A special disability trust is a trust established under legislation passed by the Federal Government in 2006 to assist families plan for the future care and accommodation needs of a family member with a severe disability.
The trust can be established during the lifetime of the person contributing assets to the trust or in that person’s Will.
A means test applies to the assets and income of an individual for the purposes of assessing their entitlement to social security payments.
Assets owned by a special disability trust up to the specified limit (currently $609,500 indexed annually plus the value of a home occupied by the beneficiary) are disregarded for the application of the Centrelink or Department of Veterans Affairs assets test. Download our brochure “Special Disability Trusts”
Immediate family members who are in receipt of a social security or service pension and have reached pension age can take advantage of gifting concessions and are not caught by the ordinary gifting rules when gifting to a special disability trust.
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The trust deed must meet specified requirements to be classified as a special disability trust.
For the concessions to be available the trust must adhere strictly to those rules and be established for the sole purpose of providing care and accommodation for the principal beneficiary.
The special disability trust must not pay for things that would ordinarily be day to day expenses not connected with the disability and cannot be used to pay immediate family members for providing services.
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Only a person who is “severely disabled” will qualify. Potential beneficiaries must be at least 16 years of age who:
Have an impairment which would entitle them to a Disability Support Pension or invalidity service pension or invalidity income support supplement
AND
Because of their disability are not working, and are not likely to work, at relevant minimum wages; and either:
Lives in an institution, hostel or group home that provides care for people with disabilities;
OR
Has a disability that would, if the person had a sole carer, qualify the carer to receive Carer Payment or Carer Allowance
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Tax consequences can flow from the operation of a special disability trust and these need to be taken into account.
There are significant Capital Gains Tax consequences when transferring or selling real estate property and income earned by a special disability trust that is not expended in a tax year is taxed at the top marginal rate.
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