The Special Disability Trust is an underutilised but useful vehicle for providing for family members who may have a physical or intellectual disability. It permits one to hold up to an amount of $551,740 which is excluded from the asset test, and the income from which is excluded from the income test.
What Is It?
A Special Disability Trust is a trust which satisfies the following criteria (with different rules for beneficiaries under 16 years old). It has only one Principal Beneficiary who if over 16 years of age who qualifies for a disability support pension and—
- must be living in accommodation provided for people with a disability with Commonwealth and/or State Government funding (or other approved accommodation) or who, if they had a sole carer, their carer would qualify for a carer payment or allowance; and
- is not working and there is no likelihood that they will ever work again for more than the relevant minimum wages (other rules apply for people under 16 years of age);
- is not already the beneficiary of another SDT;
The sole purpose of the SDT must be to provide for the care and accommodation of the Principal Beneficiary and the trustee must be either a professional trustee or at least two Australian resident individuals. There are various additional requirements.
What Are the Benefits?
Disability pensions are means tested as to both (a) the assets of the pensioner, including any interest the pensioner may have in a trust; and (b) the income of the pensioner. The value of assets beyond which a full pension is reduced is, for a home owning single pensioner, $178,000 (excluding the family home), and for a single pensioner who does not own his or her own home, $307,000. The level of income beyond which the full pension is reduced is, for a single person, $142 per fortnight. After that, it reduces at the rate of 50 cents in the dollar.
The value of assets in a Special Disability Trust, up to $551,750, will be disregarded when applying the assets to test to the beneficiary; and so too will be the income generated from those assets. Note also that it is important to try and retain at least a partial pension in order to be eligible for a Health Care Card, as people with disabilities often have requirements for medication which can become quite expensive. A Special Disability Trust helps in this regard too.
And as a bonus it can be the case that the person establishing the trust can also benefit, as the transfer of property to the trust may assist them in qualifying for a pension or Health Care Card too.