Unit Trust - Founder
FOUNDER UNIT TRUST (NON-FIXED ENTITLEMENTS)
This Deed provides for a Founder, rather the original unit holders to be a party to the Deed. In Western Australia this is advantageous from a stamp duty point of view. This may be the case in other jurisdictions as well.
From a taxation perspective, this Deed has been drafted to provide for the Unit Trust to be (initially) a fixed trust. Where a trust incurs tax losses, certain rules (set out in trust loss measures in the Income Tax Assessment Act (ITAA)) need to be satisfied in order to claim those losses.
A trust is a fixed trust if the Unit holders have fixed entitlements to all of the income and capital of the trust. No one Unit holder has the ability to receive more or less given certain circumstances.
For a unit trust to be a fixed trust, the trust deed must contain a clause that states that units can only be redeemed or issued for a price determined on the basis of the net asset value, according to Australian accounting principles, of the unit trust at the time of redemption or issue. If the trust deed allows for other methods of valuing new units or the redemption of units then the trust will be a "non-fixed trust".
If your trust is a fixed trust, to carry forward any losses it makes, Step 2 is to apply two (of the possible four) tests:
- the 50% stake test (or continuity of beneficial ownership test). Have the same individuals had, at all relevant times, more than a 50% stake in the fixed trust (ie more than a 50% stake in the income and capital of the trust between them);
- the income injection test. Under these schemes, income is injected into trusts with losses or other deductions so that no tax is payable on the income. Has there been a transfer of income into the trust under an arrangement whereby the owners/controllers of the trust receive a fee/benefit for the use of the losses from the transferor of the income? Simply stated - would the deal have proceeded if it had not been for the losses sitting in the trust? If a trust is involved in an income injection scheme to take advantage of deductions it may be prevented from making full use of the deductions/losses under the income injection test.
Your Trustees have the ability to issue Income units but this may result in the Trust becoming non-fixed.
This Deed of Trust requires a Trustee to be appointed by the Founder. Details of each Unit Holder (the Deed provides for ten (20 if you include Joint Unit holders)) and the number of units that they will hold in the Unit Trust, are set out in the Deed. The monies paid by the Founder (and subsequently the Unit Holders) comprise the trust fund that is held on trust by the Trustee. The Trust has a life of 80 years.
The Deed sets out the rights, duties and obligations of the Trustee, the ability for Unit Holders to transfer their units (rights of pre-emption), the calling and conduct at Unit Holder meetings.
The Deed allows for the Trustee to be replaced and for the Trust Deed to be amended.
All relevant Minutes are included in this package.
If you require any amendments to the document after it has been returned to you, one of our lawyers can make those amendments however the cost for this work is
not included in the price of this document. Please contact us on info@ampalmer.com.au for further assistance.