Selling Units in an Australian Unit Trust: Legal Steps and Pitfalls

If your business (or investment group) holds assets through a unit trust, there may come a point where someone wants to exit, a new investor wants to come in, or you’re restructuring ownership for tax, succession or risk reasons.

That’s when you start thinking about selling units in a unit trust. On the surface, it can sound straightforward: one person transfers their units to another person, and the trust keeps operating. In practice, there are a few legal and commercial “trip wires” that can turn a simple sale into a messy dispute if you’re not careful.

This article breaks down how a unit transfer in a unit trust generally works in Australia, the legal documents you should check (and update), and the common issues we see small businesses run into - so you can plan the sale properly and protect the value of what you’ve built.

What Does It Mean To Sell Units In A Unit Trust?

A unit trust is a trust structure where beneficiaries hold units (similar in concept to shares in a company). Each unit typically represents a proportionate entitlement to distributions (income and/or capital) from the trust.

When you sell units in a unit trust, you’re generally transferring your beneficial interest in the trust to someone else.

What You’re Really Transferring

Unlike selling a specific trust asset (like a property or plant and equipment), a unit sale is usually a transfer of a “bundle of rights”, which might include:

• the right to receive trust distributions (if and when made by the trustee);
• the right to a share of capital (depending on the trust deed and the class of units);
• the right to vote or approve certain trustee decisions (if the deed or any unitholders agreement provides this); and
• practical influence over trust operations (particularly if the unitholder is also a director of the trustee company).

Why Small Businesses Use Unit Trusts

Unit trusts are commonly used by Australian small businesses and investors to:

• hold investment assets (like commercial property);
• separate asset ownership from trading risk;
• bring investors in with clear proportional interests;
• enable profit distributions that reflect ownership proportions; and
• support succession planning and ownership changes over time.

Because a unit trust can sit at the centre of a broader structure (for example, with a corporate trustee and multiple operating entities), selling units can have “flow on” consequences that aren’t obvious at first glance.

Can You Sell Units In A Unit Trust In Australia?

Often, yes - but it depends heavily on the trust deed and any other governing documents.

A common misconception is that units are always “freely transferable” like shares. In many unit trusts, transfers are controlled and can require approvals, notices, or compliance with specific steps.

Start With The Trust Deed

Your first task is to review the trust deed, because it usually dictates:

• whether units can be transferred at all;
• any pre-emptive rights (for example, existing unitholders must be offered the units first);
• whether trustee consent is required for a transfer;
• how the transfer must be documented; and
• any restrictions on who can become a unitholder (for example, only Australian residents, only related entities, or only approved investors).

If you can’t locate your trust deed, or it’s unclear, it’s worth pausing the transaction until you’re confident you have the current executed version. This is one of the most common causes of delays (and disputes) in unit trust sales.

Check For A Unitholders Agreement (Or Similar Ownership Agreement)

Many small businesses also have a separate agreement between owners (often called a unitholders agreement). This can operate alongside the trust deed and may include commercial rules like:

• how units are valued;
• decision-making and deadlock processes;
• who can be a unitholder and on what terms;
• exit rights and forced sale events; and
• confidentiality and restraint provisions.

If you don’t have one, this is where a tailored Unitholders Agreement can be a practical risk-management tool - especially if the trust holds significant assets or if multiple family members / business partners are involved.

What If There’s A Corporate Trustee?

Many unit trusts have a company as trustee. In that case, your unit sale might not change who controls the trustee company (and therefore who controls trust decisions) unless you also update the corporate governance arrangements.

It’s common to see a structure where:

• Investor A sells units to Investor B, but
• Investor A remains a director of the trustee company (or still holds shares in the trustee), and
• Investor B has limited practical control despite owning units.

This can create commercial tension very quickly, so it’s worth mapping out whether the unit transfer should happen alongside:

• a change in directors of the trustee;
• a share transfer in the trustee company; and/or
• updated governance documents such as a Company Constitution.

How Does Selling Units In A Unit Trust Work? (A Practical Step-By-Step)

Every transaction is different, but for most small businesses, selling units in a unit trust follows a similar set of steps.

1) Confirm What’s Being Sold (And To Whom)

Before you negotiate price, clarify the basics:

• how many units exist in total, and how many are being sold;
• what class of units they are (if there are different classes);
• who the buyer is (individual, company, trustee of another trust); and
• whether any eligibility rules apply under the trust deed or other agreements.

This is also where you should consider whether the transfer triggers any “change of control” issues in other contracts (for example, bank facilities, leases or key supplier agreements).

2) Check Consent Requirements And Pre-Emptive Rights

If the trust deed or unitholders agreement requires trustee consent or gives other unitholders a first right to buy, you’ll need to follow those steps carefully.

Skipping this is a common reason unit transfers are later alleged to breach the trust deed or an ownership agreement, which can lead to disputes about distributions, voting rights and control.

3) Agree On Price And Valuation Method

Valuing units can be more complicated than valuing shares in a trading company, because the trust may hold a mix of assets and liabilities, and the distribution outcomes can depend on trustee discretion.

Common valuation approaches include:

• Net asset value (NAV): value of trust assets minus liabilities, multiplied by the unit percentage;
• Agreed value: parties agree a price (often based on a recent appraisal or business performance);
• Independent valuation: a valuer/accountant determines value using an agreed formula; and
• Staged pricing: part upfront, part contingent (less common, but can help where valuation is uncertain).

It’s wise to document the valuation method clearly in the sale agreement so you’re not re-arguing it later.

4) Document The Sale Properly

At a minimum, you’ll usually need a written unit transfer document and (in many cases) a sale agreement setting out the commercial and legal terms. Exactly what’s required will depend on the trust deed and the parties’ arrangements.

Depending on the trust deed and your situation, you may also need:

• a trustee resolution approving the transfer;
• unitholder resolutions (if required);
• updated unit register entries;
• director changes or governance updates for the corporate trustee; and
• updated bank signing authorities and operational documents.

If the sale is part of a broader business transfer, it may be more appropriate to treat it as an asset/business sale transaction rather than “just” a unit transfer. In that scenario, a properly structured Asset Sale Agreement can be crucial to allocate risk and ensure you’re transferring what you think you’re transferring.

5) Update Registers And Provide Evidence Of The Transfer

Unlike share transfers (which often have well-understood company processes), unit trust record-keeping can be inconsistent between small businesses. However, clean records matter - especially for future due diligence, financing, and disputes.

Make sure the trustee updates the unit register promptly, and keep a complete “paper trail” including:

• executed transfer documents;
• trustee consent/resolutions;
• payment evidence; and
• any updated agreements (like a new unitholders agreement or deed of accession).

Key Legal And Tax Issues To Consider Before You Sell

When you’re selling units in a unit trust, the “legal work” isn’t just about paperwork - it’s about managing risk. The issues below are some of the most important to think through early.

Stamp Duty (Especially For “Land-Rich” Trusts)

Depending on the state/territory and what the trust holds, a transfer of units can sometimes trigger duty - particularly where the trust holds land or is treated as a “landholder” (sometimes called land-rich) under state revenue rules. Duty outcomes are technical and state-based, so it’s important to get advice from your accountant/tax adviser and check the relevant revenue authority position before you sign.

CGT And Tax Outcomes

From a tax perspective, selling units may trigger capital gains tax (CGT) for the seller (subject to eligibility for concessions). The buyer may also care about cost base and future tax outcomes.

Sprintlaw can help with the legal documentation and risk settings, but we don’t provide tax advice. Because unit trust structures are often used specifically for tax and asset structuring reasons, it’s a good idea to align your legal documents with advice from your accountant/tax adviser before anything is signed.

Warranties, Indemnities And Risk Allocation

Even though you’re “just selling units”, a buyer will often want comfort about what sits inside the trust.

Common areas buyers ask for warranties about include:

• the trust’s asset ownership (for example, property title, equipment, IP);
• existing debts and liabilities;
• pending disputes or claims;
• tax compliance and reporting; and
• material contracts (leases, finance agreements, key customer contracts).

From the seller’s perspective, warranties can become a long-tail liability if they’re not carefully limited, time-bound and qualified by disclosure.

Financing And Security Interests Over Trust Assets

If trust assets are financed (for example, property loans or equipment finance), the lender may have registered security interests. A change in unitholding may also breach finance covenants or trigger a review.

As part of due diligence, buyers (and sometimes sellers) may also check whether security interests have been registered over trust assets. For example, a PPSR check can help identify certain registered security interests, depending on the asset type and circumstances.

Related Party Deals And Conflicts (Family Groups And Related Entities)

In small business structures, it’s common for units to be held by family members, family trusts, or related companies.

That can be completely legitimate, but it increases the risk of disputes if:

• the “true” commercial terms aren’t documented;
• some unitholders think they are entitled to control because of family expectations; or
• trust distributions and decision-making aren’t transparent.

Clear governance documents and consistent record-keeping help prevent misunderstandings turning into formal disputes.

What Legal Documents Should You Have When Selling Units In A Unit Trust?

One of the best ways to make a unit sale smoother is to make sure the trust’s legal foundation is in good shape before you start negotiating.

Here are common documents we often see as relevant in a unit trust unit sale (not every transaction will need all of these):

• Trust Deed: the core document that sets out how the trust operates, including unit transfer rules and trustee powers.
• Unit Sale Agreement / Units Transfer Agreement: sets out the price, settlement date, what’s included, conditions precedent, and (where agreed) warranties and indemnities.
• Unitholders Agreement: sets the “relationship rules” between unitholders (decision-making, exits, valuation, disputes). This is particularly helpful where the trust is used for a trading business or holds significant assets. A tailored Unitholders Agreement can reduce the risk of disputes as people enter and exit.
• Trustee Resolutions: if the deed requires trustee consent (or even if it doesn’t, it’s often best practice), resolutions create a clear record that the trustee approved the transfer.
• Deed Of Accession: where a new unitholder agrees to be bound by an existing unitholders agreement (if used).
• Company Constitution (If There’s A Corporate Trustee): helps ensure the trustee company’s governance supports the new ownership/control position. If you’re updating directors/shareholding or decision-making rules, the Company Constitution often becomes part of the checklist.
• Privacy Documentation (If The Trust Runs An Operating Business): if the trust (or entities within the group) runs an operating business that collects personal information (customers, users, members), you should make sure the Privacy Policy is current and reflects how data is handled (this sometimes comes up in due diligence).

If your unit trust is part of a broader business sale (for example, the buyer wants the operating business, goodwill, systems and customer base), the transaction may be better documented via a business sale process rather than a simple unit transfer. In those cases, it’s common to also work through a completion checklist to ensure all moving parts are handled consistently.

Key Takeaways

• Selling units in a unit trust is usually a transfer of beneficial interests (rights to distributions and capital), not a direct sale of specific trust assets.
• The trust deed is the starting point - it may restrict transfers, require trustee consent, or impose pre-emptive rights for existing unitholders.
• Where there’s a corporate trustee, a unit transfer may not change “control” unless you also address trustee governance (directors, shareholding and constitution settings).
• Valuation, stamp duty (particularly for landholding trusts), CGT and financing/security interests can all materially affect the true cost and risk of the transaction. Get accounting/tax advice early (including state-based duty advice) before you commit.
• Clear documentation matters: a unit sale agreement (where appropriate), trustee resolutions, updated unit registers, and (often) a unitholders agreement help reduce disputes and make due diligence smoother.
• Getting advice early can help you structure the sale properly, avoid accidental breaches of the deed, and protect your business relationships during an ownership change.

If you’d like help selling units in a unit trust (or reviewing your trust deed, governance documents, and sale terms), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.