Unit trusts have long been a go-to investment structure for Australians seeking flexibility, tax efficiency, and pooled access to a wide range of assets. In 2025, the landscape is shifting with regulatory tweaks, tax changes, and a renewed focus on transparency. Here’s how unit trusts are shaping up for investors and trustees this year.
What Is a Unit Trust? Understanding the Basics
A unit trust is a type of investment structure where investors—called unitholders—pool their money to collectively invest in assets such as shares, property, or fixed income. Each investor holds ‘units’ that represent their proportional stake in the trust’s assets. The trust is managed by a trustee (either an individual or a company), who is responsible for administering the trust in line with the trust deed and the law.
- Open-ended structure: New units can typically be issued as more investors join, and redeemed as investors exit.
- Flexibility: Unit trusts can be tailored for family, business, or investment purposes—including property syndicates, managed funds, or business ventures.
- Not a separate legal entity: The trustee holds legal title to the assets, but the income and capital gains flow through to unitholders.
2025 Updates: Regulatory and Tax Changes Shaping Unit Trusts
This year has seen several noteworthy developments in the unit trust space:
- ATO focus on compliance: The Australian Taxation Office has ramped up scrutiny of trust distributions, particularly where streaming of capital gains and franked dividends is involved. Trustees are urged to ensure resolutions and documentation are watertight by 30 June 2025 to avoid adverse tax outcomes.
- CGT discount clarity: Updates in early 2025 have clarified eligibility for the 50% capital gains tax discount for unit trusts, especially for trusts investing in property or shares. The trust must be a ‘fixed trust’ and meet specific residency and holding period requirements.
- Managed Investment Trust (MIT) rules: The MIT regime continues to offer concessional tax treatment for eligible unit trusts that meet widely held and investment rules. The government’s 2025 review of MIT rules has tightened reporting obligations but preserved tax rates for most retail investors at 15% (with some exceptions).
- Digital compliance: The rollout of e-lodgment and digital recordkeeping mandates for trust tax returns is now in effect, streamlining reporting but increasing the need for accurate, real-time records.
These shifts mean both investors and trustees need to stay vigilant—good governance and expert advice are more critical than ever.
Why Consider a Unit Trust in 2025?
Unit trusts remain popular for several reasons:
- Diversification: Pooling funds enables access to investments (like commercial property or infrastructure) that may be out of reach for individuals.
- Tax flexibility: Income, capital gains, and even franking credits can be distributed to unitholders in a way that may optimise after-tax outcomes.
- Estate and succession planning: Units are generally easier to transfer than direct property or business interests, simplifying family succession.
- Asset protection: Properly structured, trusts can provide a layer of protection from creditors or legal disputes, although the rules are complex and have tightened in recent years.
- Investment options: Unit trusts can be used for property syndicates, family wealth structures, managed funds, and business joint ventures. This flexibility remains unmatched in 2025.
Example: A group of friends pools their funds into a unit trust to acquire a small commercial property in Brisbane. Each friend owns units in the trust, receives a share of rental income, and can sell their units if they wish to exit—no need to sell the entire property.
Risks and What to Watch in 2025
No structure is perfect. With unit trusts, the key risks in 2025 include:
- Loss of ‘fixed trust’ status: If the trust deed is poorly drafted or units are issued/redeemed incorrectly, the trust may lose fixed trust status, risking adverse tax outcomes—especially for CGT concessions.
- Tax streaming complexity: The ATO’s focus on proper streaming of income and capital gains means trustees must be meticulous in their resolutions and reporting.
- Liquidity: Units may not be easily sold, especially in private or property trusts, unlike listed managed funds. Exiting can take time and may require agreement of other unitholders.
- Costs: Professional setup, annual accounting, and compliance can be higher than direct investing, particularly for bespoke or family trusts.
- Regulatory changes: The pace of regulatory and tax reform in the trust space is accelerating, so periodic reviews are essential to avoid surprises.
As always, a well-drafted trust deed and regular compliance reviews are the investor’s best friends in 2025.
Conclusion: Unit Trusts Remain a Smart, Flexible Choice—With Care
Unit trusts continue to play a pivotal role in Australia’s investment landscape, offering flexibility, tax efficiency, and access to a broad range of assets. 2025’s regulatory changes make it more important than ever to get the structure, compliance, and documentation right. For investors willing to pay attention to detail, unit trusts can unlock new opportunities for wealth creation and succession planning.
