Fixed Unit Trust Explained — How It Works in Australia
This page explains how a Fixed Unit Trust works in Australia and when it is commonly used as a business or investment structure.
This information is intended for clients who are comparing structures or want a clearer understanding before proceeding.
What is a Fixed Unit Trust?
A Fixed Unit Trust is a trust structure where ownership is divided into fixed units.
Each unit represents a defined economic interest in the trust. Income and capital are generally distributed to unit holders in proportion to their unit holdings.
Unlike a discretionary (Family) Trust, the trustee of a Fixed Unit Trust does not have discretion to vary distributions between unit holders.
Why Fixed Unit Trusts are commonly used
Unit Trusts are often used where:
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Multiple parties invest together
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Ownership interests need to be clearly defined
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Profit sharing is fixed and agreed in advance
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The structure reflects commercial arrangements between partners
For this reason, Fixed Unit Trusts are frequently used for joint ventures, business partnerships, and investment projects.
Key roles in a Fixed Unit Trust
A Fixed Unit Trust typically includes the following roles:
Trustee
Holds legal title to trust assets and manages the trust in accordance with the trust deed.
Unit Holders
Hold units representing their ownership interest and entitlement to income and capital.
How income and capital are distributed
In a Fixed Unit Trust:
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Distributions are based on unit ownership
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Each unit holder is taxed on their share of income
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The trust itself generally does not pay tax
Distribution outcomes are predictable and aligned with ownership.
Fixed Unit Trust vs Family Trust
| Feature | Fixed Unit Trust | Family Trust |
|---|---|---|
| Ownership | Fixed units | No fixed ownership |
| Distributions | Proportional to units | Trustee discretion |
| Common use | Partnerships & investments | Family tax planning |
| Flexibility | Lower | Higher |
Ongoing obligations
A Fixed Unit Trust must meet ongoing compliance requirements, including:
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Annual financial statements
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Trust tax return lodgement
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Proper distribution calculations
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Record keeping in accordance with the trust deed
When a Fixed Unit Trust may not be suitable
A Fixed Unit Trust may not be ideal if:
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You require flexible income distribution
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Family tax planning is the main objective
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Ownership proportions are expected to change frequently
In those cases, a discretionary trust or company structure may be more appropriate.
Next steps
If you are comfortable that a Fixed Unit Trust suits your situation, you can proceed with our setup service.
If you are still deciding, we recommend discussing your circumstances before committing to a structure.
