Choice of corporate vehicle - Division 6C

Generally speaking, a trust is treated as a flow-through vehicle for tax purposes. It is common for assets (especially property assets) to be held in trusts due to the ability of a trust to distribute non-assessable tax-deferred distributions to investors i.e. to distribute cash in excess of taxable income due to, inter alia, up-front tax deductions and higher rates of tax depreciation when compared with accounting depreciation. Therefore, the application of the public trading trust provisions of Division 6C (where the trust is used as the contracting entity in a PPP project) should be considered as these provisions will deem a flow-through trust to be treated as a company for income tax purposes. In this case, the trust will bear tax at the corporate rate of 30 per cent and distributions will be characterised as dividends for tax purposes.