If you’re running (or about to start) a small business, choosing the right structure can feel like one of those decisions that’s both “admin” and “make-or-break” at the same time.
A lot of founders default to a company, a partnership, or a discretionary (family) trust. But there’s another structure that can be a great fit when you’re dealing with multiple investors, shared ownership, property, or projects with clear “who owns what” arrangements: a unit trust.
This article breaks down some real-world unit trust examples in Australia that small businesses actually use. We’ll walk through what unit trusts are, why they can work well for certain commercial setups, and the practical issues you should think about before you commit to one.
As always, the best structure depends on your goals, your risk profile, and how you’re planning to bring people (or money) into the business over time.
Important: This guide is general information only and isn’t legal or tax advice. Trusts can have significant tax, duty and compliance implications depending on your circumstances. Before setting anything up (or changing an existing structure), you should speak with a qualified lawyer and your accountant or a registered tax agent.
What Is A Unit Trust (In Plain English)?
A unit trust is a type of trust where ownership is divided into units (similar to shares in a company).
Each person (or entity) who owns units is called a unit holder, and their entitlement to trust income and/or capital is typically proportionate to the number of units they hold.
A unit trust has a few key players:
- Trustee: the legal “owner” of the trust assets, responsible for running the trust in accordance with the trust deed.
- Unit holders: the investors/owners who hold units.
- Trust deed: the rulebook that sets out how the trust operates, how units are issued/transferred, how distributions work, and what powers the trustee has.
In many small business setups, the trustee is a company (often called a “corporate trustee”), because it can help separate risk and responsibilities from the individuals involved.
If you’re still getting your head around the foundational admin, it’s worth understanding the basics of trust requirements (like whether you need an ABN or TFN, and how the trustee fits into the picture).
Unit Trust vs Discretionary Trust: What’s The Practical Difference?
For small businesses, the difference that usually matters most is:
- Unit trust: ownership is generally fixed and transparent (unit holders own set proportions).
- Discretionary trust: distributions can be flexible (the trustee has discretion to decide who receives income/capital, subject to the deed).
This is why unit trusts often come up when you want a structure that “behaves” more like an investment vehicle, where different parties contribute capital and want clear ownership percentages.
When Do Unit Trusts Make Sense For Small Businesses?
Unit trusts aren’t for every business. But they can be very useful when you need:
- Clear co-ownership: you want each owner’s stake to be defined and measurable (e.g. 40/60 or 10/90).
- A clean way to bring in investors: issuing units can be a practical way to document contributions and ownership (subject to any relevant fundraising rules).
- Asset holding: you want a dedicated structure to hold valuable assets (like commercial property, equipment, or IP), sometimes separate from trading risk.
- Project-based arrangements: you’re doing a joint venture or property development project where parties contribute different amounts and want predictable returns.
That said, unit trusts also come with complexity. Your trust deed needs to be drafted properly (because it’s effectively the constitution for the trust), and you’ll want to think through issues like:
- How units can be issued, valued, or transferred
- How decision-making works (especially if unit holders disagree)
- Whether you need different classes of units (e.g. income units vs capital units)
- How profits are distributed and when
- How you handle exits (unit buy-backs, compulsory transfers, tag/drag style mechanisms)
If your trust is going to be used like a business “vehicle” with multiple owners, it’s common to back the trust deed up with a tailored Unitholders Agreement to reduce the risk of misunderstandings down the track.
6 Practical Examples Of Unit Trusts In Australia (And How They Work)
Below are six practical unit trust examples in Australia that come up frequently in small business, property, and investment contexts. These examples are designed to help you spot when a unit trust might fit your goals (and when it might be overkill).
1) A Property-Holding Unit Trust For Commercial Premises
One of the most common uses of unit trusts is holding real property, particularly where more than one party is contributing funds.
For example:
- You and another business owner buy a small warehouse together.
- The unit trust (via its trustee) owns the warehouse.
- You hold 60% of units, they hold 40% of units.
- Rental income (or sale proceeds later) are distributed in line with unit holdings (subject to the deed).
This kind of structure can be appealing because it’s very clear who owns what, and it can be easier to “sell down” an interest later by transferring units (rather than re-titling the property itself every time ownership changes).
Watch-outs: property structures can have tax and duty consequences, and the trust deed needs to anticipate transfers, valuations, and borrowing arrangements. Get tax advice specific to your situation before you commit to a property-holding structure.
2) A Unit Trust For A Small Business With Passive Investors
Another classic example is where you have a trading business, but not everyone involved is an operator.
Let’s say you’re building a specialised manufacturing business. You’ll run the operations day-to-day, but you have two passive investors providing start-up capital.
A unit trust can work well here because:
- Investors can take units that match their contributions.
- Distributions can be made according to unit holdings (and the deed’s distribution rules).
- You can build in rules around voting, approvals, and what happens if someone wants out.
Watch-outs: if you’re raising money, you also need to think about Australia’s fundraising and financial services rules. The “structure” is only one part of the compliance picture, and you should get legal advice before approaching investors or accepting funds.
3) A Unit Trust Used In A Joint Venture (JV) Project
Unit trusts are often used for joint ventures where parties want to collaborate without necessarily operating as a traditional partnership.
For example, you and another company decide to run a one-off project together (like a new product line or a regional distribution rollout). Each party contributes different amounts of cash, equipment, and expertise.
A unit trust can provide:
- A clear economic split (units reflect contributions)
- A single “bucket” to hold project assets and contracts (via the trustee)
- More structure around decision-making than a loose handshake arrangement
Watch-outs: if you were otherwise planning a simpler collaboration, a properly drafted Partnership Agreement (or a joint venture agreement) might be more appropriate, depending on how the relationship is meant to work and how risk should be shared.
4) A Unit Trust As An “Asset-Holding Trust” Separate From The Trading Business
Some small businesses use a unit trust to hold valuable assets separately from the business that trades with customers.
For example:
- Your operating company runs the business day-to-day (staff, invoices, customer contracts).
- A unit trust holds key assets (like specialised machinery, IP, or even the business premises).
- The operating company pays the trust a commercial fee to use those assets.
The idea here is risk management: separating asset ownership from day-to-day trading risk can help limit exposure in some situations. However, asset protection outcomes depend heavily on the full structure, how it’s implemented, and whether transactions are properly documented and genuinely commercial. Insolvency law and “clawback” (voidable transaction) rules may still apply, and personal guarantees or director duties can still create risk for individuals.
Watch-outs: the legal and tax design matters a lot here. You’ll want your contracts and pricing to be properly documented, and you should avoid creating a structure that looks artificial or creates unintended liabilities.
5) A Unit Trust For A Family Business With Clear Ownership Percentages
Family businesses often like discretionary trusts because of flexibility. But sometimes, you actually want the opposite: clarity.
For example, siblings might run a business together and want their ownership to be locked in at 50/50 (or weighted to reflect who contributed what initially). A unit trust can help keep the arrangement transparent, especially if:
- There’s unequal initial capital contribution
- Different family members are active vs passive
- You want a simple mechanism for buying out someone later
Watch-outs: family arrangements can be emotionally complex, so it’s worth “over-documenting” expectations early (decision-making, succession planning, what happens if someone stops working in the business, and dispute pathways).
6) A Unit Trust With External Finance (Where The Lender Wants Security)
Unit trusts can also be used where your business needs funding and the lender wants formal security over assets.
For instance, your unit trust owns plant and equipment that is being financed. The lender may require security arrangements that are registered on the Personal Property Securities Register (PPSR).
In these scenarios, you might see a lender ask for a General Security Agreement or other security documentation, and you may need to consider register a security interest to properly reflect the lender’s rights.
Watch-outs: security arrangements affect what you can do with trust assets (selling, refinancing, granting further security), so you’ll want the deed and your finance documents to line up.
How Do You Set Up A Unit Trust In Australia (Step-By-Step)?
Setting up a unit trust is not “one form and you’re done”. You’re creating an ongoing legal arrangement that will govern ownership and distributions, sometimes for years.
While the details vary, a typical unit trust setup looks like this:
1) Decide Who The Trustee Will Be
Many businesses choose a corporate trustee. If you need to create the trustee company first, that’s typically handled through a Company Set Up.
If your trustee is a company, it will usually have its own governing document (often a constitution). Depending on the setup, you might also need a tailored Company Constitution, particularly where you want rules that reflect how the trustee should be controlled.
2) Draft The Unit Trust Deed
The trust deed is the core document. It should clearly deal with:
- What units exist and whether different classes apply
- How units are issued (and at what price)
- How income and capital distributions work
- How meetings and voting work (if applicable)
- Restrictions on transfers and who can become a unit holder
- What happens if a unit holder dies, becomes insolvent, or disputes arise
- How the trust can be wound up
In practice, this is where a lot of the “future-proofing” happens.
3) Confirm Tax And Registration Requirements
Most unit trusts will need a TFN and often an ABN (especially if the trust is carrying on an enterprise). If the trust will register for GST, hire staff, or trade actively, those details should be confirmed early.
This is also the stage where you’ll want your accountant involved, because how distributions are treated and recorded matters from day one.
4) Issue Units And Record Ownership Properly
Once the trust is created, units need to be issued to unit holders under the rules in the deed. This should include proper records of:
- Who holds what
- What was paid for the units (if anything)
- Any ongoing obligations attached to holding units
If you plan to bring in new investors later, you’ll want a clear process for issuing additional units without creating disputes about valuation or dilution.
What Legal Documents Should A Small Business Unit Trust Have?
One reason unit trusts work well commercially is that they can be supported by clear, practical documents. The right documents help you avoid disputes, protect your assets, and give investors confidence that the structure is properly managed.
Depending on how you’re using the trust, you may want to consider:
- Unit Trust Deed: your core governing document (this is non-negotiable).
- Unitholders Agreement: a commercial agreement that sets expectations around governance, voting, exits, and dispute resolution (particularly useful if there are multiple owners or investors).
- Company Constitution (for a corporate trustee): helps ensure the trustee company can operate as intended and aligns with how control should work.
- Service/Lease/Licence Agreements: if the unit trust holds assets and another entity (like an operating company) uses them, the arrangement should be properly documented.
- Finance And Security Documents: if you borrow money, your lender may require formal security documentation and registrations.
- Succession/Exit Documentation: especially in family business contexts or where investors may want a clean exit pathway (valuation methods, transfer restrictions, buy-sell arrangements).
It’s worth saying plainly: a unit trust can be an excellent structure, but only if your documents match how you actually plan to run the business. If the deed is generic, unclear, or doesn’t fit your commercial reality, it can create more issues than it solves.
Key Takeaways
- A unit trust divides ownership into units, making it a practical option when you want fixed ownership percentages and clear entitlements.
- Common unit trust examples in Australia include property-holding structures, small business investment vehicles, joint venture projects, asset-holding trusts, family business ownership splits, and finance-backed asset purchases.
- Unit trusts can suit small businesses where you need transparent co-ownership, investor participation, or asset segregation (but the setup needs to be done carefully, and you should get legal and tax advice specific to your situation).
- Your unit trust deed is the foundation of the structure, and it should be drafted to match your real commercial arrangements (units, transfers, distributions, and governance).
- If you use a corporate trustee, you may also need a properly aligned company setup and constitution to ensure control and decision-making work as intended.
- Strong supporting documents (like a unitholders agreement and properly drafted commercial contracts) can help prevent disputes and make it easier to scale or bring in new investors.
If you’d like a consultation on setting up a unit trust for your small business (or reviewing whether it’s the right structure for your plans), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
