Special Disability Trusts

Introduced by the Australian Government in 2006, a Special Disability Trust (SDT) is a trust used to assist families with the current and future care and accommodation needs of a family member with a severe disability.

A primary concern of parents who have a child with a disability is how their child is going to be supported when they pass away.

With a properly prepared Special Disability Trust in place, it will (in all but the most exceptional of circumstances) cover the costs of care, accommodation, medical costs and other needs of the beneficiary during their lifetime.

Eligibility

To establish a Special Disability Trust, the intended beneficiary, the person with a disability, must meet the definition of ‘severe disability’ under the Social Security Act 1991 (Cth) (‘the SSA’).

Over 16 Years old

To qualify as an eligible beneficiary, the disabled person aged over 16 years old must:

Have a level of impairment that would qualify the person for Disability Support Pension or is already receiving a Department of Veterans’ Affairs Invalidity Service Pension or Department of Veterans’ Affairs Invalidity Income Support Supplement; and
If the disabled person has a sole carer, the carer would qualify for the Carer Payment or Carer Allowance; or
The disabled person is living in an institution, hostel or group home which is provided for people with disabilities and funded by the Commonwealth, the States and Territories; and
Does not work more than seven hours per week due to the disability.

Under 16 Years Old

To qualify as an eligible beneficiary, the disabled person under 16 years old must be a profoundly disabled child as defined in the SSA, or:

Have a severe disability or severe medical condition; and
A carer has been given a qualifying rating of intense for caring for the child; and
A treating health professional has certified in writing that, because of that disability or condition, the child will need personal care for 6 months or more, and child care is required to be provided by a specified number of persons, and
The carer has certified in writing that the beneficiary will require the same care, or increased care, provided in the future.

Benefits

The benefits of Special Disability Trusts include:

Planning for the future;
Asset control;
Tax benefits; and
Social security benefits.

Planning for the Future

A Special Disability Trust ensures the ongoing needs of the beneficiary can be met even when family members are unable to provide assistance and care.

Asset Control

The trustee of the Special Disability Trust has the obligation of holding the assets of the SDT on trust for the intended beneficiary.

Taxation

The net income on the Special Disability Trust assets is taxed at a lower person income tax rate and there are Capital Gains Tax exemptions.

Social Security Benefits

Under the Special Disability Trust, a gifting concession is available of up to $500,000 combined by one or more eligible family members of the beneficiary and an asset test exemption is available for the beneficiary (the amount is indexed each year).

This means that the income support entitlements of the person with a disability remain unaffected.

Ongoing Obligations

Given that a Special Disability Trust is a trust, there are ongoing legal and accounting requirements and reporting obligations.

The obligations that a trustee must undertake include, but are not limited to, the following:

Providing a compulsory annual financial statement to Centrelink.
Providing a schedule for each class of assets.
Providing a statutory declaration confirming that the expenditure was spent on care and accommodation costs.
Lodging a tax return for the Special Disability Trust each financial year.

Whilst Special Disability Trusts have complex rules and guidelines, they can provide significant benefits to persons with a disability and provide peace of mind to family members.

Contact Us

If you have a family member with a disability and think an SDT may be a good option for you, contact us at Bambrick Legal to discuss your circumstances and how we may assist you.

We offer a free, no-obligation 15-min consultation for all enquiries.