Steps in setting up a Unit Trust

What is a Unit Trust?

A unit trust is a trust in which the trust property is owned by those persons who hold units in the trust, much like shareholders own shares in a company. The unitholders are the beneficiaries.

A trust continues after it is established for such period as specified in the trust deed up to a maximum period specified by law (usually 80 years), unless the trust assets are distributed earlier to the beneficiaries and the trust is terminated (or wound up). The trust fund is held by the trustee and administered in accordance with the terms of a trust deed.

Steps in setting up a Unit Trust

1. Choosing Roles in a Unit Trust

The two key roles in a unit trust are the trustee and the unitholders.
The trustee is the person/legal entity responsible for administering the trust in accordance with the terms of the trust deed. The trustee may be one or more individuals or a private (i.e. proprietary limited) company specifically setup to act as trustee.

The unitholders of a trust are people or entities who hold a beneficial interest in the trust. These people usually contribute capital to the trust by purchasing units. To distribute trust property to each unitholder, you should consider the number of units held by each unitholder and the rights attaching to their units.

2. Preparing the Trust Deed & necessary documentation

eCompanies can prepare a customised unit trust deed for $150. Our questionnaire will guide you through all the required information. Necessary Unit Trust documentation will be generated and emailed to you within 5 minutes. The documentation includes:

  • Unit Trust Deed Information Sheet
  • Unit Trust Deed
  • Application for Units
  • Unit Certificates
  • Register of unitholder

3. Settling Your Trust

Depending on the terms of your trust deed, you may require a settlor to settle the trust. Many unit trusts do need a settlor. However, if your unit trust requires a settlor to be established, the settlor will sign the trust deed and pay a nominal sum to the trustee.

4. Shareholders and Unitholders Agreement

Ordinarily, if a unitholder purchases units in a unit trust, they will also purchase a percentage of shares in the corporate trustee. Consequently, their ownership interest is consistent in the corporate trustee and the unit trust.

It is beneficial for the shareholders of the corporate trustee and the unitholders of the unit trust to enter into a shareholders and unitholders agreement to deal with the governance of the trust. Compared to a trust deed, a shareholders and unitholders agreement goes into more detail about the decision making and control of each trust. Likewise, these agreements can set out additional rights and protections for the shareholders or unitholders.

5. Registering the bare trust with the relevant authorities.

Depending on the type and value of the asset held by the bare trust, you may need to pay stamp duty, capital gains tax, or land tax.

You may also need to obtain an Australian Business Number (ABN) or Tax File Number (TFN) for the bare trust if it receives income or makes capital gains.

6. Operating your Trust

The trust is now operational. Your need to manage the unit trust according to its terms and conditions.

Unit Trust Information

Need more info? Check out our what is a unit trust and our explanation of roles in a unit trust pages.