Weighing up unit trusts

Weighing up unit trusts


Unit trusts are a way of holding assets and are most commonly used as a form of investment strategy.

A unit trust is a particular type of trust that allows individuals to pool together their resources to improve their investment leverage. Each unit trust will have a trustee that decides how the money and where the money is invested in order to generate wealth for unit holders.

There are a number of advantages and disadvantages of investing into a unit trust that ought to be considered.

Advantages

  • Less risk involved in investing due to the diversification of where the units are invested.
  • The trustee is responsible for making expert decisions as to where units are invested.
  • Due to the pooling of resources, there are far more opportunities to invest in areas that would not be possible as an individual investor.
  • If one unit holder comes into debt, they cannot use assets from the trust to satisfy their debt as the trustee has power over said assets.

Disadvantages

  • Fees associated with investing into a unit trust are comparatively higher than investing directly.
  • Revenue losses or capital losses cannot be offset against other assessable income of trust’s unit holder.
  • Investors may feel they have limited control due to a trustee making the investment decisions.
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If you believe the matters discussed above are relevant to your business, please contact Darren Smith of our office to discuss further.


Darren is a Chartered Accountant with extensive experience, including working in the big 4 and medium sized firms before becoming a partner of a city based firm in 2000.

He has gained much experience and has extensive knowledge in providing business and taxation advice, superannuation planning, negotiation of sales and acquisitions of businesses and property development. His client base covers a wide range of industry groups.

Darren works with business owners to grow their businesses and create personal wealth within and outside of their business.


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