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Special Disability Trusts

Although the introduction of the Special Disability Trust (SDT) in September 2006 was welcomed by parents and carers of those living with disabilities, it has not been as widely taken up as expected, during questioning in Senate Estimates it was revealed that only 22 trusts have been established Australia wide to date.

I'm aware through constituents contacting the office that many people are not happy with various aspects of the current SDT legislation and that significant barriers are preventing Trusts being established.

Some of the key limitations to the Special Disability Trust in its present form include:

1. Eligibility to be a beneficiary of a STD is too restrictive, meaning that many people may miss out.
There is concern that many people living with a disability will fail to qualify for eligibility because of their inability to meet the requirements, which states the beneficiary must:
i.) have a disability that would, if the person had a sole carer, qualify the carer for carer payment or carer allowance: or
ii.) be living in an institution, hostel or group home in which care is provided for people with disabilities and for which funding is provided (wholly or partly) under an agreement, between the Commonwealth, the State sand the Territories.

2. Capital Gains Tax payable on assets transferred to a SDT.
When a property or assets are transferred into a SDT, Capital Gains tax is payable. This is seen to be unfair when people are trying to establish long term care arrangements for people living with a disability.

3. Tax is payable at 46.5% on unused SDT income and Capital Gains Tax is payable if a property in a SDT is sold (even if it is sold for relocation reasons).
A property held by the Trust is not viewed as personal property or home of the person with a disability as it would be if the property was in the person’s name (that is, if they did not lack the testamentary capacity to own property). If this person was not living with a disability they would be able to buy and sell their own home, paying no Capital Gains Tax.

4. Limited use for SDT funds.
Limiting the SDT to providing for care and accommodation is too narrow. Items such as food, medical expenses, private health cover and dental care are all costs that cannot be paid by a SDT (unless specifically required for the beneficiary’s disability). There is also no allowance for holidays or recreational needs.

5. Stringent Reporting & Audit Requirements
The reporting and audit requirements of a SDT exceed the rules applied to other forms of trusts.

6. Public Trustees have not embraced SDT.
Public trustees in all states are seemingly reluctant to utilise SDT as the administration requirements are unworkable. I have been told two trusts would be required in order to avoid tax on unused SDT income – a costly and complicated exercise that defeats the point of setting up the SDT system.

On Thursday, I moved a motion in the Senate, referring this issue to the Community Affairs Committee for inquiry into what are the problems and what can be done to fix them. I hope this inquiry [set to report by 18th September 2008] will result in Special Disability Trusts that deliver great benefits for those living with a disability.

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