What is the difference between a Unit Trust that is “fixed” and one that is “non-fixed”?
The differences between the two types of unit trust are: • the Unit Trust (Fixed) contains one class of ordinary unitholders, with the same rights to capital and income distributions of the trust in proportion to their unitholdings. • the Unit Trust (Non-Fixed) allows two classes of unitholders: • ordinary unitholders, with rights to capital and income distributions of the trust in proportion to their unitholdings; and • income unitholders who may, at the trustee’s absolute discretion, receive distributions of income of the trust. The trust is “non-fixed” because no unitholder or class of unitholders have a fixed (proportional) entitlement to income of the trust. This has important implications — for instance unitholders in the “non-fixed” unit trust cannot claim a tax deduction on borrowing costs associated with their unit holding.
