EXPLANATORY STATEMENT
Issued by the authority of the Secretary of the Department of Social Services
Social Security Act 1991
Social Security (Special Disability Trust —Reporting Requirements) Amendment Determination 2023
Purpose
The purpose of this amending determination is to ensure special disability trusts are able to maintain previously applicable financial reporting requirements but remain compliant with the Social Security Act 1991 (the Act), to avoid the more onerous financial statement requirements under the amended Australian Accounting Standards from 1 July 2021.
Background
A special disability trust is a trust established primarily for succession planning by parents and immediate family members for the current and future care and accommodation needs of a person with a severe disability or medical condition.
Special disability trusts assist immediate family members and carers who have the financial means to do so, to make private financial provision for a family member with severe disability and receive means test concessions. Special disability trusts are provided concessional treatment under the Act.
To ensure special disability trusts are compliant with the Act, the trustee or trustees of a special disability trust must prepare and give to the Secretary written annual financial statements of the trust as at 30 June of the relevant financial year.
Section 1209S of the Act allows the Secretary of the Department to determine, by legislative instrument, special disability trust reporting requirements, for the purposes of the Act. The Social Security (Special Disability Trust — Trust Deed, Reporting and Audit Requirements) (FaHCSIA) Determination 2013 (the Determination) is made under that section of the Act.
Paragraph 3.2(2)(b) of the Determination requires financial statements prepared by special disability trusts to comply with the relevant Australian Accounting Standards. The Australian Accounting Standards Board (Board) develops and maintains financial reporting standards, including the Australian Accounting Standards, which are applicable to special disability trusts.
From 1 July 2021, the Board amended the Australian Accounting Standards. The amendments meant that some special disability trusts could no longer prepare Special Purpose Financial Statements in order to comply with the Act and Determination. Instead, they would be required to prepare General Purpose Financial Statements, which is a more onerous undertaking.
This amending determination allows trustees of special disability trusts to continue to prepare financial statements that provide the level of detail considered adequate to monitor the financial status of the trust, but to remove the unnecessary and more onerous burden of requiring a General Purpose Financial Statement to be prepared. This change ensures that special disability trust can continue to comply with their social security financial reporting obligations without undertaking a significantly increased level of accounting work.
The amendments also update the names of the various professional bodies with which an accountant may be registered in Australia to match their current names.
Consultation
Section 17 of the Legislation Act 2003 requires a rule-maker to be satisfied, before making a legislative instrument, that any consultation the rule-maker considered appropriate and reasonably practicable, has been undertaken.
The Board and CPA Australia, a professional accounting body, were consulted during the development of the amending determination. Both organisations assisted in the design of the amendments to ensure they properly allowed for special disability trusts to comply with their social security financial reporting obligations without being required to complete a General Purpose Financial Statement.
Availability of review
The Determination guides decisions as to whether a special disability trust complies with the requirements of the Act, and therefore receives social security means test concessions for the beneficiary and eligible contributors.
Such decisions are subject to internal and external merits review under Parts 4 and 4A of the Social Security (Administration) Act 1999.
The Determination is a legislative instrument for the purposes of the Legislation Act 2003 and is also subject to disallowance.
Explanation of the provisions
Section 1 states that the name of the determination is the Social Security (Special Disability Trust —Reporting Requirements) Amendment Determination 2023.
Section 2 is the commencement provision. It provides that the Determination commences on the day after the instrument is registered.
The amendments will then apply to any financial reporting by a special disability trust after the amendments commence. Trusts have generally not finalised reporting for the 2021/2022 financial year, and will be able to report in respect of that year in the manner provided for by the amendments.
Section 3 sets out that the relevant legislative authority for making the Determination is subsection 1209S(4) of the Social Security Act 1991.
Section 4 provides that each instrument that is specified in a Schedule to this 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.
Schedule 1
This Schedule amends the Social Security (Special Disability Trust — Trust Deed, Reporting and Audit Requirements) (FaHCSIA) Determination 2013.
Item 1 repeals and substitutes subparagraph 3.1(a)(i) with the updated business names of the professional bodies whose members are able to prepare financial statements in order to comply with the Act.
Since the Determination came into effect, the Institute of Chartered Accountants in Australia has changed its business name to Chartered Accountants Australia and New Zealand, and the National Institute of Accountants has changed its business name to the Institute of Public Accountants.
This item does not remove the option for an employee of a trustee corporation, who is engaged by the trustee corporation as an accountant or financial planner, to also prepare financial statements.
Item 2 updates the information that is required to be included in the financial statements in substitution for compliance with the Australian Accounting Standards (repealed by item 3).
In addition to the information relating to profit and loss statements and balance sheets, a financial statement will also require explicit confirmation of the basis on which the financial statements were prepared, as well as confirmation of whether they comply with the requirements of the Act and the trust deed.
This amendment will also require information on the accounting policies that were applied in preparing the financial statements and the nature and extent of any changes in those accounting policies, including the reasons why applying the new accounting policy provides more relevant and reliable information. This will provide information to the Secretary (or delegate) to allow them to be satisfied that the same accounting basis continues to be applied when preparing the financial statements, or give information justifying the nature and extent of any changes and the reasoning for the changes.
Item 3 repeals and substitutes subsection 3.2(2), specifically to remove the requirement in paragraph 3.2(2)(b). Paragraph 3.2(2)(b) of the Determination requires financial statements prepared by special disability trusts to comply with the relevant Australian Accounting Standards. Substitute subsection 3.2(2) maintains the current wording in paragraph 3.2(2)(a), retaining the requirement that financial statements give a true and correct view in all material particulars of the trust’s financial position and performance as at 30 June of the relevant financial year.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Social Security Act 1991
Social Security (Special Disability Trust —Reporting Requirements) Amendment Determination 2023
The Determination 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 effect of the Determination is to allow special disability trusts to continue to prepare financial statements that provide the level of detail required in a Special Purpose Financial Statements, in order to comply with their statutory financial reporting obligations.
Human rights implications
The Determination engages the right to social security under Article 9 of the International Covenant on Economic, Social and Cultural Rights (ICESCR). The right to social security requires that a system be established under domestic law, and that public authorities must take responsibility for the effective administration of the system. The social security scheme must provide a minimum essential level of benefits to all individuals and families that will enable them to acquire at least essential health care, basic shelter and housing, water and sanitation, foodstuffs, and the most basic forms of education.
Conclusion
The Determination is compatible with human rights as it supports a person’s right to social security.
Ray Griggs AO CSC
Secretary
Department of Social Services