Setting Up a Special Disability Trust

Get in touch: 1800 770 780

How can we help?

Get Expert Advice on Special Disability Trusts with Owen Hodge Lawyers

The ongoing care and provision for a disabled child or family member is a constant issue of concern for many people. In the past, certain financial arrangements for the disabled would often prejudice their entitlement to particular benefits.

From 20 September 2006, legislation allowing the creation of a Special Disability Trust (SPECIAL DISABILITY TRUST) came into power. These trusts must have the sole purpose of providing for the current and future care and accommodation of a disabled person. At Owen Hodge Lawyers, our attorneys specialise in the creation of a Special Disability Trust for your loved one.

What is a Special Disability Trust?

A Special Disability Trust is a legal arrangement designed to manage and protect the assets of an individual with a disability. The trust is established to provide for the financial well-being and quality of life of the person with a disability. The trust is typically set up by a third party, such as a family member or legal guardian, and is managed by a trustee who oversees the distribution of funds according to the terms laid out in the trust agreement.

Who is Eligible for a Special Disability Trust?

There are three classes of disabled persons, which vary depending on the individual’s age.

1) The first class of persons eligible for a Special Disability Trust is:

A person who has reached 16 years of age:

  • whose level of impairment would qualify the person for Disability Support Pension or who is already receiving a Department of Veterans’ Affairs Invalidity Service Pension or Department of Veterans’ Affairs Invalidity Income Support Supplement, and
  • who has a disability that would, if the person had a sole carer, qualify the carer for Carer Payment or Carer Allowance, or
  • who is living in an institution, hostel or group home in which care is provided for people with disabilities, and for which funding is provided under an agreement between the Commonwealth and states and territories, and
  • who has a disability as a result of which he or she is not working and/or has no likelihood of working for more than seven (7) hours a week for a wage that is at or above the relevant minimum wage”

2) The second class of persons eligible for a Special Disability Trust is:

A person under 16 years of age who is a profoundly disabled child as defined in SSAct section 197(1) who was a principal beneficiary immediately before 1 July 2009.

3) The third class is specific to children under the age of 16;

  • who is a person with a severe disability or a severe medical condition, and
  • another person (the carer) has been given a qualifying rating of intense under the Disability Care Load Assessment (Child) Determination for caring for that person, 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 the caregiver has certified in writing that the beneficiary will require the same care, or an increased level of care, to be provided to him or her in the future.

Benefits of Special Disability Trusts

One of the main advantages of a Special Disability Trust is that the capital invested within it (limits apply) is not subjected to Centrelink’s Asset Test. Further, any income generated by that capital is not subjected to Centrelink’s Income Test. It is important to note that normal income tax rules apply.

Some recent changes now permit people with a disability to work up to 7 hours per week in the open labour market.  The trust can now also pay for the beneficiary’s medical expenses, including private health fund fees and maintenance expenses of assets and properties.

There is now also provision for up to $10,000 in any financial year on discretionary items (such as holidays).

Can family members access Special Disability Trust concessions?

Just as importantly, there are also concessions and benefits for the family member contributing funds to a Special Disability Trust. Provided no more than $500,000 in total is gifted to a Special Disability Trust, any gift by a family member is not deemed to be a deprivation of assets by Centrelink.

Quite simply, family members can now secure the financial future of a disabled person without adversely impacting their own or the disabled Centrelink entitlements. In addition, where a family member was not eligible for the Age Pension due to their assets, they can now legitimately divest themselves of assets and possibly qualify for a full or part pension.

How to Set Up a Special Disability Trust

The Special Disability Trust can be established during your lifetime so that it operates immediately from the time it is established. The legislation requires that the Special Disability Trust is set up by a trust deed or Will, using a Model Special Disability Trust (prescribed by social security rules).

Special Disability Trust Requirements

Special Disability Trusts are subjected to many rules, for example who can be a trustee and what investment options can the trustee elect. These rules are extensive and advice from your lawyer and financial advisor is highly advisable to ensure that non-compliance and the associated consequences never become an issue.

Set Up A Special Disability Trust Today

Contacting a law firm for Special Disability Trusts is a crucial step in ensuring the financial well-being and security of individuals with disabilities. These specialised trusts are designed to protect and manage assets for the benefit of someone with special needs, while also preserving their eligibility for government assistance programs. The experienced solicitors at Owen Hodge Lawyers will assess your unique circumstances and guide you through the process of setting up a Special Disability Trust.

Owen Hodge’s Special Disability Trust Services

At Owen Hodge Lawyers, we have a select team of highly specialised attorneys who help families and caregivers set up the right type of Special Disability Trust for their disabled family member or client. As a team of attorneys who specialise in this area of law, we are knowledgeable about all of the legal options available to secure a safe financial future for a severely disabled person who cannot manage their own affairs. Contact us today on 1800 770 780 to discuss setting up a Special Disability Trust.

Talk to Owen Hodge Lawyers

Owen Hodge is here to help

Get in touch now

Frequently Asked Questions

Special disability trusts are trusts established in accordance with Part 3.18A of the Social Security Act 1991 to help families and carers provide financially for the care and accommodation of a person with a severe disability. This is referred to as the principal beneficiary.

The tax rules for special disability trusts are designed so that the net income of the trust is taxed at the principal beneficiary’s marginal tax rate.

The general answer is that there is no capital gains tax applicable to a special disability trust. A contributor to the trust can contribute up to $500,000.00 without either party being taxed.

The discretionary spending limit has increased over the years. However, as of January 7, 2023, the discretionary spending limit is $14,000.00.