Special Disability Trusts
Parents and family members may think about how they can financially provide for a person living with disability into the future. One option may be to set up a Special Disability Trust (SDT).
A Special Disability Trust is established by parents and/or immediate family members to plan for the future care and accommodation needs of a person living with a severe disability.
‘Severe disability’ is defined under Section 1209M of the Social Security Act 1991.
A Special Disability Trust will often give families peace of mind that on-going financial support will be available for loved ones who require additional assistance.
There are many complex rules and regulations relating to Trusts, and this Quick Guide highlights only a few of the key points.
It is recommended that you consult a financial adviser or solicitor for advice before establishing a Special Disability Trust.
SDTs are subject to complex rules and limitations, but they do have the potential to provide real benefit in certain situations. SDTs are not a ‘one size fits all’ solution, and accordingly whether an SDT is right for you will depend entirely on your unique circumstances.
Below are some of the key points:
- The Name: the word ‘special’ does not refer to the person living with disability but refers to the specific concessions in relation to social security and tax that can be claimed as part of the trust.
- The Beneficiary: the person living with a severe disability is the primary beneficiary under the Trust. There can only be ONE beneficiary.
- Centrelink assessment: Centrelink will make an assessment and determine if a person meets the definition of a person living with a severe disability.
- Purpose: A special disability trust can only be used for limited purposes, which include:
- reasonable accommodation for the person with the disability
- care costs arising from the disability
- medical expenses (including health insurance)
- maintenance expenses on the trust assets
- discretionary spending currently limited to $11,500 in a financial year .
- Concessions: If an immediate family member transfers assets into the SDT, generous concessions are available to benefit both the contributor and the beneficiary. This can include assets test assessment, income tax and capital gains tax exemptions in particular circumstances. These concessions are intended to encourage family members to make future arrangements for a beneficiary with a severe disability.
- Gifts: Apart from the beneficiary, anyone can gift assets to a Special Disability Trust. But only immediate family members will be eligible for Centrelink Social Security means tests or gifting rule exemptions.
- Now or later: The Trust can be set up in the present or can come into effect at a later date for example, on the death of a parent or family member.
- The Deed: The Trust is created using a Model Special Disability Trust Deed (prescribed by social security rules).
- The Trustee: The Special Disability Trust should have an independent trustee, or alternatively have more than one trustee.
- Annual Financial Statements: The trustee of an SDT must provide compulsory annual financial statements to Centrelink.
- Restrictions: The trust cannot be used to pay immediate family members for providing any type of care, accommodation, maintenance services etc.
Useful links and resources
To find out more about Special Disability Trusts:
- contact the Department of Human Service’s Special Disability Trust Team by:
- phoning 1800 734 750 for the cost of a local call except from mobile and pay phones, or
- emailing Department of Human Service’s Special Disability Trust Team
- visit the https://www.dss.gov.au/
.pdfor a comprehensive guide with examples of different scenarios of the use of a Special Disability Trust: https://www.dss.gov.au/sites/default/files/documents/01_2015/8_special_disability_trusts_questions_and_answers_0.pdf
.pdfor legal rules relating to SDTs: http://guides.dss.gov.au/guide-social-security-law/4/14/3/30
.pdfor an overview of Special Disability Trusts: https://andreyev.com.au/2015/05/20/what-is-a-special-disability-trust-and-why-would-you-need-one/
The information on this page is also available as a downloadable Quick Guide, by clicking below. There are.pdf and word versions.