EXPLANATORY STATEMENT
Social Security (Means Test Treatment of Private Trusts — Excluded Trusts) Declaration 2005
Following the Administrative Arrangements Order of 16 December 2004, discussions have been undertaken across the Department of Education, Science and Training, Department of Employment and Workplace Relations, and Department of Family and Community Services with the aim of determining a coordinated approach to the administration of the common provisions in the Social Security Act 1991 (the Act) such as social security means test provisions.
One of the conditions for attributing an asset or the income of a trust to an individual under the Act is that the trust is a "designated private trust”. Subsection 1207P(4) of the Act provides that the Secretary may, by writing, declare that a trust in a specified class of trusts is an excluded trust.
The purpose of this Declaration is to specify classes of trusts that are excluded trusts for the purposes of section 1207P of the Act in relation to payments for which DEST has responsibility, in particular, Austudy and Youth Allowance for persons who are students and any other payment, allowance or supplement insofar as that payment, allowance or supplement relates to persons who are students.
This Declaration excludes certain classes of trusts from the ambit of the definition of designated private trust with the result that the assets and income of such an excluded trust will not be attributed, under Part 3.18 of the Act, to the individual for means-testing purposes. A trust excluded under this Declaration may still be assessed as an asset of a person for social security purposes under any other part of the Act.
This Declaration aims to ensure that clients who hold their assets in private companies or private trusts receive comparable treatment under the means test to those clients who hold their assets directly. The assets and income of the structure will be attributed to the person or persons who control the company or trust, or to the person or persons who were the source of the capital or principal sum of the company or trust.
Part 1 of the Declaration consists of 4 sections. Section 1 of the Declaration states the name of the legislative instrument and section 2 states that the instrument commences on the day after registration pursuant to the Legislative Instruments Act 2005. Section 3 sets out the purpose of the instrument. Section 4 contains interpretation provisions. In particular, the term “community purpose” is defined to mean a purpose that is intended to benefit primarily the members of a particular community or group.
Part 2 specifies that community trusts and fixed trusts (created before reference time) are excluded trusts. Section 5 provides that where the sole or dominant purpose of a trust is to receive, manage and distribute property transferred to it, directly or indirectly, by a government body, for a community purpose, then the trust is an excluded trust. A trust will also be an excluded trust if it holds, manages or disposes of indigenous-held land for a community purpose. Similarly, where the sole or dominant purpose of a trust is to receive, manage and distribute income generated from the use of indigenous-held land for a community purpose, that trust is an excluded trust.
Section 6 specifies that a fixed trust created before 7:30pm (A.C.T. time) on 9 May 2000 (the reference time) will be an excluded trust for the purposes of section 1207P of the Act, unless the trust deed has been varied, or property (other than income generated by the trust) has been transferred into the trust, after that time.
Consultation
The Instrument is of a minor nature and does not substantially alter existing arrangements. The Instrument clarifies the situation which has been raised in regard to “court-ordered trusts”. “Court-ordered trusts” will now be assessed under the trusts and companies legislation rather than being assessed under the general assets test definition in section 11 of the Act. The change does not in any way alter the intent or spirit of the relevant legislation. Public consultation was therefore seen as unnecessary.
Retrospectivity
None.