Despite the similarities between the holders of units in a unit trust and the shareholders of a company there are quite a few differences. Some key differences are:

  • A company is a legal entity and is regulated by government legislation (the Corporations Act), company records are publicly searchable. A unit trust is a private arrangement regulated by the terms of the trust deed, they are not searchable. Since they are less regulated a unit trust might be more flexible.
  • A company can retain profits at the company tax rate of 30%. Any undistributed income in a unit trust is taxed at the top marginal rate of 49%.
  • A unit trust can access the 50% capital gains discount for assets held longer than 12 months, companies can't
  • Shareholders do not have an interest in any assets held by the company, rather their interest is in the company itself, unit holders are equitable owners of property held by the trustee(s).
  • As a legal entity a company can own property and contracts in its own name, a unit trust has to have the trustee hold property for the benefit of the trust.
  • A company can exist forever, a trust has a maximum life of 80 years.
  • A unit trust is potentially cheaper to setup and operate than a company (if you do it yourself, not recommended if you don't know what you are doing.)

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