Trusts 043-04020000

A trust is an obligation binding a person (the trustee) to hold property (the trust property) for the benefit of persons (the beneficiaries). The trustee may be an individual or a private company. Likewise, the beneficiaries may be individuals and/or other trusts or companies.

Different rules apply to an approved Special Disability Trust (SDT). Income generated by SDT is exempt from the Income Test. SDT assets are exempt from the Assets Test as long as the assets are not over the concessional asset limit.

From 1 January 2002, new rules were implemented for the way private trusts are treated under the Income and Assets Tests. If a customer is involved in a private trust, the income and assets of that trust may be taken into account (attributed to the customer) when working out their rate of income support payments or concessions. The attribution decision is made by the Complex Assessment Officer (CAO), based on information provided on the Private Trust form (MOD PT) and accompanying documents.

There are occasions where a customer claims that a trust exists even though there is no trust deed or will. A trust would not be accepted to exist solely because such a claim has been made. In these cases the CAO will determine if a court would be likely to decide that a trust exists.

Trusts are divided into three main types under the Social Security Act 1991 and the Veterans' Entitlements Act 1986, namely public trusts, statutory trusts and private trusts.

Public Trusts

Public trusts are run commercially and the public can invest by purchasing units for example, property trust, mortgage trust, and equity trust. These investments are treated as financial assets.

Statutory trusts

Statutory trusts are created by law, usually established to look after the affairs of a customer who is incapable, or legally unable to attend to their own affairs, and exists if property is held by public trustees, Workers Compensation Boards and courts. Statutory trusts are treated as private trusts.

Private trusts

Private trusts are set up by customers either to hold property or investments, or to run a business. Some private trusts are considered a designated trust, and assessed under the rules implemented 1 January 2002. Other private trusts are non-designated private trusts and are assessed in a similar manner to the rules existing prior to 1 January 2002.

The trust in which the customer is involved may be referred to using several different words to describe the same trust. For example, a discretionary trust may fit the definition of a designated trust in Part 3.18 of the Social Security Act.

The terms 'family trust' and 'unit trust' may be included in the name of a trust but are not relevant to the determination of the type of trust in which the customer is involved. Family trusts are the most common type of trust requiring an assessment under income and assets tests. These trusts are known as express trusts as they were set up by a trust deed. These tend to be discretionary and will generally fall within the definition of a designated private trust. However, a CAO will need to establish the type of trust and should not make any assumptions in this respect.

The delegation for the assessment of a person's involvement in a private trust is normally a CAO. In most cases the CAO will determine the income and assets to maintain.

Although a CAO can provide specialist advice about a customer's qualification for an income support payment or other benefit, the delegation for this decision is with the Service Officer in a service centre.

If a customer is not qualified for an income support payment and/or concession card, it is not necessary for the case to be referred to the CAO for assessment nor will it be necessary for the CAO to assess the private trust in which the customer is involved. For example, if a customer lodges a claim for the Disability Support Pension they are not medically qualified for the payment then there is no need for an assessment of the customer involvement in a private trust at this stage.