Social Security (Special Disability Trust —Trust Deed, Reporting and Audit Requirements) Determination 2023

EXPLANATORY STATEMENT

Issued by the authority of the Acting Secretary of the Department of Social Services

Social Security Act 1991

Purpose

The Determination prescribes operational requirements for special disability trusts, related to the form of and provisions to be used in a trust deed, financial reporting and auditing requirements.

Background

A special disability trust is a trust established for succession planning by parents and immediate family members to maintain the care and accommodation needs of a person with a severe disability or medical condition causing impairment. Special disability trusts assist immediate family members and carers to make private financial provision for a family member with severe disability. Special disability trusts are provided concessional treatment under the Social Security Act 1991 (the Social Security Act).

Subsections 1209P(2), 1209S(4) and 1209T(7) of the Social Security Act provide the Secretary of the Department of Social Services may, by legislative instrument, determine trust deed form, reporting and audit requirements for special disability trusts.

The Social Security (Special Disability Trust —Trust Deed, Reporting and Audit Requirements) Determination 2023 (the Determination) is made under subsections 1209P(2), 1209S(4) and 1209T(7) of the Social Security Act.

The Determination replaces and is substantively unchanged from the Social Security (Special Disability Trust – Trust Deed, Reporting and Audit Requirements) (FaHCSIA) Determination 2013, which sunsets on 1 October 2023.

Consultation

The Department of Veterans’ Affairs, Department of the Treasury, Australian Securities and Investments Commission, the Australian Accounting Standards Board, CPA Australia, State and Territory Public Trustees and the National Disability Insurance Agency.

Availability of review

The Determination guides decisions as to whether a special disability trust complies with the requirements of the Social Security Act, and therefore receives social security means test concessions for the beneficiary and eligible contributors. These concessions form part of the overall calculation of a person’s rate of social security payment, which is 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 subject to disallowance.

Commencement

The Determination commences on 1 October 2023.

Explanation of the provisions

Part 1—Preliminary

Section 1 states the name of the Determination is the Social Security (Special Disability Trust —Trust Deed, Reporting and Audit Requirements) Determination 2023.

Section 2 provides that the Determination commences on 1 October 2023.

Section 3 prescribes the Determination is authorised by subsections 1209P(2), 1209S(4) and 1209T(7) of the Social Security Act.

Section 4 defines various terms that are used in the Determination.

Part 2 – Trust Deed Requirements

Section 5 provides that, for the purposes of paragraph 1209P(2)(a) of the Social Security Act, a trust deed for a special disability trust must be in the form of the model trust deed. This generally means that a trust deed should be the same in substance as the model trust deed, but does not require it to be identical to the model trust deed.

Section 6 prescribes a list of provisions, as set out in the model trust deed, that must be included in a trust deed for a special disability trust as per paragraph 1209P(2)(b) of the Social Security Act. The provisions broadly relate to matters which are necessary to ensure that the trust complies with the requirements of the Social Security Act in order to be a special disability trust, such as the characteristics of the Principal Beneficiary, trustee and trust purposes. Items 1 and 2 of the table in subsection 6(1) relate to preliminary clauses found immediately above the introduction to the model trust deed.

Section 7 provides that, for the purposes of paragraph 1209P(2)(d) of the Social Security Act, a trust deed of a special disability trust cannot contain any clause that is inconsistent with, or overrides, the operation of any of the clauses listed in the table in subsection 6(1).

Part 3 – Reporting requirements

Section 8 provides that, for the purposes of paragraph 1209S(2)(a) of the Social Security Act, the financial statements of a special disability trust must be prepared by a person who is a member of CPA Australia, Chartered Accountants Australia and New Zealand, the Institute of Public Accountants, or is an employee of a trustee corporation and who is engaged by the trustee corporation to work as an accountant or financial planner. This ensures the financial statements are prepared by a person with the appropriate qualifications to prepare them correctly, in accordance with all accounting requirements. The person preparing the statements is not to be an immediate family member of the principal or residuary beneficiary or a trustee of the trust. This ensures sufficient objectivity is applied in the preparation of the statements.

Section 9 prescribes that, for subsection 1209S(3) of the Social Security Act, the financial statements about the trust must include a profit and loss statement, and a balance sheet with applicable notes, for the relevant financial year. The financial statements must also include notes that disclose the basis on which they were prepared. This includes whether the statements comply with the requirements of the Social Security Act and the trust deed. These notes must also disclose the material accounting policies applied in 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. If necessary, the financial statements must also include a depreciation schedule for each class of assets held by the trust.

The financial statements must include a statement that all amounts paid out of the trust, other than those paid for reasonable administration expenses and taxation, were to meet the reasonable care and accommodation needs of the principal beneficiary, for other purposes ancillary to meeting those needs, or for other purposes that are primarily for the benefit of the principal beneficiary. The statement must also confirm that no amount was paid out of the trust for purposes other than those noted above, or for services provided to the principal beneficiary by an immediate family member.

Subsection 9(2) further requires that all financial statements lodged in accordance with section 1209S of the Social Security Act and Part 3 of the Determination must 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.

Section 10 deals with financial statements and the income tax returns of the trust. Subsection 10(1) provides that, subject to subsection 10(2), when the Secretary is provided with the trust’s financial statements each year, a certified copy of the trust’s income tax return, in relation to the same period, must also be provided. An exception is created by subsection 10(2), where a certified copy of the trust’s income tax return is not required if section 95AB of the Income Tax Assessment Act 1936 applies to the trust’s income.

Section 11 provides that when the trust’s financial statements are provided each year, the trustees of the trust must also provide a statutory declaration to the effect that all the information that has been presented to the Secretary, in accordance with section 1209S of the Social Security Act, is true and correct in all material particulars.

All of these requirements are intended to protect the beneficiary of the trust, and prevent the assets and income of the trust being misused.

Part 4 – Auditing requirements

Section 12 provides that, for the purposes of paragraph 1209T(2)(b) of the Social Security Act, where a person has requested an audit under subsection 1209T(3), the period of the audit will be the period specified by the person requesting the audit. This may be a period of 1 to 5 financial years during the last five completed financial years prior to the audit request.

Section 13 provides that, for the purposes of paragraph 1209T(5)(a) of the Social Security Act, the auditing of a special disability trust must be conducted by a person who is a member of CPA Australia, the Institute of Chartered Accountants in Australia or the National Institute of Accountants. The auditor cannot be any person who prepared, or is preparing, the financial statements of the trust for the financial year to be audited. The person conducting the audit also cannot be an immediate family member of the principal or residuary beneficiary of the trust, or a trustee of the trust.

Section 14 prescribes that, for subsection 1209T(6) of the Social Security Act, the audit must include a statement that the trust’s financial statements give a true and fair view of the trust’s financial position and performance as at 30 June in the relevant year. The audit must also include a statement indicating whether the trust has met the requirements of any trust deed provisions identified by a person who has requested the audit under subsection 1209T(3) of the Social Security Act. Subsection 14(2) outlines that this information must comply with relevant Australian Accounting Standards.

Impact Analysis

The Office of Impact Analysis (OIA) considers the proposal is unlikely to have a more than minor impact. The OIA has advised that the preparation of an Impact Analysis is not required (OIA23-05400).

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Social Security (Special Disability Trust- Trust Deed, Reporting and Audit Requirements) 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 Determination prescribes operational requirements for special disability trusts, related to the form of and provisions to be used in a trust deed, financial reporting and auditing of special disability trusts.

Human rights implications

This legislative instrument engages the following rights:

The right to social security as recognised in Article 9 of the International Covenant on Economic, Social and Cultural Rights (ICESCR); and
The right to an adequate standard of living as recognised in Article 11 of ICESCR and Article 28 of the Convention on the Rights of Persons with Disabilities.

This instrument promotes the right to social security and the right to an adequate standard of living for those people whose social security entitlements are affected by the receipt of income from a special disability trust.

Special disability trusts allow families to access additional social security assets test and gifting rules exemptions that allow them to privately provide for the future care and accommodation needs of their children and certain close relatives with severe disabilities.

This instrument promotes the relevant rights by confirming that where a trust remains compliant with reporting and audit requirements, it maintains its special disability trust status, and in turn, provides additional concessional benefits to the beneficiary under the Social Security Act.

Conclusion

The Determination is compatible with human rights as it promotes the right to social security and the right to an adequate standard of living.

Matt Flavel

Acting Secretary

Department of Social Services

Administered by Department of Social Services

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