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