Explanatory Statement
Issued by the authority of the Secretary of the Department of Social Services
Social Security Act 1991
Social Security (Means Test Treatment of Private Trusts – Excluded Trusts) Declaration 2025
Purpose
The Social Security (Means Test Treatment of Private Trusts – Excluded Trusts) Declaration 2025 (the Declaration) specifies classes of trusts that are excluded trusts for the purposes of section 1207P of the Social Security Act 1991 (the Act). The effect of a trust being an excluded trust is that the assets and income generated by such a trust is not attributed to an individual for means testing purposes, in working out the individual’s eligibility for and rate of a social security payment under the Act.
The Declaration specifies that fixed trusts created before a specified time and community trusts are the two classes of trusts that are excluded trusts for the purposes of Part 3.18 of the Act.
Background
Private trusts and excluded trusts
In 2000, the means test treatment of private companies and private trusts was revised and Part 3.18 was introduced into the Act.
Part 3.18 of the Act ensures that people who hold their assets in private companies or private trusts receive comparable treatment under the means test to those people 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) of the Act 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.
Subsection 1207P(4) of the Act provides that the Secretary may, by legislative instrument, declare that each trust included in a specified class of trusts is an excluded trust for the purposes of section 1207P. As a result, the Secretary can declare that a private trust is an excluded trust for the purposes of means tests under the Act.
Declaration
The Declaration excludes specified classes of trusts from the definition of designated private trust. The result is that the assets and income generated within such an excluded trust are not attributed, under Part 3.18 of the Act, to the individual for means testing purposes. However, a trust excluded under this Declaration may still be assessed as an asset of a person for social security purposes under any other relevant part of the Act.
There are two classes of trusts which are specified in the Declaration. Firstly, trusts whose assets comprise of property provided by government for the benefit of a community, or whose assets comprise indigenous-held land or income from that land, and whose sole or dominant purpose is to benefit the community. Secondly, fixed trusts existing prior to the 2000-2001 Budget announcement whose trust deed or assets have remained unchanged since that announcement.
The Declaration repeals and replaces the Social Security (Means Test Treatment of Private Trusts — Excluded Trusts) Declaration 2015 (2015 Declaration) which is due to sunset on 1 October 2025. The Declaration remakes the 2015 Declaration in substantially the same terms and does not change the law or policy.
Authority
The Declaration is made under subsection 1207P(4) of the Act, which provides that the Secretary may, by legislative instrument, declare that each trust included in a specified class of trusts is an excluded trust for the purposes of section 1207P of the Act.
Subsection 33(3) of the Acts Interpretation Act 1901 provides that where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend or vary any such instrument. In repealing the 2015 Determination, the Secretary is relying on this provision in conjunction with the power in subsection 1207P(4) of the Act.
The Declaration is a legislative instrument for the purposes of the Legislation Act 2003 and is subject to disallowance.
Commencement
The Determination commences on the day after it is registered on the Federal Register of Legislation.
Consultation
The Department of Social Services consulted with Services Australia and the Department of Veterans’ Affairs on the intention to make the Declaration. These agencies supported the Declaration.
The Department of Social Services did not consult with social security recipients likely to be affected by the Declaration, given the beneficial nature of the Declaration. The Declaration is made in substantively the same terms to the 2015 Declaration and serves the same purpose as the 2015 Declaration.
Availability of merits review
Under subsection 23(17) of the Act, legislative instruments made under the Act form part of the social security law. Decisions made under the Act that are decisions under the social security law are subject to internal and external review under Parts 4 and 4A of the Social Security (Administration) Act 1999.
A decision as to an individual’s rate of social security payment, informed by whether a trust is an excluded trust such that the assets and income generated within such a trust will not be attributed to an individual, is reviewable in this manner.
Explanation of the provisions
Details of the Social Security (Means Test Treatment of Private Trusts – Excluded Trusts) Declaration 2025
Section 1 - Name
Section 1 states how the instrument is to be cited, that is, as the Social Security (Means Test Treatment of Private Trusts – Excluded Trusts) Declaration 2025.
Section 2 - Commencement
Section 2 specifies that the Declaration commences on the day after it is registered.
Section 3 - Authority
Section 3 provides that the Declaration is made under subsection 1207P(4) of the Social Security Act 1991.
Section 4 - Definitions
Section 4 contains definitions of certain terms that are used in the Declaration.
The term “community purpose” means a purpose that is intended to benefit primarily the members of a particular community or group.
The term “government body” includes a department or agency of the Commonwealth, a department or agency of a State or Territory, a municipal corporation or other local government body, or a body corporate in which the Commonwealth, a State or a Territory body holds a controlling interest.
The term “income” is defined as having the same meaning as in subsection 1207P(7) of the Social Security Act 1991. Subsection 1207P(7) defines “income” as meaning income within the ordinary meaning of that expression.
The term “indigenous-held land” is defined as having the same meaning as in section 4B of the Aboriginal and Torres Strait Islander Act 2005. “Indigenous-held land” is defined in that Act to be indigenous-held land if an interest in the land is held by an Aboriginal or Torres Strait Islander corporation, or an interest in the land is held by an Aboriginal person or Torres Strait Islander. Subsections 4B(2) to 4B(4) of the Aboriginal and Torres Strait Islander Act 2005 provide exceptions to this definition where the interest is a minority interest or is held in the capacity of mortgagee.
The term “reference time” means 7.30pm, standard time in the Australian Capital Territory, on 9 May 2000. The definition of reference time is the time and date on which the Ministerial announcement about the then proposed new means test treatment of private trusts and private companies was made.
Section 5 - Schedules
Section 5 provides that each instrument that is specified in a Schedule to the instrument is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this instrument has effect according to its terms.
Section 6 – Excluded trusts – community trusts
Subsection 6(1) provides that a “community trust”, that meets the requirements of subsection 6(2), is an excluded trust. Subsection 6(2) specifies three types of community trusts.
Paragraph 6(2)(a) provides that where the sole or dominant purpose of a trust is to receive, manage or distribute property transferred to it, directly or indirectly, by a government body, for a community purpose, then the trust, as a “community trust”, is an excluded trust for the purposes of section 1207P of the Act.
A trust is also an excluded trust under paragraph 6(2)(b) if the sole or dominant purpose of the trust is to hold, manage or dispose of indigenous-held land for a community purpose.
Paragraph 6(2)(c) provides that where the sole or dominant purpose of a trust is to receive, manage or distribute income generated from the use of indigenous-held land, for a community purpose, then that trust is an excluded trust. This includes situations where a trust has its sole or dominant purpose of distributing income which includes mining royalties, if that income is applied for a community purpose.
Section 7 – Excluded trusts – fixed trusts created before reference time
Section 7 specifies that a fixed trust created before 7:30pm (Australian Capital Territory time) on 9 May 2000 will be an excluded trust for the purposes of Part 3.18 of the Act. However, this will not apply if the trust deed has been varied, or property (other than income generated by the trust) has been transferred into the trust, after the reference time.
Schedule 1 – Repeals
Item 1
Item 1 of Schedule 1 repeals the whole of the Social Security (Means Test Treatment of Private Trusts – Excluded Trusts) Declaration 2015. This instrument is due to sunset on 1 October 2025.
The Declaration is intended to remake the 2015 Declaration in substantively the same terms. It is not intended that there are any changes to the excluded trusts specified in the 2015 Declaration.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Social Security (Means Test Treatment of Private Trusts – Excluded Trusts) Declaration 2025
The Social Security (Means Test Treatment of Private Trusts – Excluded Trusts) Declaration 2025 (the Declaration) is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
The Declaration specifies classes of trusts that are excluded trusts for the purposes of section 1207P of the Social Security Act 1991 (the Act). The effect of a trust being an excluded trust is that the assets and income generated by such a trust is not attributed to an individual for means testing purposes, in working out the individual’s eligibility for and rate of a social security payment under the Act.
The Declaration specifies that fixed trusts created before a specified time and community trusts are the two classes of trusts that are excluded trusts for the purposes of Part 3.18 of the Act.
Human rights implications
The Declaration engages the right to social security and the right to an adequate standard of living.
Article 9 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) recognises the right to social security and requires a social security scheme to be established under domestic law that provides a minimum essential level of benefits to all individuals and families that will enable them to cover essential living costs.
Article 11 of the ICESCR recognises the right to an adequate standard of living, which provides that everyone is entitled to adequate food, clothing and housing and to the continuous improvement of living conditions.
The Declaration operates beneficially as the effect of the Declaration is to ensure that assets and income generated within the specified excluded trusts are not attributed to a person for the purposes of ascertaining their assets or income for means testing purposes under Part 3.18 of the Act. This means the person’s entitlement to a social security payment under the Act is not affected by the assets or income of the excluded trust.
Conclusion
The Declaration is compatible with human rights as it promotes and supports the right to social security and the right to an adequate standard of living.
Xia Du
Acting Branch Manager of the Payment Structures and Seniors Branch Delegate of the Secretary of the Department of Social Services