A listed investment trust (LIT) has no taxation benefits whatsoever over an unlisted managed fund. I assume you are talking about a listed investment company (LIC)?
Tax benefits: As mentioned earlier, a LIC would avoid the problems associated with a non-AMIT managed fund, as the actions of other investors would have no impact on your own tax liability. The other benefit is more administrative, as you just have the one dividend to worry about, which is automatically prefilled on your tax return, whereas with most managed funds you will have to fill out the sections yourself.
I checked my distribution statements for the last FY and there were more than 10 sections (Share of non-primary production income, share of credit for tax withheld where ABN not quoted, Franked distribution from trusts, other deductions relating to non-primary production distributions, share of franking credits, share of credit for TFN amounts withheld, Total current year capital gains, net cpaital gain, assessable foreign source income, other net foreign source income, foreign income tax offset, tax deferred distribution breakdowns for unlisted property funds etc). Having to fill out the tax on a couple funds, and to manually calculate the total capital gains component is a major pain/expense (if you use an accountant).
Tax downsides: The biggest downside to a LIC tax wise is that corporate structures are not entitled to the 50% capital gains discount. This is a major problem for LICs that hold assets for the long term, but not a problem for shorter term LICs. The other downside is that any franking credits, foreign tax offsets, tax deferred distributions etc would not be directly passed on to you.
Other downsides: The main disadvantages of LICs is liquidity risk, which comes in 2 forms. The first is that you are not guaranteed to have a market to sell your shares into, especially if its a smaller LIC. With managed funds that invest predominantly in liquid shares, you are *virtually guaranteed to be able to redeem your investment within a few days. The exception are the unlisted property funds, and other exotic debt/alternative/private equity funds. During the GFC Charter Hall, Centuria (and all the unlisted property fund managers froze redemptions for a few years), and some funds that invested in housing related debt instruments (such as Basis Capital, LM first mortgage completely collapsed). All the equity managed funds were ok.
The 2nd form of liquidity risk is not being able to sell your LIC shares for what it is valued at (the NTA). Most ASX LICs persistently trade under their net asset values (with no guarantee that they will ever revert to NTA), whereas with managed funds your redemption price is always at the NTA, minus a small spread.
