Unit Trusts

Unit trusts is an investment vehicle where assets are pooled and divided into units, allowing investors to hold a proportional ownership of the trust’s income and capital.

Unit Trusts allow multiple investors to contribute to a diversified portfolio. These large funds often invest in shares, real estate and various securities, with each investor’s unit representing their share of equity or interest in the trust. While owning a unit in a unit trust is conceptually similar to owning a share in a company, there are notable differences. 

Some examples of Unit Trusts are Vanguard, State Street, BlackRock Unit Trust, Westfield Trust and Perpetual Limited. 

Trust Income

When an SMSF invests in Unit Trusts, the distributions received from the Trust are part of the SMSF income and is treated on an accrual basis.

The income derived from a Unit Trust is allocated to its unit holders in the form of a distribution.  When a distribution statement is sent to unit holders the components of the income will be noted as dividends from shares, interest from bonds or rental income from real estate. 

A Unit Trust will normally distribute all the taxable income derived during the year to its unit holders. 

 Trust Income Schedule

SMSFs that invest in Unit Trusts are required by the ATO to complete and lodge a trust income schedule with the Fund’s annual tax return, from 2024 and onwards.

The new requirement applies to all trust distributions received by SMSFs, including those from managed funds, listed and unlisted trusts, ETFs and platforms.

Each trust requires a separate schedule, with a limit of 150 schedules before consolidation is necessary. Even Funds in the pension phase with exempt income must complete the schedule. The accounting software we use will take into account distributions received by the SMSF in the appropriate schedules.

The Trust Income Schedule is part of the annual tax return and we give a sample of the Tax Return and Instructions on this page.