Tuesday, October 2, 2018

Three (days) – Trust Naming Conventions – Part III

Continuing on from recent posts about the types of trust deeds that can be created, this week's post summarises another five types of trusts:

SPV Trust – an SPV trust will traditionally be a discretionary trust, however will be created so as to perform only one discrete activity. Examples include a particular property development project, a certain investment activity or to conduct a discrete part of a wider business, for example, employing staff, owning plant and equipment or undertaking borrowings with third parties.

Unit Trust – often seen as an ideal vehicle for investment activities between unrelated third parties in capital appreciating assets, unit trusts provide unitholders with fixed entitlements to income and capital, however are generally subject to CGT event E4.

Fixed Trust – the definition of a fixed trust for taxation purposes remains uncertain following the Colonial decision in 2011, which concluded that the meaning of a fixed trust is narrower than commonly thought by taxpayers and their advisers. However, generally, the test for qualifying as a fixed trust turns on whether the beneficiaries have a vested and indefeasible interest in the trust property.

Hybrid Trust
– a hybrid trust effectively blends particular characteristics of other forms of trusts into one arrangement. Most commonly, a unit trust is combined with a discretionary trust so as to give the ultimate owners a fixed entitlement to capital, and a discretionary entitlement to income. This structure is generally only used in tightly held groups or family investment activity.

Corporate Trust
– there are a range of trusts that can be referred to as a corporate trust. In particular, there are specific provisions under the tax legislation that treat particular forms of trusts (for example, public trading trusts) as companies for tax purposes. Subject to satisfying certain rules, it is also possible for trusts to form part of a tax consolidated group, and again, effectively be treated as if they are companies for tax purposes.

Each of the above trusts is explored in View’s book – 40 Forms of Trusts – Workbook.

** For the trainspotters, ‘Three days’ is a song by legendary/notorious band Janes Addiction from 1991.