EXPLANATORY STATEMENT

Veterans’ Entitlements (Special Disability Trust – Trust Deed, Reporting and Audit Requirements) Determination 2006

Summary

The Veterans’ Entitlements (Special Disability Trust – Trust Deed, Reporting and Audit Requirements) Determination 2006 (the Determination) is made under subsections 52ZZZWC(2), 52ZZZWF(4) and 52ZZZWG(7) of the Veterans’ Entitlements Act 1986 (the Act).  The Determination has three purposes:

• it allows the Repatriation Commission (the Commission) to specify the form and provisions to be used in a trust deed for a trust to qualify as a Special Disability Trust;
• it sets out requirements for the annual financial reports of a trust; and
• it sets out requirements for the auditing of Special Disability Trusts.

The Determination is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

Part 1—Preliminary

Part 1 sets out the preliminary information about the Determination, namely, the name of the determination (section 1.1), commencement (section 1.2) and definitions (section 1.3).

Part 2 – Trust Deed Requirements

Section 2.1 provides that for the purposes of paragraph 52ZZZWC (2)(a), the trust deed of a trust that wishes to qualify as a Special Disability Trust must be in the form of the “model trust deed”.  This is a term defined in section 1.3 and refers to a booklet published by the Department of Families, Community Services and Indigenous Affairs, which sets out the preferred model trust deed for a Special Disability Trust.

Section 2.2 provides a list of clauses from the “model trust deed” that are mandatory to be included in any trust deed that wishes to qualify as a Special Disability Trust (paragraph 52ZZZWC(2)(b)).  These clauses must be used in the form set out in the “model trust deed” (paragraph 52ZZZWC (2)(c)).

Section 2.3 provides that, for the purposes of paragraph 52ZZZWC (2)(d) of the Act, a trust deed of a Special Disability Trust cannot contain any clause that is inconsistent, or overrides, the operation of any of the clauses listed in the table in subsection 2.2(1).

Part 3 – Reporting requirements

Section 3.1 provides that, for the purposes of paragraph 52ZZZWF(2)(a) of the Act, the financial statements of a Special Disability Trust must be prepared by a person who is:

• a member of CPA Australia, the Institute of Chartered Accountants in Australia or the National Institute of Accountants; or

• an employee of a trustee corporation and  is engaged to work as an accountant or financial planner. 

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.

Section 3.2 provides that, for subsection 52ZZZWF(3), the financial statements about the trust must include, for the relevant financial year, the following items:

• a profit and loss statement;
• a balance sheet (with applicable notes); and
• a depreciation schedule for each class of assets held by the trust (if necessary). 

The financial statements must comply with relevant Australian Accounting Standards and give a true and fair view of the trust’s position as at 30 June in the relevant year.  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 (or for purposes ancillary to meeting those needs) and no amount was paid out for purposes other than those noted above or for services provided to the principal beneficiary by an immediate family member.

Section 3.3 provides that when the Commission is provided with the trust’s financial statements each year, a certified copy of the trust’s income tax return, in relation to this same period, must also be provided.

Section 3.4 provides that when the Commission is provided with the trust’s financial statements 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 Commission, in accordance with section 52ZZZWF of the Act, is true and correct in all material particulars.

Part 4 – Auditing requirements

Section 4.1 provides that for the purposes of paragraph 52ZZZWG (2)(b) of the Act, where a person has requested an audit under subsection 52ZZZWG (3) of the Act, the period of the audit will be the period specified by the person requesting the audit, being a period of 1 to 5 financial years during the last 5 completed financial years prior to the audit request.

Section 4.2 provides that, for the purposes of paragraph 52ZZZWG (5)(a) of the 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;
• not an immediate family member of the principal or residuary beneficiary or of a trustee of the trust;
• not any person who prepared, or is preparing, the financial statements of the trust for the financial year to be audited.

Section 4.3 provides that, for subsection 52ZZZWG (6), the audit must comply with relevant Australian Auditing Standards and provide a statement that the trust’s financial statements give a true and fair view of the trust’s position and performance as at 30 June in the relevant year.  The audit must also include a statement as to whether the trust has complied with specified provisions of the trust deed (or all of the provisions of the trust deed), if the person requesting the audit has asked for this matter to be audited.

CONSULTATION

When the Special Disability Trusts measure was announced an Advisory Group was established.  This group was chaired by Ian Spicer, chair of the National Disability Advisory Council, and included financial experts and parents of children with a severe disability.  The Advisory Group first met in December 2005 and made twenty recommendations in March 2006, the majority of which were accepted and included in the resulting policy.

These determinations form part of the policy that was developed from the recommendations provided by the Advisory Group.  As such consultation has already been undertaken.

The Commission noted that the Department of Families, Community Services and Indigenous Affairs (FaCSIA) recently made a legislative instrument virtually identical to the one attached.  FaCSIA consulted the Department of Education, Science and Training (DEST) and the Department of Employment and Workplace Relations (DEWR), to ensure a co‑ordinated approach in respect of payments under the Social Security Act 1991, for which DEST and DEWR share responsibility.  FaCSIA also consulted the Department of Human Services in relation to service delivery issues.

INCORPORATED DOCUMENT

The attached Instrument incorporates-by-reference the Australian Accounting Standards, the Australian Auditing Standards and a Model Trust Deed.  These documents are available on the Internet at, respectively, the following sites:

http://www.aasb.com.au/

http://www.auasb.gov.au/standards_new_AuASB.htm#Standards

www.facsia.gov.au

Regulation Impact Statement

There was no requirement to prepare a Regulation Impact Statement in regard to the Instrument, as this measure is not likely to have a direct, or a substantial indirect, effect on business and is not likely to restrict competition.