Social Security (Means Test Treatment of Private Trusts - Excluded Trusts) Declaration 2006 (DEWR)

Administered by Department of Employment and Workplace Relations

Legislation au F2006L01987 Not in force Legislative Instrument

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EXPLANATORY STATEMENT

Social Security (Means Test Treatment of Private Trusts — Excluded Trusts) Declaration 2006

Summary

Subsection 1207P(4) of the Social Security Act 1991 (the Act) provides that the Secretary may, by writing, declare that a trust in a specified class of trusts is an excluded trust for the purposes of section 1207P. This declaration repeals the former declaration made under this provision and makes a new declaration.

The declaration specifies classes of trusts that are excluded trusts.

The effect of a trust being an excluded trust is that the assets and income of such a trust will not be attributed to an individual for the purposes of ascertaining the person's assets or income for means-testing purposes under Part 3.18 of the Act.  However, 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 sets out what trusts are to be classified as excluded trusts for the purposes of Part 3.18 of the Act.

Background

The Social Security and Veterans’ Entitlements Legislation Amendment (Private Trusts and Private Companies – Integrity of Means Testing) Act 2000 amended the Social Security Act 1991 and the Veterans' Entitlements Act 1986 to give effect to a measure in the Government's 2000-2001 Budget to revise the means test treatment of private companies and private trusts.

The measure 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 corpus of the company or trust.

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(1) provides that a trust is a designated private trust if certain criteria are satisfied. One of these criteria is that "the trust is not an excluded trust". In short, a designated private trust cannot be an excluded trust.

The declaration, therefore, 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 the declaration may still be assessed as an asset of a person for social security purposes under any other part of the Act. 

The declaration is a legislative instrument. Under subparagraph 6(d)(i) of the Legislative Declarations Act 2003 (the LIA) a declaration is a legislative instrument if it is declared to be a disallowable instrument under legislation in force before the commencement of the LIA. Subsection 1207P(6) of the Act as in force before the commencement of the LIA declares that a declaration issued under subsection 1207P(4)  is a disallowable instrument.

The declaration has been issued by the Secretary in accordance with section 1207 and commences on 1 July 2006.

 

 


Explanation of the provisions

Part 1

Section 1 of the declaration states the name of the disallowable declaration and section 2 states that it commences on 1 July 2006 and stops having effect at the end of June 2007. Section 3 sets out the purpose of the declaration. 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

Subsection 5(1) specifies that each trust that meets the requirements of subsection 5(2) is an excluded trust. 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 (as defined in section 4), for a community purpose, then the trust is an excluded trust. 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, then, likewise, that 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.  An excluded trust is only excluded from the ambit of Part 3.18 of the Act by operation of this declaration.

Section 6 specifies that a fixed trust created before 7:30pm (A.C.T. time) on 9 May 2000 will be an excluded trust for the purposes of Part 3.18 of the Social Security 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

Consultation regarding the removal of “court-ordered trusts” as a class of excluded trust for the purposes of Part 3.18 of the Act was undertaken with the Department of Veterans’ Affairs before the previous declaration was made as that Department administers legislation which incorporates similar rules relating to the treatment of trusts and companies as that provided by the Act.  The Department of Family and Community Services and the Department of Education, Science and Training were also consulted to ensure a co-ordinated approach to the administration of “court-ordered trusts” in respect of payments under the Act for which they now have responsibility.

The declaration does not alter existing arrangements.  Public consultation was therefore seen as unnecessary.

Retrospectivity

None.

Overview

The Social Security (Means Test Treatment of Private Trusts — Excluded Trusts) Declaration 2006 was enacted to address the problem of ensuring 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. This legislative instrument was introduced by the Parliament of Australia under the authority of the Social Security Act 1991. The policy objective is to revise the means test treatment of private trusts to ensure integrity in social security assessments. The declaration excludes certain classes of trusts from being designated private trusts, thereby preventing the attribution of their assets and income to individuals for means-testing purposes under Part 3.18 of the Act. However, these trusts may still be assessed as an individual's asset under other parts of the Act. The declaration specifies that trusts with the sole or dominant purpose of managing government transfers for community purposes, or those managing income from Indigenous-held land, are excluded trusts. The declaration also considers fixed trusts created before a specific date as excluded trusts unless certain conditions have been met post that date.

Scope and Application

The Social Security (Means Test Treatment of Private Trusts — Excluded Trusts) Declaration 2006 applies to trusts that meet certain criteria and are thereby excluded from being designated private trusts for the purposes of means testing under the Social Security Act 1991. The declaration specifies that certain trusts are excluded if their sole or dominant purpose is to receive, manage and distribute property or income for a community purpose, or if they hold, manage or dispose of Indigenous-held land for a community purpose. Additionally, fixed trusts created before 9 May 2000 are included as excluded trusts unless their deeds have been varied or property (other than income generated by the trust) has been transferred into the trust post this date. These excluded trusts are not subject to having their assets and income attributed to an individual for means testing purposes under Part 3.18 of the Act, although they may still be assessed as an asset under other parts of the Act. The declaration is issued under the authority of the Secretary and applies nationally within Australia. The Act provides for the exclusion of certain trusts from the means test treatment through subordinate instruments, and this declaration is one such legislative instrument.

Key Provisions

The Social Security (Means Test Treatment of Private Trusts — Excluded Trusts) Declaration 2006 (sections 1 to 6) provides for the exclusion of certain classes of trusts from the ambit of Part 3.18 of the Social Security Act 1991, which deals with means testing. These excluded trusts will not have their assets and income attributed to an individual for the purposes of determining their assets or income under the means test. However, these trusts can still be considered as an asset of a person for social security purposes under other parts of the Act. The declaration outlines specific criteria for trusts to be classified as excluded trusts, such as those trusts established primarily to manage and distribute government property for a community purpose or those holding and managing Indigenous-held land for a community purpose. Additionally, fixed trusts created before a specified date will be treated as excluded trusts unless there have been changes to their trust deed or property transfers post that date. The declaration imposes specific obligations on trustees of excluded trusts to ensure their trusts meet the criteria outlined in the Act. Trustees must ensure that their trusts' activities align with the purposes defined in the declaration, such as managing government property or Indigenous-held land for community benefit, to qualify for exclusion from means testing. Trustees must also be aware of and comply with the date restrictions for fixed trusts to maintain their excluded status. Failure to meet these criteria or comply with the declaration could result in the assets and income of the trust being attributed to individuals for means testing purposes, impacting social security entitlements. There are no explicit offences or penalties outlined in the declaration for failing to comply with the exclusion criteria. However, if a trust that should not be classified as an excluded trust under the declaration is treated as such, this could lead to improper means testing outcomes. The Social Security Act 1991 provides for penalties for fraudulent or incorrect claims, including fines and imprisonment. The extent of any penalties would depend on the specific circumstances and the degree of intentionality or negligence involved. Trustees must ensure strict compliance with the declaration to avoid such consequences.

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Social Security Law
Instrument
Declaration
Concepts
Definitions & Interpretation
Repeal & Amendment
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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.