Special Disability Trusts
Since 20 September 2006, families have been able to establish a Special Disability Trust, which attracts social security means test concessions for the beneficiary and eligible contributors. The purpose of the trust is to assist immediate family members and carers who have the financial means to do so, to make private financial provision for the current and future care and accommodation needs of a family member with severe disability and receive means test concessions.
It is necessary that, before a Special Disability Trust is established, the prospective trust beneficiary be assessed as severely disabled under the legislation for this type of trust (for details see Special Disability Trust beneficiary assessment process).
Inquiry into Special Disability Trusts
On 15 May 2008 the Senate Standing Committee on Community Affairs announced an inquiry into Special Disability Trusts. The Committee issued its report Building trust: Supporting families through Disability Trusts on 16 October 2008. The Government tabled its response to the report on 14 May 2009 (for details see Government response to the Senate Standing Committee on Community Affairs report, Building trust: Supporting families through Disability Trusts).
As part of the 2009-10, 2010-11 and 2011-12 Federal Budgets, the Australian Government announced measures to respond to the recommendations of the Senate Standing Committee on Community Affairs report, Building trust: Supporting families through Disability Trusts.
From 1 July 2006:
- allow capital gains tax exemption for any asset donated to a Special Disability Trust,
- allow capital gains tax main residence exemption for Special Disability Trusts,
- allow capital gains tax exemption for the recipient of the beneficiary’s main residence, if disposed of within two years of the beneficiary’s death, and
- ensure equivalent taxation treatment amongst Special Disability Trusts established under different Acts.
From 1 July 2008:
- unexpended income of a Special Disability Trust is taxed at the beneficiary's personal income tax rates, rather than the highest marginal tax rate.
From 1 January 2011:
- a beneficiary of a Special Disability Trust can work up to seven hours a week at or above the relevant minimum wage,
- the Trust can pay for the beneficiary’s medical expenses, including private health fund membership, and the maintenance expenses of the Trust’s property, and
- the Trust can spend up to $10,000 in a financial year on discretionary items not related to the care and accommodation needs of the beneficiary of the trust, ie for items relating to a beneficiary’s health, wellbeing, recreation, independence and social inclusion.
Since 1 July 2011 the amount that can be spent in a financial year on discretionary items not related to the care and accommodation needs of the beneficiary of the trust has been indexed annually.
A Special Disability Trust is able to spend up to $11,000 in the 2014-15 financial year.
Frequently asked questions
Means test concessions
A Special Disability Trust can have assets worth up to $626,000 (indexed annually and current as at 1 July 2014) without these assets impacting on the trust beneficiary's income support payment (such as Disability Support Pension). Where the assets of the trust exceed the limit, the amount in excess of the limit will be counted as assessable assets for the person and will be assessed against the relevant assets test thresholds.
Where immediate family members contributing to the trust are in receipt of a social security or veterans' entitlement payment and are within five years of Age Pension age or older, they may be eligible to receive a concession from the usual social security or veterans' entitlement rules relating to making gifts (disposal of assets). For the purposes of this concession, 'immediate family members' include natural parents, legal guardians, adoptive parents, step parents, grandparents and siblings.
Setting up a trust in your will
A Special Disability Trust can be a testamentary trust established through a will (that is, it does not come into effect until after the death of the person making the will).
Model Trust Deed
The Model Trust Deed has been developed to help families who have decided to set up a Special Disability Trust. The Model Trust Deed contains both compulsory clauses needed to satisfy requirements for accessing the social security concessions and non-compulsory clauses that provide options for the person with severe disability and their family.
Deed of Variation of Special Disability Trust Deed
Special Disability Trusts created before 1 July 2011 need to be varied to reflect the legislative beneficial measures that came into effect on 1 January 2011 and in accordance with the Trust Deed, Reporting and Audit Requirements Determination 2011. The beneficial measures introduced as at 1 January 2011 altered the purpose of a Special Disability Trust from ‘sole purpose’ to ‘primary and other purposes’.
To assist you in updating your existing Special Disability Trust’s deed, a Deed of Variation of Model Trust Deed has been created to ensure your Special Disability Trust meets all current legislative requirements. The variation needs to be signed and attached to your Special Disability Trust’s deed and lodged with the Department of Human Services to ensure the Special Disability Trust remains compliant.
Note: The Deed of Variation of a Model Trust Deed for Special Disability Trusts is based upon varying the Model Trust Deed, as previously published prior to 1 July 2011. If you have any concerns you may wish to speak to your legal representative.
To ensure Special Disability Trusts are compliant with legislation, the Trustee must provide annual financial statements of the trust as at 30 June of the relevant financial year. The financial statements must include information, which complies with the Australian Accounting Standards.
One requirement of this process is that the Trustee sign a statutory declaration document which can be accessed below. More information on financial statements and reporting procedures can be found in Questions and Answers.
Special Disability Trusts: Getting things sorted booklet includes information on:
- planning for the future, taking account of disability issues generally,
- how families can use trusts to provide for family members with disability, and
- availability of concessions from social security and veterans' entitlement means tests for beneficiaries and eligible family members establishing a Special Disability Trust.
- guidance on the things to consider when planning for the future
- options available to families when planning for the future
- information about how to set up a trust
- information about how to obtain financial and legal advice
- useful contacts
- future planning checklist
For more information about the social security treatment of Special Disability Trusts see the Guide to Social Security Law - Chapter 4.14 Means Test Concessions for Special Disability Trusts.
For information about the Legislative Instruments for Special Disability Trusts see Special Disability Trust Legislative Instruments.
To find out more about Special Disability Trusts:
- contact the Department of Human Services Special Disability Trust Team by:
- phoning 1800 734 750, for the cost of a local call except from mobile and pay phones, or
- emailing the Department of Human Services Special Disability Trust Team , or
- writing to Reply Paid 7819, Canberra BC ACT 2610, or
- visit the Special Disability Trusts page on the Department of Human Services website.