Social Security (Means Test Treatment of Private Trusts - Excluded Trusts) Declaration 2005 (DEST)

Administered by Department of Education, Employment and Workplace Relations

Legislation au F2005L01195 Not in force Legislative Instrument

Legislation content

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.

Overview

The Social Security (Means Test Treatment of Private Trusts — Excluded Trusts) Declaration 2005 was enacted to address the issue of how private trusts should be treated under the Social Security Act 1991, particularly in relation to the means test for certain social security payments such as Austudy and Youth Allowance for students. This instrument was developed in response to the need for a coordinated approach to the administration of common provisions across the Department of Education, Science and Training, Department of Employment and Workplace Relations, and Department of Family and Community Services. The policy objective is to ensure equitable treatment for clients holding assets in private trusts or companies, attributing the assets and income of such structures to the appropriate individuals for means-testing purposes. The Declaration was introduced by the Commonwealth of Australia and specifies classes of trusts that are excluded from the definition of designated private trust, ensuring these trusts' assets and income are not attributed to individuals for means-testing purposes under Part 3.18 of the Act.

Scope and Application

The Social Security (Means Test Treatment of Private Trusts — Excluded Trusts) Declaration 2005 applies to certain classes of trusts, specifying them as excluded trusts for the purposes of the Social Security Act 1991. This legislative instrument is designed to ensure that individuals holding their assets in private companies or private trusts receive consistent treatment under the means test, aligning with those who hold their assets directly. Specifically, the Declaration excludes community trusts and fixed trusts created before a specified reference time from being classified as designated private trusts, thereby exempting their assets and income from attribution to individuals for means-testing purposes. However, these trusts may still be considered assets for other social security purposes under the Act. The Declaration is effective for payments for which the Department of Education, Science and Training has responsibility, particularly Austudy and Youth Allowance for students. This legislative instrument does not require public consultation as it is of minor nature and does not substantially alter existing arrangements, merely clarifying the treatment of court-ordered trusts.

Key Provisions

The Social Security (Means Test Treatment of Private Trusts — Excluded Trusts) Declaration 2005 (the Declaration) specifies classes of trusts that are excluded from being designated private trusts under the Social Security Act 1991 (the Act). These excluded trusts will not have their assets or income attributed to individuals for the purpose of means testing under Part 3.18 of the Act (section 5). The Declaration aims to ensure equitable treatment for clients who hold their assets in private companies or trusts, aligning their treatment with those who hold assets directly (section 3). The excluded trusts can still be considered as assets under other provisions of the Act (section 5). The Declaration imposes specific obligations on entities to ensure compliance with the Act. It mandates that certain trusts, such as community trusts and fixed trusts created before a specified date, are excluded from being designated private trusts (section 5 and section 6). This exclusion means that the assets and income of these trusts will not be attributed to individuals for means testing purposes. Entities must ensure that any trust meeting the criteria specified in the Declaration is properly classified and treated according to the Act. Failure to comply with the requirements set out in the Declaration can result in civil and criminal consequences. While the specific penalties are not detailed in the text, the Act generally provides for fines and other penalties for non-compliance with its provisions. The exact penalties may vary depending on the nature and severity of the breach, and could potentially include substantial fines and other legal repercussions (section 1207P(4)). Ensuring adherence to the Declaration is therefore crucial to avoid any adverse legal outcomes.

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Area of Law
Social Security Law
Instrument
Declaration
Concepts
Definitions & Interpretation
Regulatory Standards
Exclusions & Exclusions

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.