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Trust Documents
Trusts document

Hybrid Trust

Create all the documents you need to set up a Hybrid Trust (also known as a Hybrid Discretionary Trust). In a Hybrid Trust, entitlement to some part of the trust income or capital is fixed and the trustee has discretion to distribute the remainder.

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  • Cleardocs fee incl GST $181.50
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Product Information

What documents are included in the Cleardocs Hybrid Trust package?

The document package for a Hybrid Trust includes:

  • the Trust Deed;
  • Consent to act as Trustee (and related minutes if the trustee is a company);
  • Application for Units;
  • Unit Certificate(s);
  • Register of Unit Holders;
  • Register of Units Issued;
  • Register of Units Transferred; and
  • an Establishment Kit explaining what to do next.

What information do you need to order a Hybrid Trust through Cleardocs?

Our checklist outlines all the information required.

Features of the Cleardocs Hybrid Trust

The term "Hybrid Trust" does not refer to one particular type of structure. There are many types of Hybrid Trust. The type of structure that is established under the Cleardocs Hybrid Trust package is described here.

  1. Establishing the Hybrid Trust The Cleardocs version of a Hybrid Trust is established by the settlor transferring the settled sum to the trustee in consideration for the issue of the initial units to the initial unit holders.
  2. Units: fully paid only The Cleardocs version of a Hybrid Trust allows for only fully paid units. (There cannot be partly paid units.)
  3. Unit price When the Cleardocs version of a Hybrid Trust is set up, the unit holders receive units in consideration of the settlor paying the settled sum. So there is no unit price that applies to those units. If a unit holder later invests in the Hybrid Trust, then they can be issued units in consideration of their investment (and a price can be set then).
  4. Distributing capital, income, or both The trustee may make income distributions or capital distributions or both.
  5. Classes of beneficiary There are a number of beneficiary classes equal to the number of unit holders. Each class of beneficiaries is defined by reference to their relationship with the relevant unit holder.
  6. Distributions in proportion to number of units In the Cleardocs version of a Hybrid Trust, the general rule is that if the trustee makes a distribution of income and capital, then that distribution must be to each class of beneficiary in proportion to the number of units the relevant unit holder owns in the trust. (However, in certain circumstances, the trustee can make distributions that are not in proportion to the number of units the unit holder owns, see the next paragraph.)
  7. Distributions NOT in proportion to number of units In the Cleardocs version of a Hybrid Trust, the trustee may determine to make a distribution otherwise than in proportion to the number of units held by a unit holder. However, if the trustee determines to do this, then:
    • the trustee must first give written notice about the proposed distribution to all the unit holders; and
    • any unit holder (or person who is a joint unit holder) may veto that distribution and so prevent it from being made.
  8. Distribution to particular person not required The trustee is not bound to make a distribution to any particular person. Instead, any distribution must be only to some person or persons who meet the definition of a beneficiary in the relevant class.
  9. Unit holder meetings The Hybrid Trust deed provides for meetings of unit holders. Also, unit holders have the power to wind-up the Hybrid Trust (by a simple majority) or to remove the trustee (by a special majority).

Need another sort of Hybrid Trust?

The term "Hybrid Trust" does not refer to one particular type of structure. There are many types of Hybrid Trust. For any other sort of Hybrid Trust, you can order a Cleardocs Hybrid Trust and then arrange for Maddocks to amend it to meet your needs. This is cheaper than asking Maddocks to create your version from scratch.

Simply start by calling Cleardocs on 1300 307 343 and we will direct you to the relevant lawyer at Maddocks to begin the process.

Seek legal advice

The Hybrid Trust information here should be considered general in nature, and in no way interpreted as legal advice. You must always seek your own independent legal, accounting and financial advice about your particular situation. The summary on this page is for information purposes only.

Frequently Asked Legal Questions

Cleardocs is not a law firm. So as with all the legal material on this site, the answers to these "frequently asked legal questions" are provided by the law firm Maddocks. Cleardocs does not endorse those answers.

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Does the Cleardocs Hybrid Trust have different classes of units?

No, there is only one class or type of unit. (However, in certain circumstances, the trustee can make distributions that are not in proportion to the number of units the unit holders own.)

Each unit attracts the same rights. However, the class of people who may benefit by virtue of their relationship with a unit holder will vary depending on whether the unit holder is:

  1. An individual;
  2. A corporation; or
  3. The trustee of a trust.

Can additional units in a Cleardocs Hybrid Trust be issued in the future?

Yes, units may be issued in the future. This is the flexibility that a hybrid trust provides. Further units may be issued, and units may be sold or redeemed.

The deed sets out:

  1. The process for issuing more units or selling or redeeming units; and
  2. How to calculate the price for the relevant units.

Can the unit holders negatively gear their investment in a Cleardocs Hybrid Trust?

No, the Cleardocs Hybrid Trust deed does not allow negative gearing by unit-holders in respect of funds borrowed to purchase those units - however, the trust may be able to borrow in its own right and to claim a deduction for interest costs against its own income.

The reason the trust does not allow negative gearing is because the trustee has a discretion to distribute income:

  1. Among the trust's unit-holders out of proportion to their unit holdings (provided no unit-holder objects); and
  2. To people other than the actual unit holder provided that they qualify as beneficiaries by virtue of their relationship with the unit-holder.

These features mean that it is unlikely you can claim a deduction for expenses associated with owning units in the Trust.

Can a trust own units in a Cleardocs Hybrid trust?

No (but see next 2 questions). A trust cannot own units in a hybrid trust because the law says a trust is not a separate legal person. For example, the 'John Smith Family Trust' cannot own units or any other property.

Even so, the trustee of a trust, in his, her or its capacity as trustee, is capable of owning units and other property - see next question.

Can a trustee own units in a Cleardocs Hybrid trust?

Yes, a trustee can own units in a hybrid trust - as long as you include the trustee's name and their capacity. For example:

'John Smith in his capacity as the trustee of the John Smith Family Trust'.

In this case, the trustee holds the units in the hybrid trust on trust for the beneficiaries of the trustee's own trust.

(The trust itself cannot own units as it is not a legal entity.).

Can a corporate trustee own units in a Cleardocs hybrid trust?

Yes, a corporate trustee can own units in a hybrid trust - as long as you include the trustee's name and their capacity. For example:

'ABC Pty Ltd in its capacity as the trustee of the ABC Family Trust'.

In this case, the trustee holds the units in the hybrid trust on trust for the beneficiaries of the trustee's own trust.

(The trust itself cannot own units as it is not a legal entity.)

Can a trustee of a Cleardocs Hybrid Trust also be a unit holder in another trust?

Yes. A trustee of a Cleardocs Hybrid Trust can be a unit holder either in his, her or its own right or as the trustee of another trust.

What do I do if my bank won't give me finance because "the trust deed doesnt allow it"?

If a bank says it wont give you finance because the trust deed wont allow it, there are 3 steps you can take:

  1. Inform the bank that under the "Overriding general powers" and "Specific powers'" clauses the trustee has very broad powers including the power to apply for and obtain finance; and
  2. If this doesnt work, ask the bank what amendments to the Deed they require. Then instruct a lawyer to draft the amendments.

Most issues of this nature can be adequately and promptly addressed in this way.

If I change from an individual trustee to a corporate trustee (or vice-a-versa) does the Deed require amending?

If I change from an individual trustee to a corporate trustee (or vice-a-versa) does the Deed require amending?

No, the trustee can change from individual trustee to a corporate trustee (or vice-a-versa) without the deed being amended. However, you will require a resignation from the retiring individual and consent to act as trustee from the company.

Does a Cleardocs trust give me asset protection?

A trust can play an important role in an asset protection strategy.

However, if you are concerned about asset protection, then you should seek legal advice concerning your own circumstances.

When should the trustee apply for an ABN for the trust?

ABNs are not compulsory. However, there are many good reasons to have one. For example, ABNs help:

  1. You to deal with the ATO; and
  2. You in dealing with other businesses when supplying goods or services to them, or when purchasing goods and services.

Also, you need an ABN to register for GST. Entities carrying on an enterprise in Australia with a GST turnover of $75,000 must register for GST.

More information can be found at www.abr.gov.au.

Will the trust be entitled to an ABN?

A trust must meet either one of the following 2 criteria to be eligible for an ABN:

Criterion 1

The entity is any one of:

  1. A company incorporated under the Corporations Act 2001 in Australia;
  2. A charitable institution or trustee of a charitable fund in Australia;
  3. A deductible gift recipient in Australia; or
  4. A religious institution in Australia.

Criterion 2

The entity can answer 'Yes' to each of the following statements:

1. Its activity is carried out in any of:
1.1 the form of a business
1.2 the nature of trade, or
1.3 the form of a regular or continuous grant of a lease, licence or interest in property.
2. Its activity is carried out in Australia or it makes supplies that are connected with Australia.
3. Its activity is not a private recreational pursuit or hobby.

I want to change the trustee of my hybrid trust from an individual to a corporate trustee. I have not yet incorporated the company to act as trustee. What do I do?

You can create a company through Cleardocs using the Company Registration package. Once you have registered the company it can be appointed as trustee of the trust. You will need to see a solicitor to draft a Deed of Appointment and Resignation. This document officially appoints the new company as trustee of your trust and records the outgoing individual trustee's resignation.

Maddocks can provide you with a quote to prepare these documents. Please call us to arrange a quote from Maddocks.


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