About the Hybrid Discretionary Trust

A Hybrid Discretionary Trust takes the best features of a discretionary (family) trust and the best features of an unit trust and mix them together in the one entity to create a powerful and flexible tax planning solution.

This document follows a two step approach.
Step 1: Set up a Hybrid Discretionary Trust
Step 2: Issue the units

A Discretionary Trust is one of the most common small business structures in Australia. Unlike, a Unit Trust, you establish a Discretionary Trust to benefit the members of a family.

The Hybrid Discretionary Trust structure is useful if you hold capital growth or income-generating assets. Some of the key attributes of the Hybrid Discretionary Trust are:

- prepared for asset protection purposes. It helps protect from bankruptcy and insolvency
- it is a relatively low cost and simple structure to use
- it allows you to distribute income to family members who are on low tax rates
- there are no formal audit requirements
- absence of any formal legislative framework, such as the Corporations Law, to control the activities of the trustee
- it allows you to “stream” income: you can distribute one type of income to one person and another type of income to another person
- unit holders can claim a deduction for the interest incurred on the cost of their units
- it is comparatively easy for new owners to join and for old owners to leave the structure

A Hybrid Discretionary Trust can operate for up to 80 years.

More questions? Please have a look at the sample questions and sample of Hybrid Discretionary Trust Deed provided.

Please read Taxpayer Alert TA2008/3 and subsequent media release 2008/13

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