Is a trust or a partnership more flexible for income splitting?

Whilst the partnership agreement can be drafted in a way that allows income to be split between different partners on an annual basis, a discretionary trust will generally offer more flexibility.

In a partnership, partners hold their interest in the assets and income of the business in set proportions. However, in a discretionary trust, the trustee has absolute discretion as to who he distributes in come to, in what amounts (if at all), and when. This will generally provide greater flexibility and opportunities for tax minimisation than a partnership arrangement. This is particularly the case in family business scenarios.