What special disability trusts can pay for 13 Nov 2018

Blog / Special Disability Trusts

A special disability trust provides great financial benefits (click here for an explanation of what is a Special Disability Trust).
However there are restrictions regarding expenses which can be paid from the Trust and the following is an explanation.

The primary purpose of the trust is to pay for any care and accommodation costs that relate to the person's disability. These are costs which are necessarily higher due to the nature of the beneficiary's disability.

A care need is a reasonable care need if:
•    the need arises as a result of the disability of the principal beneficiary, and
•    the need is for medical-related and dental costs of the principal beneficiary, including but not limited to health insurance
     and  ambulance cover, medicines, surgery, specialist and general practitioner services, or
•    the daily care fee and any additional itemised fees charged by an approved provider in relation to the principal beneficiary's
     care and accommodation in a residential care service or in certain supported care accommodation, and
•    the need is met in Australia.

Examples of reasonable care needs include, but are not limited to:
•    professional care and case management required for, or because of, the principal beneficiary's disability,
•    therapy (including alternative therapy) that is approved, in writing, by a medical practitioner as required for, or because of, the
     principal beneficiary's disability,
•    specialised food specified by a medical practitioner as essential for the principal beneficiary's health,
•    mobility aids, prostheses and positioning aids required for, or because of, the principal beneficiary's disability,
•    sleeping and sensory aids required for, or because of, the principal beneficiary's disability,
•    personal care aids required for, or because of, the principal beneficiary's disability,
•    pressure care aids required for, or because of, the principal beneficiary's disability,
•    continence aids required for, or because of, the principal beneficiary's disability,
•    communication devices (including computers) that are essential, or that have been modified, because of the principal
     beneficiary's disability,
•    modified vehicle, if required for, or because of, the principal beneficiary's disability,
•    modification to vehicle, if required for, or because of, the principal beneficiary's disability,
•    transport required for, or because of, the principal beneficiary's disability,
•    training for transitional or independent living skills of the beneficiary.

The trust cannot be used to meet the costs of care provided by the trustee, partner, parent or immediate family member for care provided.

Act reference: SSAct section 1209N Trust purpose requirements, section 23(1)-'immediate family member'

Allowable accommodation needs & costs

An accommodation need of the beneficiary is a reasonable accommodation need if:
•    it arises as a result of the disability of the principal beneficiary, or
•    the need to pay for property (whether purchased in part or full, or rented) is for the accommodation needs of the beneficiary
     AND the property is acquired or rented from a person who is not an immediate family member of the principal beneficiary.
     Property not used for the accommodation needs of the principal beneficiary can be rented at market value provided the
     income is used for the benefit of the principal beneficiary, or
•    the need to pay rates and taxes on a property is a reasonable accommodation need if the property:
     o    is owned by a special disability trust, and
     o    is used for the accommodation of the principal beneficiary of the special disability trust, or
     o    is rented at market value and the income from the rent is used for the benefit of the beneficiary, or
•    the need to pay for maintenance or upkeep on property is a reasonable accommodation need if the property:
     o    is owned by a special disability trust, and
     o    is used for the accommodation of the principal beneficiary of the special disability trust, or
     o    is rented at market value and the income from the rent is used for the benefit of the beneficiary.

Examples of reasonable accommodation needs include, but are not limited to:
•    modification to the principal beneficiary's place of residence arising from his or her disability,
•    payment for the purchase of the principal beneficiary's place of residence if the payment is not made to an immediate family
     member of the principal beneficiary,
•    payment of rental for the principal beneficiary's place of residence if the payment is not made to an immediate family member
     of the principal beneficiary,
•    payment of accommodation bond for the principal beneficiary if the payment is not made to an immediate family member of
     the principal beneficiary,
•    any itemised fees which specifically relate to the accommodation of the principal beneficiary residing in a residential care
     service.

The trust cannot be used to meet the costs of care provided by the trustee, partner, parent or immediate family member for care provided.

Act reference: SSAct section 1209N Trust purpose requirements, section 23(1)-'immediate family member'

Maintenance of trust property

From 1 January 2011, the trust can pay for the maintenance of trust property if there is a reasonable need. Maintenance of trust property assets means keeping the property in comparable condition and/or to a condition that it is safe for use.

Maintenance does not mean replacement, unless it can be proven in writing by a specialist in the specific field that the item needs to be replaced as it cannot be fixed.

Example: The heating system malfunctions and due to the age of the system, a part cannot be obtained to return it to working order, therefore a new comparable heating system needs to be installed, i.e. ducted heating replacing ducted heating, a wall heater cannot be replaced under maintenance for ducted heating, but can be replaced from the discretionary spending.

Examples of maintenance include, but are not limited to:
•    having a leaking roof fixed by replacing several tiles, or getting the ridge capping re-capped,
•    having a leaking pipe fixed or tap washers replaced,
•    having faulty part/s replaced on heating/air conditioning units that are malfunctioning,
•    servicing of heating/air conditioning units,
•    painting of exterior of house once every 10 - 12 years,
•    painting of interior of house once every 8 - 10 years,
•    monthly garden maintenance, i.e. lawn mowing, pruning (if required),
•    adjustment of internal/external doors due to house movement,
•    yearly steam cleaning of floor coverings, i.e. carpets/tiles,
•    yearly cleaning of gutters (if required).

Payment for maintenance cannot be paid to an immediate family member. Any maintenance must be provided by an arms-length employee of the special disability trust, i.e. gardener, cleaner, painter, plumber etc.

Act reference: SSAct section 1209N Trust purpose requirements
Social Security (Special Disability Trust) Guidelines 2011


Purposes ancillary to the primary purpose

The trust may also pay for costs that are ancillary to the primary purpose and necessary or desirable to facilitate the achievement of that purpose. For example, the trust may pay for legal costs associated with purchasing the principal beneficiary's place of residence.

The trust cannot be used to meet the costs of care provided by the trustee, partner, parent or immediate family member for care provided.

Act reference: SSAct section 1209N Trust purpose requirements, section 23(1)-'immediate family member'
Social Security (Special Disability Trust) Guidelines 2011


Prohibition on payment of immediate family members

The trustee cannot pay any immediate family member for providing care to the principal beneficiary. Any paid care must be provided by an arms-length employee of the special disability trust, e.g. nurse, physiotherapist, etc.

Act reference: SSAct section 23(1) Dictionary, section 1209R Trust property requirements

Incidental benefit from expenditure

Where another party (not the principal beneficiary) benefits from expenditure that was incurred for the principal beneficiary, the expenditure is allowable where the other party's benefit was of a non-cash nature, minor and provided on a basis that is infrequent and irregular.

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  Disclaimer and Warning
The information above is of a general nature only.  It should not be used as a source to make financial decisions.  It's also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status.  We recommend that if you are looking for advice on this matter, you should contact us.


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