EXPLANATORY STATEMENT
Veterans’ Entitlements (Special Disability Trust ─ Trust Deed, Reporting and Audit Requirements) Determination 2023
Empowering provisions
Subsections 52ZZZWC(2), 52ZZZWF(4) and 52ZZZWG(7) of the Veterans’ Entitlements Act 1986 (the Act).
Purpose
The Veterans’ Entitlements (Special Disability Trust — Trust Deed, Reporting and Audit Requirements) Determination 2023 (the Determination) specifies requirements relating to the form, financial reporting and auditing of special disability trusts.
A trust may be considered a ‘special disability trust’ under the Veteran’s Entitlements Act 1986 (the Act) if a person or family chooses to make private financial provision, through a trust, for the future care and accommodation needs of their children or relatives with disability and the primary purpose of the trust is to meet the reasonable care and accommodation needs of the person with the disability (the beneficiary).
The Act provides beneficial treatment for the beneficiary in relation to the income and assets of a special disability trust. This means that the beneficiary of the trust may potentially have more income and assets to meet their needs before it affects their veterans’ entitlement. Additionally, certain gifts made by immediate family members to a complying Special Disability Trust may be disregarded for the purposes of the donor’s veterans’ entitlement.
The Act provides that a trust is a special disability trust only if it complies with certain requirements. These include trust deed requirements, annual financial reporting requirements and audit requirements. The Act enables the Repatriation Commission to determine requirements in relation to the form and provisions to be used in the trust deed, and the kind of information to be included in the annual financial statements and audits. The Act also enables the Commission to determine qualifications for persons who may prepare financial statements and audits of special disability trusts.
The Determination sets out these matters. It repeals and remakes the Veterans’ Entitlements (Special Disability Trust ─ Trust Deed, Reporting and Audit Requirements) Determination 2013. Under subsection 33(3) of the Acts Interpretation Act 1901, a power to make an instrument of a legislative character, such as the Determination, includes the power to repeal the instrument.
The terms and effect of the Determination are substantially the same as the 2013 Determination. Minor changes have been made to update references to professional bodies and improve readability. The Determination also removes a requirement that was in the 2013 Determination that financial statements for special disability trusts comply with Australian Accounting Standards. This change was made so that trusts are not required to comply with more onerous reporting requirements imposed on certain trusts by changes to the Standards in July 2021. In place of the compliance requirement, the Determination includes two additional requirements for information to be provided in the trust’s financial statements. The reporting requirements in the Determination ensure that trustees of special disability trusts continue to prepare financial statements that provide the level of detail considered adequate to monitor the financial status of the trust without undertaking a significantly increased level of accounting work.
The Determination is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Explanation of provisions
Part 1 Preliminary
Section 1 states the name of the Determination.
Section 2 provides that the Determination commences on the day after it is registered on the Federal Register of Legislation.
Section 3 sets out the authority for making the Determination. It provides that the Determination is made under subsections 52ZZZWC(2), 52ZZZWF(4) and 52ZZZWG(7) of the Act.
Section 4 defines certain expressions used in the Determination.
Section 5 is a standard provision used in instruments that amend or repeal other instruments. It provides that Schedule 1 has the effect that the instrument specified in Schedule 1 is repealed as set out in Schedule 1.
Part 2 Trust deed requirements
Part 2 of the Determination is made for the purposes of section 52ZZZWC of the Act. Part 2 determines the form for a special disability trust deed, the provisions it must include and the form of those provisions, and provisions it must not include. The purpose of Part 2, together with section 52ZZZWC of the Act, is to ensure special disability trusts, to which beneficial treatment under the Act applies, adequately and appropriately provide for essential matters such as restrictions on use of trust funds and powers of trustees.
Section 6 provides that the form of the trust deed is the model trust deed. The term model trust deed is defined at section 4 of the Determination to mean the document named Model Trust Deed for Special Disability Trusts published by the department responsible for administering the Social Security Act, and as existing on the day the Determination commences.
The model trust deed is published by the Department of Social Security and is freely available at Model trust deed for Special Disability Trusts | Department of Social Services, Australian Government (dss.gov.au)
Section 7 requires that the trust deed includes provisions dealing with each of the 31 matters set out in subsection 7(2). Each provision must be in the same form as in the relevant clause of the model trust deed, as specified in subsection 7(2).
Section 8 specifies two types of provisions that a special disability trust deed must not include. These are provisions that are inconsistent with a clause of the model trust deed mentioned in section 7, and provisions that would have the effect of overriding such a clause.
Part 3 Reporting Requirements
Part 3 of the Determination specifies reporting requirements for special disability trusts for the purposes of section 52ZZZWF of the Act.
Section 52ZZZWF requires the trustees of a special disability trust to provide annual financial statements for the trust to the Commission. Subsection 52ZZZWF(4) provides that the Commission may make determinations for the purposes of section 52ZZZWF. If the Commission determines qualifications that must be held by the person preparing the statements, or kinds of information that must be included in the statements, these requirements must be complied with.
Section 9 specifies who may prepare the financial statements for a trust. The person must be a member of CPA Australia, Chartered Accountants Australia and New Zealand, or the Institute of Public Accountants. If a trustee corporation has been engaged to manage the trust, the financial statements may be prepared by an accountant or financial planner employed by the trustee corporation. The person preparing the statements must not be an immediate family member of the principal beneficiary or a residuary beneficiary of the trust, or of a trustee. The term ‘immediate family member’ is defined in section 5Q of the Act.
The purpose of section 9, together with subsection 52ZZZWF(2), is to ensure that only appropriately qualified persons may prepare the financial statements, and there is no potential for a conflict of interests to arise from the statements being prepared by an immediate family member of a beneficiary or trustee.
Section 10 specifies the kind of information must be included in the financial statements.
Section 10 provides that the statements must include a profit and loss statement and balance sheet, as well as notes about the basis on which the statements prepared, whether they comply with the Act and trust deed requirements, and the material accounting policies applied. If the trust has depreciating assets, a depreciation schedule must be included. The information in the financial statements must give a true and fair view of the trust’s financial position and performance as at 30 June of the relevant financial year. The statements must also state the matters set out in subsection 10(4) of the Determination regarding the purpose of payments made out of the trust during the relevant financial year.
Section 10 also provides that the financial statements must include a statutory declaration made by the trustees to the effect that the information given in accordance with section 52ZZZWF of the Act, and Part 2 of the Determination, is true and correct in all material particulars.
Section 11 provides that the financial statements must include a certified copy of the trust’s income tax return for the relevant financial year. However, this requirement does not apply if section 95AB of the Income Tax Assessment Act 1936 applies to the trust’s income.
Part 4 Auditing requirements
Part 4 of the Determination specifies audit requirements for special disability trusts for the purposes of section 52ZZZWG of the Act.
Section 52ZZZWG requires the trustees of a special disability trust to cause an audit of the trust to be carried out, or provide a copy of the report of an earlier requested audit, on receiving an audit request made under subsection 52ZZZW(3) of the Act.
Subsection 52ZZZWG(7) provides that the Commission may make determinations for the purposes of section 52ZZZWG. If the Commission determines qualifications that must be held by the person preparing the audit, or kinds of information that must be included in the audit, these requirements must be met. The period to which the audit must relate is the period (if any) determined by the Commission.
Section 12 sets out the period to which the audit must relate. It provides that the audit must relate to the period specified by the person requesting the audit, being a period of 1 to 5 financial years in the period of 5 financial years ending on the 30 June last preceding the request.
Section 13 specifies who may prepare the audit. Section 13 provides that the person must be a member of the member of CPA Australia, Chartered Accountants Australia and New Zealand, or the Institute of Public Accountants. The audit must not be prepared by the person who prepared, or is preparing, financial statements about the trust for the audit period. In addition, the auditor must not be an immediate family member of the principal beneficiary or a residuary beneficiary of the trust, or of a trustee. The term ‘immediate family member’ is defined in section 5Q of the Act.
The purpose of section 13, together with subsection 52ZZZWG(5), is to ensure that only appropriately qualified persons may prepare audits of trusts, and there is no potential for a conflict of interests to arise from the audit being prepared by an immediate family member of a beneficiary or trustee.
Section 14 specifies kinds of information that must be included in the audit.
Section 14 provides that the audit must include a statement to the effect that the trust’s financial statements give a true and fair view of the trust’s financial position and performance as at 30 June of each financial year to which the audit relates. A statement indicating whether the trust has met the requirements of all or specified provisions of the trust deed must also be included if the audit request was for the purpose of determining whether the trust had met those requirements.
Section 14 also requires the audit to comply with the relevant Australian Auditing Standards. The Australian Auditing Standards are issued by the Auditing and Assurance Standards Board and are freely available at Auditing Standards (auasb.gov.au)
The Standards are incorporated as in force at the date of the commencement of the Determination in accordance with subsection 14(2) of the Legislation Act 2003.
Schedule 1—Repeals
Item 1 repeals the Veterans’ Entitlements (Special Disability Trust ─ Trust Deed, Reporting and Audit Requirements) Determination 2013 as it is replaced by the Determination.
Consultation
Consultation in respect of the Determination was undertaken with the Department of Social Services. The Department of Social Services consulted with CPA Australia when amendments were made to the equivalent Social Security Instrument in 2023 on which this instrument is based.
Incorporation by reference
The Determination refers to and incorporates the Australian Auditing Standards. The Australian Auditing Standards are issued by the Auditing and Assurance Standards Board. The Standards are freely available at Auditing Standards (auasb.gov.au)
The Determination also incorporates the model trust deed, which is a non-legislative non-disallowable document published by the Department of Social Security. The model trust deed is freely available at Model trust deed for Special Disability Trusts | Department of Social Services, Australian Government (dss.gov.au)
In accordance with section 14 of the Legislation Act 2003, the Determination incorporates the model trust deed and Australian Auditing Standards as existing at the time the Determination commences.
Regulatory Impact Analysis
The Determination will have minimal impacts on competition, business activity and compliance costs. The Determination removes a requirement in the instrument it replaces that financial statements for special disability trusts comply with Australian Accounting Standards. This change was made so that trusts are not required to comply with more onerous reporting requirements imposed on certain trusts by changes to the Standards in July 2021.
HUMAN RIGHTS STATEMENT
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Veterans’ Entitlements (Special Disability Trust Deed – 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.
Human rights implications
A trust may be considered a ‘special disability trust’ under the Veteran’s Entitlements Act 1986 (the Act) if a family chooses to make private financial provision, through a trust, for the future care and accommodation needs of their children or relatives with disability and the primary purpose of the trust is to meet the reasonable care and accommodation needs of the person with the disability (the beneficiary).
The Act provides beneficial treatment for the beneficiary in relation to the income and assets of a special disability trust. This means that the beneficiary of the trust will potentially have more income and assets to meet their needs before it affects their veterans’ entitlement.
The Act provides that the Repatriation Commission may determine certain matters in regards to the form and provisions, reporting requirements, and audits of special disability trusts. The Act requires these matters to be complied with. The Determination sets out these matters.
The Determination repeals and remakes the Veterans’ Entitlements (Special Disability Trust ─ Trust Deed, Reporting and Audit Requirements) Determination 2013. The terms and effect of the Determination are substantially the same as for the 2013 Determination. Minor changes have been made to update references to professional bodies and improve readability. The Determination also removes a requirement that was in the 2013 Determination that financial statements for special disability trusts comply with Australian Accounting Standards. This change was made so that trusts are not required to comply with more onerous reporting requirements imposed on certain trusts following changes to the Standards in July 2021. In place of the compliance requirement, the Determination includes additional requirements for information to be provided in the trust’s financial statements. The reporting requirements specified in the Determination ensure that trustees of special disability trusts must continue to prepare financial statements that provide the level of detail considered adequate to monitor the financial status of the trust without undertaking a significantly increased level of accounting work.
The Determination engages the following human 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 in Article 11 of ICESCR and Article 28 of the Convention on the Rights of Persons with Disabilities.
The Determination promotes these rights by ensuring that trust deeds for special disability trusts contain essential provisions. It also ensures that persons who prepare financial statements for special disability trusts, or who audit those trusts, as required by the Act, are appropriately qualified and there is no risk of a conflict of interest. Further, it ensures the financial statements contain information adequate to monitor the financial status of the trust without undertaking a significantly increased level of accounting work.
Conclusion
The Determination is compatible with human rights because it promotes the right to social security and the right to an adequate standard of living.
Repatriation Commission
Rule-Maker