What is it?
This is a product created to enable an SMSF to invest in a private unit trust, without breaching what is known as the in-house asset rule.
Difference between this trust and SIS reg 13.22C trust
This trust is a product for the same purpose as the SIS reg 13.22C trust, but it is structured differently and has different restrictions. These trusts can borrow, whereas a SIS reg 13.22C trust cannot. These trusts can also invest in other trusts and carry on a business – a SIS reg 13.22C trust.
The catch with these trusts is you cannot allow one SMSF to control more than 50% of the rights to the income generated by the trust, nor more than 50% of the rights to capital, nor more than 50% of the rights to vote.
Specific provisions are inserted into these deeds so that cannot occur. These restrictions centre around the allotment of fresh units, the redemption of units or the transfer of units. If the end result which occurs by one of these transactions is that one SMSF ends up with more than 50% of the rights to income, to capital or the rights to vote, the transaction is voidable. This trust should only be purchased with the benefit of professional advice. They are a special purpose trust.