure

The Cleardocs Unit Trust - fixed is a trust under which:

• ordinary units of the one class are created and issued to the unit holders.
• all unit holders have the same rights and obligations.
• each unit holder is entitled to a proportion of income and capital distributions equal to their proportional holding of all of the total issued units in the trust.

If you require:

• a "non-fixed" unit trust that allows both ordinary units and income units, then click here to order it from Cleardocs — remember, unit holders in a "non-fixed" unit trust cannot claim a tax deduction on borrowing costs associated with their unit holding; or
• unit trust with different classes of units, or if you wish to have special classes of units, then you must seek legal advice. Please contact us so that we can refer you to Maddocks who can provide you with a free estimate of fees for drafting the necessary amendments to the Cleardocs unit trust deed so that it suits your needs.

Other types of trust from Cleardocs

Cleardocs also has these types of trust available:

• a Unit Trust — non-fixed
• a Hybrid Trust
• a Discretionary Trust

Frequently Asked Legal Questions for Unit Trusts

• Which type of Unit Trust should I use - "fixed" or "non-fixed"? Includes "What is the difference between a Unit Trust that is "fixed" and one that is "non-fixed"?"
• Can a trust own units in a Cleardocs unit trust?
• Can a trustee own units in a Cleardocs unit trust?
• Can a corporate trustee own units in a Cleardocs unit trust?
• Can additional units in a Cleardocs Unit Trust be issued in the future?
• Does a Cleardocs trust give me asset protection?
• When should the trustee apply for an ABN for the trust?
• Will the trust be entitled to an ABN?
• What do I do if the unit trust deed is lost?
• I want to change the trustee of my unit trust from an individual to a corporate trustee. I have not yet incorporated the company to act as trustee. What do I do?
• Does the Cleardocs Unit Trust help reduce land tax in NSW?
• What do I need to do for the trust to be a fixed trust for NSW Land Tax purposes?
• What if the Commissioner rules that my trust is not a fixed trust for NSW Land Tax purposes?