When planning for the future care and financial security of a loved one with a severe disability, many families face the challenge of balancing adequate support with preserving access to government benefits. Special Disability Trusts (SDTs) can be an effective solution. These trust structures allow families to safeguard assets while ensuring the long-term care of their loved one.
What is a Special Disability Trust (SDT)?
A Special Disability Trust is a trust structure established under federal legislation to help families and carers provide for the long-term care and accommodation needs of a person with a severe disability, without compromising government entitlements.
SDTs offer unique social security concessions and asset test exemptions for the person with a disability (the beneficiary) and their immediate family members. They are specifically designed to encourage families to plan ahead for ongoing care and financial support.
Key Features of an SDT
- Means Test Concessions:
SDTs can hold up to a specific concessional amount—$781,250 for 2025–26 (indexed annually)—without affecting the beneficiary’s Centrelink or DVA entitlements. - Capital Gains Tax (CGT) Exemption:
Assets transferred into the trust by an immediate family member are exempt from CGT. - Primary Purpose:
The trust must be used primarily for the beneficiary’s care and accommodation, with limited discretionary spending. - Trustee Requirements:
SDTs must have at least two individual trustees, unless a professional trustee (e.g. solicitor, accountant, or licensed trustee company) is appointed. - Strict Reporting & Compliance Obligations:
SDTs are subject to Centrelink reporting, auditing, and financial obligations each year.
Who is Eligible?
To qualify as the principal beneficiary of an SDT, a person must meet the definition of having a severe disability under the Social Security Act.
For individuals aged 16 years and over:
- Must be eligible for the Disability Support Pension (DSP) or receive a DVA Invalidity Service Pension or Income Support Supplement;
- Must qualify for Carer Payment/Allowance if cared for by a carer, or live in a Commonwealth-State funded facility;
- Must be unable to work more than 7 hours per week at or above minimum wage.
For individuals under 16 years:
- Must meet the criteria for a profound or severe disability, supported by assessments and health professional certifications, including an intense care rating under the Disability Care Load Assessment (Child) Determination 2020.
When Might an SDT Be Used in Estate Planning?
SDTs are particularly valuable in the following situations:
- Planning for the future care of a child or adult child with a disability
- Allowing grandparents to leave an inheritance without affecting benefits
- Appointing an independent trustee to manage funds after death
- Including the SDT in your Will so it takes effect after your passing
- Transferring a home into the trust for the beneficiary to live in, without triggering CGT
Including an SDT in Your Will
There are several ways to incorporate an SDT into your estate plan:
- Include the SDT in your Will in full, ensuring it is automatically established at your death.
- Give your executor the discretion to create an SDT if your intended beneficiary qualifies at the time.
- Set up an SDT during your lifetime (inter vivos) and direct part of your estate to it via your Will.
If you plan to rely on social security concessions, the trust must be established at the time of death (via a Will) or your Will must authorise your executor to create it.
Timing Considerations
There is a three-year window from the date of death to establish and fund an SDT. If the trust is set up and funded within this period, the inheritance will not affect the beneficiary’s Centrelink asset test.
This timeframe allows executors to:
- Confirm eligibility
- Determine if the trust is appropriate
- Set up the trust
- Ensure compliance with Centrelink rules
How Can Nurture Law Help?
At Nurture Law, we guide families through this complex area by:
✔️ Assessing whether an SDT is the right option
✔️ Including the SDT (or option for one) in your Will
✔️ Working alongside financial planners and accountants to create a comprehensive plan
FAQs
Can I set one up now, or only in my Will?
You can establish an SDT during your lifetime or have it created in your Will. Your Will can also give your executor the option to create one later.
Who controls the money?
The trustee (not the beneficiary) manages the trust. You may choose family members, a professional trustee, or both.
Can others contribute?
Yes, immediate family members can contribute and receive CGT relief. Other contributors may not enjoy the same concessions.
Can the funds be used for holidays or other expenses?
Yes, but there is an annual cap (e.g. $13,000 for 2025–26) on discretionary spending. Most expenses must relate to care and accommodation.
Contact Us
If you are considering how best to provide for a loved one with a disability in your estate plan, contact Nurture Law today for clear and compassionate guidance.
