A unit trust is a trust in which the trust property is divided into a number of defined shares called units. The beneficiaries subscribe for the units in much the same way as shareholders in a company subscribe for shares. The assets of the trust are held by the trustee on trust for the unitholders, who generally are entitled to the capital and income of the trust fund in proportion to their holding of units.

The trust deed for this trust contains provisions that endeavour to ensure that the trust is a fixed trust for both:

• Income tax purposes; and
• New South Wales (NSW) land tax purposes

Fixed trusts for income tax purposes

Where a trust incurs tax losses, certain rules need to be satisfied in order to claim those losses. The rules for claiming the losses depend on whether the trust is a ‘fixed trust’ or a ‘non-fixed trust’.

A trust is a fixed trust if persons (i.e. individuals, companies, trusts, etc.) have fixed entitlements to all the income and capital of the trust, but this does not necessarily mean that all unit trusts will be fixed trusts.

Fixed trusts for NSW land tax purposes

For a trust to be a fixed trust for NSW land tax purposes, and not a ‘special trust’, the trust deed includes certain provisions approved by the NSW Office of State Revenue, to ensure that the unitholders are presently entitled to the income and capital of the trust.