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Most commonly, a partnership is an association of two or more persons who come together in an enterprise with a view to making a profit.

A partnership of discretionary trusts is different in that the partners, instead of being individuals, are discretionary trusts (through the trustees of those trusts).

This method of structuring is often useful for an enterprise where a number of unrelated persons are the participants (although the suitability of a partnership of trusts will depend on a number of factors, and independent legal and accounting advice should always be sought).

Often the partner trusts will appoint a company to conduct the business on their behalf.

(Note: This summary should be read in conjunction with BJT Legal's summary of discretionary trusts). Typical partnership of discretionary trusts Advantages of a partnership of discretionary trusts

Although the partners are jointly and severally liable, the personal assets of the individuals are protected as the partners in the partnership are trusts. Each participant has a fixed interest in the income and capital of the partnership, but the partner trusts have flexibility in respect of distributions. Each partner trust is separately assessed for their ability to access small business CGT concessions - meaning the assets and activities of one partner trust will not prevent another partner trust from accessing those concessions. In most cases, tax exempt amounts can be distributed from the partner trusts with no adverse taxation consequence. Each partner can separately seek to satisfy the trust loss rules, enabling that trust to carry forward tax losses (independently of what other partner trusts do in this regard). Individuals can be employed by the partnership (which is not technically possible where the partners are individuals) and obtain all of the benefits of superannuation, salary packaging, worker's compensation etc. Losses made by the partnership are 'distributed' to the partner trusts.


The use of a company as an agent of the partnership is primarily for administrative ease - so that third parties need only deal with one entity, rather than a group of entities.

Typically a company is used in this role to enable:

Further asset protection; Shares in the company to be issued to the partners in proportion to their interests in the partnership; and Each partner trust to appoint a director to the agent company.

Using an agent does raise issues with respect to GST.

The agent will make supplies and acquisitions, and the question arises as to who accounts for GST and who registers for GST.

As a general rule, a partnership of trusts (like any other partnership) should have its own ABN and (if turnover thresholds require it) GST registration. Where the partnership appoints an agent which is empowered to enter into transactions on behalf of the partnership, it may be making supplies and acquisitions on the partnership's behalf.

In these circumstances, the agent can utilise either:

the partnership's name and ABN; or the agent's name and ABN

but not a mixture (for example, the agent's name and the partnership ABN).

In many cases, the Agent will not be carrying on an enterprise in its own right and so may not need an ABN, so the first option is generally more appropriate.

In practice, we recommend:

The partnership ABN be used; The agent's name and the partnership name be identical or similar; and The name of the partnership appear on tax invoices

Disadvantages of a partnership of discretionary trusts

The trusts participating in the partnership are jointly and severally liable for the liabilities of the partnership - this is generally not an issue if the trustees of the trusts are companies of which the only asset is its issued share capital. Complex, more costly to establish and run than most other trading and investment entities. Losses cannot be distributed from the trusts to individuals, and each trust must distribute 100% of its income in each year (to beneficiaries who become liable for the tax on that income) if the trustee is to avoid paying tax at the highest marginal rate. If a new partner is introduced, this will involve a disposal by the current partner trusts which will usually trigger CGT (and possibly other heads of taxation). Each partner must comply with the tax loss rules if they wish to carry forward losses. Additional stamp duty and land tax implications.

Partnership deeds

There are a number of variations on partnership deeds, but all of them aim to set out the primary relationship between the partners, including rights and obligations.

BJT Legal's Partnership Deed for a partnership of discretionary trusts creates a 'unit partnership. This means only that partnership interests are defined by the owning of 'units' in the partnership. However, rights to income, capital and voting are proportionate to the number of units held in the partnership (as a percentage of total units).

In practice we find that no two partnership deeds end up exactly the same, because our clients often are looking for a range of issues to be dealt with within the deed, and these issues can be dealt with in a number of ways. Some of the more common provisions incorporated into partnership deeds include:

Establishing provisions - setting out the initial partners, name, type of business; Duties owed by the partners to each other; Appointment of the agent, and provisions setting out the agent's responsibilities; Units, including transfers of units; Change in the partnership - including retirement and admission, change in personnel and/or control; Financial matters such as the distribution of income, funding, borrowing and accounting matters; Meetings of partners; Dispute Resolution; Restraints; Termination.


A partnership of trusts is a flexible and sometimes very effective vehicle through which a number of unrelated parties can own an asset or conduct a business, but it also is quite complex.

Tax and other laws also change frequently, and the applicability of this type of structure will depend on these and many other factors. Therefore, legal and accounting advice should always be sought before entering into an arrangement of this type.

Contact our Business Law team to find out more