DISCRETIONARY TRUSTS

Advantages:

-          Flexibility with income and capital distribution

-          Tax planning can be done

-          Small business concessions access

-          The 50% CGT discount is available

-          Asset protection against bankruptcy and or creditors

-          Simple to wind up

-          Can pay salaries and wages

-          Can provide superannuation for principals

-          Succession planning is possible

Disadvantages:

-          Distributions must be in accordance to the Truest deed Trust Deed

-          There is a risk of resettlement when beneficiaries added

-          Losses cannot be distributed

-          Could be complex for clients to understand the concepts of ‘trust’

-          More costly than individual or partnership to operate

-          Trustees can be personally liable for some debts of the trust

-          ATO can treat trust as anti-avoidance attempt

UNIT TRUSTS

Advantages:

-          Significant individuals and CGT concessions to unit holders

-          Easy to introduce new equity partners by issuing new units

-          Less regulations than a company

-          Interests are fixed

-          Asset protection

-          Extra asset protection through use of a corporate trustee

-          Simple to wind up

Disadvantages:

-          Sale of units can be a CGT event and attract stamp duty as well

-          Not flexibility as in discretionary trusts

-          May not be able to make family trust election

-          Trustees can be personally liable for some debts of the trust