Special Disability Trust (SDT) - initial contact 043-04070000

An SDT is a private trust established for a sole beneficiary who has a severe disability or medical condition, generally by the parent/s or a close relative, for the future care and accommodation needs of the beneficiary.

The contributor may also be exempt from the deprivation provisions if all of the following are met:

• they are of Age Pension age. This may differ if the customer or partner is in receipt of a Department of Veterans' Affairs (DVA) Age Service Pension as qualification for this payment is 5 years earlier, and
• they are in receipt of an income support payment or a DVA Age Service Pension, and
• they are an immediate family member or a certain close relative, and
• the SDT funds do not exceed the concessional gifting cap

An immediate family member and close relative includes natural parents, step-parents, adoptive parents, grandparents, legal guardian for SDT purposes and sibling for SDT purposes. It does not include foster parents, step-grandparents, aunts, uncles, partners, children or in-laws.

To establish an SDT the beneficiary must be assessed as meeting specified medical and work capacity qualifications, but they do not have to claim or be in receipt of a social security pension or benefit. The trust is primarily for accommodation and care related costs incurred by or on behalf of the beneficiary.

An SDT must meet the following requirements:

• be 'protective' in nature
• have only the one principal beneficiary
• the beneficiary must meet the eligibility criteria
• provide primarily for the accommodation and care needs of the principal beneficiary
• have a trust deed containing the clauses set out in the model trust deed
• have a professional trustee, or alternatively have more than 1 trustee
• comply with the investment restrictions
• provide annual financial statements and statutory declarations
• conduct independent audits when required

The sole beneficiary of the SDT must meet the definition of a person with a severe disability or medical condition for SDT purposes to access SDT concessional arrangements.

Anyone can gift to the complying trust although income support customers must meet certain conditions to qualify for an exemption from the deprivation provisions.
The exceptions are:

• the beneficiary and their partner, who are only allowed to make contributions when funded by a bequest or superannuation death benefit, within 3 years of receipt of these assets
• the Settlor, who can only contribute the settled sum

In certain circumstances, the requirement to transfer within the last 3 years may be waived under Section 1209U of the Social Security Act 1991 and in accordance with Part 3 of the Social Security (Special Disability Trust) Guidelines where:

• transfer of the asset to the trust was delayed as a result of court proceedings relating to the asset, or
• assets were previously transferred to a trust intended to be a Special Disability Trust, or
• intention was to transfer the assets within the allowable 3 year timeframe, and
• contravention of paragraph 1209R(1)(b) did not involve fraudulent conduct

These waivers must be referred to the Income Support Means Test Level 3 Policy Helpdesk for approval.

The complying SDT is exempt from the Assets Test for the beneficiary to the extent of the funds below the concessional asset limit. If the asset value of the trust is over this limit, the excess will be included in the means test assessment of the beneficiary of the SDT.

If the beneficiary's principal home is part of the trust assets, it is an exempt asset and does not count towards the trust's concessional limit or assessable assets. Any income earned by the SDT is not assessable under the Income Test for the beneficiary.

The following are subject to the deprivation provisions:

• gifts that are above the concessional gifting cap
• gifts made prior to 20 September 2006 for 5 years from the date of gift
• gifts made by customers under Age Pension age
• gifts made by customers who are not immediate family members

Age pension age customers can contribute to an SDT and be exempt from the deprivation provisions provided the SDT is for their child, grandchild or sibling and the total SDT concessions applied funds do not exceed the concessional gifting cap.

• The Victorian Government introduced a legislative measure for the 2024 calendar year to allow a land tax exemption when land, that is owned by an immediate family member of a person with a qualifying disability, is used as a principal place of residence by that person with a qualifying disability
• The criteria for a qualifying person with a disability is satisfied if Services Australia provides a letter that states the person meets the impairment and disability conditions of the beneficiary requirements of a special disability trust
• A special disability trust is not required to be established to receive this exemption

Staff must escalate to an SDT Complex Assessment Officer for a faster assessment if a customer or nominee is:

• making initial contact about a potential Special Disability Trust
• querying the progress of an existing case, or
• requesting a beneficiary assessment for the sole purpose of seeking a land tax exemption

See Process for the steps required, before sending a Fast Note. Select Auto Text, use Complex Assessment > Request for CAO action > CAO Special Disability Trust.