MGS Products — Unit Trusts

MGS Capital Pool
Unit Trust

A fixed unit trust that delivers bankable entitlements to unit holders — and quarantines tax-preferred amounts in a discretionary pool for the family members best placed to use them. No CGT event E4. By design.

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At a glance

Fixed

Unit holder entitlements — vested & indefeasible from day one

4 Categories

Quarantined in the Tax-Preferred Capital Pool

No E4

Pool excluded from unit value and redemption price

Discretionary

Trustee directs pool to the best-placed Concession Beneficiary

No CGT Event E4

Pool excluded from unit value and redemption price — unit cost base never reduced

Quarantined Pool

Div 40, Div 43, CGT discount and indexation amounts held separately from unit entitlements

Family Flexibility

Trustee directs pool distributions to the Concession Beneficiary with the best tax position

Indexation-Ready

Structure captures the full benefit of the Government's re-introduced indexation concessions

Overview

A fixed unit trust with a discretionary capital pool

The MGS Capital Pool Unit Trust is a fixed unit trust with a unique built-in mechanism for managing and distributing tax-preferred amounts. It combines the certainty and transparency of a fixed unit trust — where ordinary income and distributable capital gains flow pro-rata to unit holders — with the flexibility of a discretionary Tax-Preferred Capital Pool.

The Pool captures four categories of concessionally-taxed amounts and holds them for discretionary distribution to a broad class of Concession Beneficiaries connected to the Appointor. Because the Pool is at all times excluded from the Current Unit Value and from any redemption payment, no CGT event E4 ever arises on the units — the unit holder's cost base is never reduced.

Key principle: Unit holders hold vested and indefeasible interests in income and distributable capital. The Tax-Preferred Capital Pool belongs, in a real sense, to the Appointor's family group — not the unit holders.

Key Features at a Glance

Fixed unit trust — vested and indefeasible unit holder entitlements
Tax-Preferred Capital Pool — four quarantined amount categories
Pool excluded from unit value, distributions and redemption price
No CGT event E4 — unit cost base never reduced
Broad Concession Beneficiary class — Appointor family group
Trustee absolute discretion over pool timing, amount and recipient
Pool architecture entrenched — unanimous unit holder consent required to alter
Temporal flexibility — pool amounts can be carried forward indefinitely
Indexation-ready — captures returning concessions in full

Structure

Two pools. One smart structure.

The Trust Fund is divided into two permanently separated pools. The distinction is legally entrenched — unanimous unit holder consent is required to alter it.

General Trust Fund

Unit HoldersFixed entitlement

Return of capital (pro-rata by units)
Distributable capital gains
Net income of the trust estate
Interim distributions at trustee's discretion

Vested and indefeasible from day one. No discretion required. Pool exclusion means no CGT event E4 arises — unit cost base is never reduced.

Separate
Pools

No E4
Event

Tax-Preferred Capital Pool

Concession BeneficiariesTrustee's discretion

Division 40 amounts (depreciation recoupment)
Division 43 amounts (capital works deductions)
CGT discount amounts (50% discount)
Indexation amounts (returning concession)

Excluded from unit value and redemption price. Trustee has absolute discretion — amount, timing, and recipient. Amounts may be accumulated across multiple years.

CGT Analysis

Why no CGT event E4 arises

CGT event E4 (section 104-60 of the ITAA 1997) applies when the non-assessable part of a trust payment exceeds the cost base of a unit. In an ordinary fixed unit trust, tax-free amounts such as the CGT discount flow to unit holders and may trigger E4, gradually eroding their unit cost base.

The MGS Capital Pool Unit Trust resolves this by architectural design. Because the Tax-Preferred Capital Pool is permanently and legally excluded from the Current Unit Value and from any redemption payment:

Pool amounts never form part of any payment made in respect of a unit
The non-assessable part of any unit distribution therefore never includes pool amounts
There is no mechanism by which the unit cost base can be reduced by pool flows
A departing unit holder receives nothing from the Pool on redemption

Result: Unit holders retain their full cost base. The Pool flows through to Concession Beneficiaries — without triggering CGT event E4 on the way through.

Feature	Ordinary Fixed UT	MGS Capital Pool UT
CGT discount flows to unit holders	✓ Yes	✗ No — goes to Pool
Risk of CGT event E4	✗ Yes	✓ No — by design
Unit cost base reduction risk	✗ Present	✓ Eliminated
Div 40 recoupment allocation	Pro-rata to all unit holders	✓ Trustee discretion
Div 43 recoupment allocation	Pro-rata to all unit holders	✓ Trustee discretion
Indexation amounts	Pro-rata to all unit holders	✓ Trustee discretion
Family tax optimisation	Limited	✓ Maximum flexibility
Pool entrenchment	N/A	✓ Unanimous UH consent

Concession Beneficiaries

Who can receive pool distributions?

The Concession Beneficiary class is broad — defined by reference to the Appointor's family group and related entities. The trustee has absolute discretion to choose the most tax-effective recipient in any given year.

Spouse & children

The Appointor's spouse (including widow or widower) and all issue — children, remoter issue, and legally adopted children.

Relatives & spouses of issue

Any relative of the Appointor, the spouse of any issue of the Appointor, and the estates of any of the above individuals.

Associated companies

Any company in which any of the above persons holds shares or acts as a director — including family companies and holding entities.

Associated trusts

The trustee of any trust of which any of the above persons is a beneficiary or object — enabling distribution to related family trusts.

Charitable beneficiaries

Such other persons, trusts, companies or charities as the trustee may appoint (with relevant Appointor consent) before the Vesting Date.

Important note

Unit holders are not automatically Concession Beneficiaries. The two classes are legally distinct. Excluded Class members and Foreign Persons are excluded from pool distributions.

Questions & Answers

Frequently asked questions

Everything you need to know about the MGS Capital Pool Unit Trust. For questions not covered here, please contact our team.

Ask a Question

CGT event E4 arises when the non-assessable part of a trust payment exceeds the cost base of a unit. Because the Tax-Preferred Capital Pool is permanently excluded from the Current Unit Value and from any redemption payment, pool amounts can never form part of a payment "in respect of" a unit. There is therefore no mechanism by which the unit cost base can be reduced by pool flows, and event E4 cannot arise.

Division 40 Amounts — balancing charges and depreciation recoupment on disposal of depreciating assets, representing the recovery of prior deductions claimed against income.
Division 43 Amounts — amounts attributable to building allowance deductions previously claimed under Division 43 (capital works).
CGT Discount Amounts — the 50% (or other applicable) discount applied to a capital gain. Where a $2m capital gain is discounted to $1m, the $1m discount goes into the Pool.
Indexation Amounts — the inflation-adjusted uplift in the cost base of a CGT asset under the Government's re-introduced indexation regime.

Yes. The trustee is not required to distribute pool amounts in the year they arise. Amounts can be accumulated and carried forward indefinitely — allowing the trustee to wait for the optimal recipient, or for a year in which a Concession Beneficiary's tax position is most favourable. This temporal flexibility significantly compounds the tax planning benefit.

A departing unit holder receives nothing from the Tax-Preferred Capital Pool on redemption. The redemption price is calculated by reference to the Current Unit Value, which expressly excludes the Pool. On redemption, pool amounts remain in the trust and continue to be held for discretionary distribution to Concession Beneficiaries.

Upon termination, any balance remaining in the Tax-Preferred Capital Pool is distributed to the Concession Beneficiaries of each unit holder as the trustee in its absolute discretion determines. This is entirely separate from, and in addition to, the unit holders' pro-rata share of the general Trust Fund proceeds.

Unit holders hold a vested and indefeasible interest in the Trust Fund (excluding the Pool) from the date units are issued. This fixed entitlement to ordinary income and distributable capital is the hallmark of a fixed trust for Schedule 2F purposes. The Pool is a separate mechanism that does not qualify or diminish those fixed interests. Advisers should obtain specific advice for their client's circumstances.

The pool quarantine mechanism is legally entrenched in the deed. The amendment clause requires unanimous consent of all unit holders to alter the core pool architecture. No simple majority can dismantle it. This provides structural certainty for all parties — unit holders, Concession Beneficiaries, and the trustee alike.

Suitability

Who should consider this structure?

The MGS Capital Pool Unit Trust is particularly well-suited to investors and advisers in the following circumstances.

Property investors & developers

Portfolios that regularly generate CGT events, depreciation recoupment and capital works deduction recoupment on disposal.

Business owners with depreciating assets

Plant and equipment-heavy operations where Division 40 balancing charges arise periodically on disposal.

Families with diverse tax profiles

Groups with significant variation in marginal tax rates between members — directing concessional amounts to lower-rate recipients produces meaningful savings.

Ordering

How to order your MGS Capital Pool Unit Trust

Register or log in

Create your MGS account or log in to your existing account at macquariegs.com.au. Registration is free and takes under two minutes.

Complete the order form

Provide details for the trust — trustee, Appointor, Initial Unit Holders, and initial unit allocation. Our form guides you through each field.

MGS prepares your deed

Our team prepares the bespoke Capital Pool Unit Trust deed to your specifications. Standard turnaround is 1–2 business days.

Execute and establish

The deed is delivered ready for execution. Our explanatory memorandum guides trustees through establishment, registration obligations, and ongoing administration.

Included with your deed

Bespoke Capital Pool Unit Trust deed
Explanatory memorandum (full)
Unit register template
Minute book and resolutions template
Pool ledger administration guide
Access to MGS technical support team

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Questions? Call us on (02) 9231 5111

MGS Capital PoolUnit Trust