Veterans' Entitlements (Means Test Treatment of Private Trusts - Excluded Trusts) Declaration 2005

Administered by Department of Veterans' Affairs

Legislation au F2005L00874 Not in force Legislative Instrument

Legislation content

 

EXPLANATORY STATEMENT

 

Veterans' Entitlements (Means Test Treatment of Private Trusts - Excluded Trusts) Declaration 2005

 

Summary

 

Subsection 52ZZB(4) of the Veterans' Entitlements Act 1986 (the Act) provides that the Repatriation Commission (Commission) may, by writing, declare that a trust in a specified class of trusts is an excluded trust for the purposes of section 52ZZB of the Act. This Instrument repeals the former Instrument made under this provision and makes a new Instrument.

 

The attached Instrument 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 the Act.

 

This Instrument removes "court-ordered trusts" as a class of excluded trust for the purposes of the Act. This amendment is to make it clear that "court-ordered trusts" should now be assessed under 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 52ZZB(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 Instrument, 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 the Act, to the individual for means-testing purposes.

 

Explanation of the provisions

 

Part 1

 

Section 1 of the Principles states the name of the instrument and section 2 states that the instrument commences on the day after registration pursuant to the Legislative Instruments Act 2003. 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

 

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 or 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.

 

A trust will also be an excluded trust if its sole or dominant purpose is to hold, manage or dispose of indigenous-held land for a community purpose.

 

Similarly, 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, likewise, 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 will be an excluded trust for the purposes 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.

The instrument is considered to be a legislative instrument for the purposes of the Legislative Instruments Act 2003.

 

Consultation

 

None. For the purposes of the definition of "explanatory statement" (consultation) in subsection 4(1) of the Legislative Instruments Act 2003 the Rule-Maker, in this case the Repatriation Commission, considered consultation in respect of the legislative instrument was not necessary.

 

The Instrument is essentially the same as the instrument it repeals except that it now provides that the income/assets of a court-ordered trust may be attributed to an individual under a body of rules in the Veterans' Entitlements Act 1986 (VEA) known as the "attribution rules" (new rules).

 

The repealed instrument provided that the income/assets of a court-ordered trust could not be attributed to an individual under the new rules. It did this only because it was the intention that such income/assets could be assessed as the individual's income under another set of rules in the VEA (old rules).

 

Put simply, it was considered that there was no need to provide under the new rules that the income/assets of a court-ordered trust could be attributed to the beneficiary because this was provided for under the old rules. Accordingly, the repealed instrument excluded court-ordered trusts from the new rules. But it was always the intention that the income/assets of a single-beneficiary trust could be assessed as the property of the beneficiary.

 

However, a recent judicial decision brought into question the reliance upon the old rules to ensure that the income/assets of a single-beneficiary court-ordered trust would be assessed as the beneficiary's income/assets.

 

It became necessary, therefore, in order to remove any doubt that the income/assets of a court-ordered trust may be assessed as the property of a beneficiary, to repeal the former instrument and make a new one that enables the income/assets of court-ordered trusts to be attributed to a beneficiary, thereby reinforcing the integrity of the relevant legislation. This change does not in any way alter the intent or spirit of the relevant legislation and it will have an impact in very few cases. Public consultation was therefore seen as unnecessary.

 

Documents Incorporated By Reference

 

For the purposes of the definition of "explanatory statement" in subsection 4(1) of the Legislative Instruments Act 2003 (documents incorporated in legislative instruments) the document incorporated-by-reference in the instrument is:

 

Section 4B of the Aboriginal and Torres Strait Islander Commission Act 1989

This document is available on the website SCALE of the Australian Government Attorney-General's Department.

 

http://scaletext.law.gov.au/html/pasteact/0/286/top.htm

Retrospectivity

 

None.

 

Overview

The Veterans' Entitlements (Means Test Treatment of Private Trusts - Excluded Trusts) Declaration 2005, enacted in 2005, addresses a specific gap in the means testing provisions under the Veterans' Entitlements Act 1986 (VEA). The Act, initiated by the Parliament of Australia, aims to ensure a more equitable assessment of veterans' entitlements by revising how private trusts are treated under the means test. One significant change introduced by this legislation is the exclusion of "court-ordered trusts" from the category of trusts that are not subject to the means test, thereby ensuring that these trusts are appropriately assessed under the Act. This amendment was necessary to clarify that court-ordered trusts should now be included in the means testing, thereby reinforcing the integrity of the legislation. The purpose of this declaration is to specify classes of trusts that are excluded from being designated private trusts, ensuring their assets and income are not attributed to individuals for means-testing purposes under the VEA. The instrument identifies certain trusts, such as those established for community purposes or to manage indigenous-held land, as excluded trusts. The declaration also specifies that fixed trusts created before a particular date remain excluded unless their trust deed has been altered or property has been transferred into them post that date. This legislative instrument, made under the Legislative Instruments Act 2003, was deemed not to require public consultation as the changes primarily clarify existing legislative intent without substantively altering the policy framework.

Scope and Application

The Veterans' Entitlements (Means Test Treatment of Private Trusts - Excluded Trusts) Declaration 2005 pertains to the Veterans' Entitlements Act 1986 and provides a framework for the means-testing of veterans' entitlements by specifying classes of trusts that are excluded from being designated private trusts. This exclusion means that the assets and income of these trusts will not be attributed to an individual for the purposes of means-testing. The instrument applies to trusts that meet specific criteria, such as those established by a government body for community purposes or those holding, managing, or disposing of indigenous-held land for community purposes. The instrument also includes fixed trusts created before 7:30pm (A.C.T. time) on 9 May 2000, unless their terms have been varied or property (excluding income generated by the trust) has been transferred into the trust post this date. This declaration has a Commonwealth jurisdictional reach and is aimed at ensuring the integrity of means testing for veterans' entitlements, particularly in relation to private trusts. Notably, it removes court-ordered trusts from the list of excluded trusts, ensuring their income and assets are assessed under the relevant rules in the Veterans' Entitlements Act 1986, thereby reinforcing the integrity of the legislation. The instrument is a legislative instrument under the Legislative Instruments Act 2003 and does not extend retroactively.

Key Provisions

The main operative sections of the Veterans' Entitlements (Means Test Treatment of Private Trusts - Excluded Trusts) Declaration 2005 (the Instrument) are sections 5 and 6, which identify classes of trusts that are considered "excluded trusts" for the purposes of the Veterans' Entitlements Act 1986 (VEA). Specifically, subsection 5(1) states that a trust is an excluded trust if its sole or dominant purpose is to receive, manage or distribute property transferred by a government body for a community purpose, or to hold, manage or dispose of indigenous-held land for a community purpose, or to receive, manage or distribute income generated from the use of indigenous-held land for a community purpose (subsection 5(2)). Additionally, section 6 specifies that a fixed trust created before 7:30pm (A.C.T. time) on 9 May 2000 will be an excluded trust 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. The Instrument imposes specific obligations and requirements on the Repatriation Commission (Commission), which is responsible for declaring certain trusts as excluded trusts under section 52ZZB(4) of the VEA. The Commission must ensure that trusts meeting the criteria outlined in sections 5 and 6 of the Instrument are identified as excluded trusts. This means that the assets and income of such trusts will not be attributed to an individual for means-testing purposes under the VEA. Additionally, the Instrument requires the Commission to update the list of excluded trusts as necessary to reflect changes in legislative intent or to address any ambiguities that may arise. Breaches of the provisions outlined in the Instrument can lead to civil and criminal consequences. While the Instrument does not specify particular offences, it is clear that any failure by the Commission to correctly identify excluded trusts could result in improper means-testing assessments under the VEA. This could lead to significant financial implications for affected veterans and their families, as well as potential legal challenges. Furthermore, if the Commission fails to update the list of excluded trusts in line with legislative changes, it could result in the misapplication of means-testing rules, which could be subject to review or correction by the relevant authorities. The precise penalties for such breaches would be determined by the courts or relevant tribunals, but they could include fines or other sanctions as deemed appropriate by the relevant authority. In summary, the Veterans' Entitlements (Means Test Treatment of Private Trusts - Excluded Trusts) Declaration 2005 sets out specific classes of trusts that are excluded from the means-testing provisions of the Veterans' Entitlements Act 1986. These provisions are designed to ensure that certain trusts, particularly those established for community or indigenous purposes, are not subject to means testing. The Repatriation Commission has the responsibility to correctly identify and declare these excluded trusts, and any failure to do so could result in significant legal and financial consequences.

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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.