What discretion does the trustee have around distributions?

 

The trustee has the discretion to distribute income to the discretionary beneficiaries, and the unit holders then have a right to receive income and capital that has not been distributed to a discretionary beneficiary. Alternatively, the unit holders may be entitled to all of the income of the trust, but may have a right to redeem their units for face value, at which point the trustee will have complete discretion when distributing income and capital. Specialist legal advice is recommended when looking at the structuring and distributions from a Hybrid Trust as the ATO has been rather vocal in its issue with Hybrid Trusts. One of their main concerns is the potential uncommercial use of Hybrid Trusts and the application of tax avoidance.

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