Since 2006, families with a disabled child have been able to
establish a Special Disability Trust (SDT). SDTs allow immediate
family members and carers to provide for the future care and
accommodation needs of a 'severely disabled person'. The
benefits of a SDT include:
income from assets in the trust is generally not taken into
account for the purpose of the income test and therefore will not
reduce the beneficiary's social security benefits; and
families can make provision for a severely disabled person
after the death of the primary carer or parent.
Recent changes to SDTs
The Government has recently passed legislation introducing
further tax-relief for SDTs, including:
a CGT exemption for an asset transferred into a SDT;
extending the CGT main residence exemption to assets held in
a CGT exemption for a person who inherits the severely disabled
person's main residence on their death, where the property is
sold within two years of the deceased's death.
Other recent changes that have increased the flexibility of SDTs
widening the type of expenses that can be paid from the trust,
including private health fund membership and maintenance expenses
for trust property (which were previously excluded);
beneficiaries can now undertake paid work of up to seven hours
income that is assessed to the trustee is taxed at the
beneficiary's personal tax rate, rather than at the marginal
rate under section 99A of the Income Tax Assessment Act 1936;
the trustee can now spend up to $10,250 a year on discretionary
expenses (not related to the care and accommodation needs of the
What are the requirements for establishing a SDT?
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 either a parent, immediate family
member, accountant, solicitor, corporate trustee or state
Want to find out more?
Our estate planning team can assist with the establishment of a
SDT (either while clients are alive or in their Will). For more
information, contact one of our estate planning team members.
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guide to the subject matter. Specialist advice should be sought
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There are several requirements that must be completed by an executor before the distribution of assets to beneficiaries.
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