Special Disability Trusts (“SDTs”) allow immediate family members and carers to provide for the future care and accommodation needs of their disabled family members.
Some of the benefits of SDTs are:
- income from assets in the trust is generally not taken into account for the purposes of income testing, and therefore will not reduce the beneficiary’s social security benefits;
- families can make provision for a disabled family member after the death of the primary carer or parent;
- a CGT exemption is available for an asset transferred into a SDT;
- an extension of the CGT main residence exemption is applicable to assets held in a SDT;
- a CGT exemption arises for a person who inherits the disabled person’s main residence on their death, where the property is sold within two (2) years of their death;
- unexpected income of a SDT is taxed at the primary beneficiary’s personal income tax rate, rather than the highest marginal rate usually applicable to Trusts;
- the primary beneficiary of a SDT can work up to seven (7) hours per week at or above the relevant minimum wage;
- the SDT can pay for the primary beneficiary’s medical expenses, including private health fund membership, and the maintenance expenses of the SDT’s property; and
- the SDT can spend an indexed yearly threshold on discretionary items not related to the care and accommodation needs of the primary beneficiary – i.e. this might be for items relating to a beneficiary’s health, wellbeing, recreation, independent and social inclusion.
To be a qualifying SDT the trust must:
- be established for a person who is ‘severely disabled’ for Centrelink purposes;
- be established for the sole purpose of providing for the reasonable care and accommodation needs of the beneficiary;
- have a trustee that is an individual or corporation (provided they meet the legislative requirements) and can include a parent, immediate family member, accountant, solicitor, corporate or state trustee;
- comply with investment restrictions;
- provide annual financial statements; and
- conduct independent audits when required.
For more information and advice about SDTs and their suitability for your circumstances please contact our office.