Unit Trust Deed: What Small Businesses and Startups Need to Know

If you’re setting up (or restructuring) a business in Australia, you’ve probably heard the term unit trust come up - especially if you’re thinking about bringing in investors, running a property venture, or separating control from ownership.

At the centre of any unit trust is the unit trust deed. This is the legal document that creates the trust and sets the “rules of the game” for how it operates.

Done properly, a unit trust deed can help you run your venture with clearer governance, better risk management, and less ambiguity between founders, related entities, and investors. Done poorly (or using a generic deed that doesn’t match what you’re actually doing), it can create major headaches later - especially when money starts moving, new unit holders come in, or someone wants to exit.

Below, we break down what a unit trust deed is, what it usually includes, when a unit trust structure makes sense, and what to think about before you commit.

What Is A Unit Trust Deed (And Why Does It Matter)?

A unit trust deed is the document that establishes a unit trust and governs how it runs. In plain terms, it sets out:

• who controls the trust (the trustee);
• who has the beneficial interest (the unit holders); and
• how income and capital are allocated and distributed.

A unit trust is a type of trust where the ownership interests are divided into units (similar to shares in a company). If you own 25% of the units, you generally have a 25% interest in the trust’s income and capital (subject to what the deed says).

In most unit trust setups:

• The trustee holds the trust assets on trust and enters into contracts on behalf of the trust.
• Unit holders contribute capital (or acquire units) and receive distributions based on their units.

The deed matters because it’s the foundation document. If there’s a dispute, a capital raising, a change of trustee, or a distribution decision - your starting point is almost always: What does the unit trust deed say?

It’s also important to remember: a “trust” isn’t a separate legal entity like a company. The trustee is the legal person signing and holding assets, while the trust is a relationship governed by the deed.

When Does A Unit Trust Make Sense For A Small Business Or Startup?

A unit trust isn’t the default structure for every business. Many startups will still choose a company for operational simplicity (especially if you’re aiming for traditional venture capital, issuing shares, or using employee equity schemes).

That said, unit trusts are common in a few scenarios - particularly where you want a structure that looks and behaves “ownership-like”, but still operates through trust law.

Common Use Cases For A Unit Trust

• Property and development projects: Unit trusts are often used for property holding or project-based ventures where parties contribute different amounts of capital.
• Investment structures: Where multiple investors want clear proportional interests via units.
• Joint ventures: Where several parties want an agreed distribution method and governance, but not necessarily a company share structure.
• Family business and asset holding: Sometimes used alongside other entities (for example, a company as trustee and family members or entities as unit holders).

Why Businesses Choose A Unit Trust Structure

Businesses and founders often consider a unit trust because it can offer:

• Clear proportional ownership via units (helpful when investors contribute different amounts).
• Flexibility in distributions - but only to the extent allowed under the deed and relevant tax rules.
• Separation of “control” and “benefit” (trustee controls, unit holders benefit).
• Asset segregation where you want to hold certain assets away from trading risk (often with a corporate trustee).

But it’s not “one-size-fits-all”. Your tax position, funding plans, risk profile, and who you’re doing business with can all affect whether a unit trust is a good fit. It’s also common to pair the deed with a separate commercial agreement between unit holders so the governance expectations are crystal clear (for example, a Unitholders Agreement).

What Should A Unit Trust Deed Include?

Every unit trust deed is different, but most will cover a similar set of core topics. If you’re reviewing a deed (or thinking about having one prepared), these are the areas you’ll want to understand in plain English.

1. Trustee Details And Powers

The deed will identify the trustee and describe the trustee’s powers - such as the ability to:

• buy and sell trust assets;
• enter into contracts;
• borrow and grant security;
• open bank accounts;
• operate businesses and employ staff.

Many unit trusts use a corporate trustee (a company acting as trustee) for practical risk management. If you go down that path, you may also need to consider whether the trustee company’s internal rules (for example, its replaceable rules or a tailored Company Constitution) support how that trustee company is governed.

2. Units, Unit Classes, And Unit Holder Rights

The deed should clearly explain:

• what “units” are and what they represent;
• how units are issued, transferred, and redeemed (if at all);
• whether there are different unit classes (e.g. different rights to income vs capital); and
• what voting rights unit holders have (if any).

This is a big area where generic deeds can cause problems. For example, if you plan to bring in investors, you’ll want the deed to properly address:

• pre-emptive rights (rights of existing unit holders to buy units before outsiders);
• consent requirements for transfers;
• how valuations are done if someone exits; and
• restrictions on competing interests or related-party transactions.

3. Distributions: Income And Capital

The deed typically sets out how distributions are decided and paid.

In many unit trusts, distributions are proportional to unit holdings (e.g. 60/40). However, depending on the deed and structure, there may be discretion, timing rules, or thresholds.

This is also where you need to be careful about alignment with your real-world arrangements. If the deed says distributions are proportional but the parties “handshake” a different arrangement, you can end up with disputes and tax mismatches.

4. Trustee Replacement And Unit Holder Meetings

A practical deed should contain clear mechanics for:

• when and how a trustee can be removed or replaced;
• who has the power to do it (majority unit holders? unanimous consent?);
• how unit holder meetings are called and conducted; and
• what decisions require a vote, and what threshold applies.

These governance details may feel “too formal” early on, but they become critical when the business grows, when relationships change, or when new money comes in.

5. Trust Property, Record Keeping, And Administration

Unit trust deeds also usually deal with administrative issues such as:

• what assets form part of the trust property;
• how accounts are kept;
• whether audits are required;
• how financial years and reporting are handled;
• how notices are served to unit holders.

Getting the “boring” admin clauses right can save you a lot of pain later - especially when you need clean records for investors, lenders, or a sale.

How Do You Set Up A Unit Trust In Australia?

Setting up a unit trust is more than just downloading a template. You’re creating a legal structure that will hold assets, sign contracts (through the trustee), and allocate economic value.

While each business is different, the setup process often looks like this:

Step 1: Confirm The Structure (And The Trustee)

You’ll usually decide:

• who the trustee is (individual vs company);
• who the initial unit holders are (people vs entities); and
• how much each party is contributing and how many units they will hold.

If you plan to use a corporate trustee, you may also need to set up the company and make sure its governance documents and settings are appropriate for acting as trustee. This is where things like Company Set Up (and, where appropriate, a constitution) can become relevant.

Step 2: Prepare And Execute The Unit Trust Deed

The deed needs to be drafted to match what you’re actually doing (for example, a trading business unit trust will often need different powers and rules compared with a property unit trust).

Once the deed is finalised, it’s executed (signed) in accordance with the signing requirements of the trustee (and sometimes other parties, depending on the deed).

Step 3: Establish Trust Administration (ABN, TFN, Bank Account)

After the trust exists, you’ll typically need the right registrations and admin setup, which may include:

• applying for a TFN for the trust;
• obtaining an ABN (if required for business activities);
• GST registration (if applicable); and
• opening a bank account in the name of the trustee “as trustee for” the trust.

Many founders get stuck here because trusts can be confusing at the practical level. It helps to understand how identifiers and registrations work across trust and company structures, including ACN, ABN and TFN requirements depending on what entities you’re using.

Step 4: Document The Commercial Deal Between The Parties

This is the step that often gets missed. The unit trust deed sets the legal framework of the trust, but it may not fully capture the commercial arrangement between founders/investors (for example, decision-making, deadlocks, additional funding obligations, non-compete expectations, exit triggers, and dispute resolution).

That’s why many unit trust structures also use an agreement between the unit holders (again, often a Unitholders Agreement) so everyone is clear on the commercial rules as the venture grows.

Key Legal And Commercial Risks To Watch Out For

A unit trust deed can be a strong foundation, but there are some common risk areas we see when small businesses and startups use trusts.

1. Generic Deeds That Don’t Match Your Business

Not all unit trusts are the same. A deed written for a passive investment trust may be a poor fit for a business that:

• trades actively;
• employs staff;
• raises capital in stages;
• enters long-term supplier/customer contracts; or
• needs to borrow and grant security.

If the trustee powers are too narrow (or unclear), you can end up with operational friction, bank issues, or disputes about what the trustee can and can’t do.

2. Unclear Rules Around Issuing Or Transferring Units

Bringing in new unit holders is one of the most common turning points. If your unit trust deed doesn’t clearly address:

• who can approve new issues;
• how pricing/valuation works; and
• whether existing unit holders get a right of first refusal,

you can end up negotiating from scratch at the worst possible time - when you need money quickly or when relationships are under pressure.

3. Trustee Liability And Risk Management

Because a trust isn’t a legal person, the trustee is the one entering contracts and taking on liabilities. That’s one reason corporate trustees are popular: they can help separate personal assets from business liabilities (although “limited liability” never removes risk entirely - directors’ duties, guarantees, and insolvency risks can still apply).

If you’re using a corporate trustee and you want to ensure the company can execute documents efficiently, understanding signing mechanics (and the practical effect of corporate structure choices) can become important for day-to-day operations.

4. Tax And Accounting Treatment Needs To Align With The Deed

We’re focusing on the legal fundamentals here, but it’s worth saying plainly: a unit trust deed can have real tax consequences. Because tax outcomes depend on your specific facts and the deed terms, it’s a good idea to speak to an accountant or tax adviser to make sure your intended distributions and contributions are set up and recorded correctly.

It’s usually best to align your deed, your bookkeeping, and your commercial agreements early - rather than trying to “patch it up” later.

5. Confusing Trust Structures (Especially Where More Than One Trust Is Involved)

Founders sometimes mix different trust types without a clear plan - such as using bare trusts, discretionary trusts, and unit trusts together.

There are legitimate reasons to use different trust structures, but it’s important to be deliberate about it. For example, a bare trust is usually used for specific holding arrangements where the beneficiary has a clear entitlement, which is very different to the ongoing governance approach in a unit trust.

Key Takeaways

• A unit trust deed is the key legal document that establishes a unit trust and sets the rules for control (trustee), ownership (unit holders), and distributions.
• Unit trusts can suit certain Australian small businesses and startups - particularly property ventures, joint ventures, and investment-style structures where proportional ownership matters.
• A good unit trust deed should clearly cover trustee powers, how units work, how distributions are made, transfer/exit rules, and governance processes.
• Trust setup usually involves choosing the trustee, executing the deed, setting up ABN/TFN/GST and banking, and documenting the commercial deal between unit holders.
• Common risk areas include generic deeds that don’t match your business, unclear unit transfer rules, trustee liability issues, and misalignment between the deed and real-world financial arrangements.

If you’d like help preparing or reviewing a unit trust deed for your business or startup, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.