top of page
  • Facebook
Search

A Special Disability Trust (SDT) is worth to set up?

  • Writer: NSC
    NSC
  • 2 days ago
  • 3 min read
Never give up your hope.....
Never give up your hope.....

As a parent of a neurodivergent child with additional needs, you may have asked yourself a difficult but important question: “Who will provide financial support for my child when I am no longer here?” It is a question I have reflected on every day for the past nine years, and one that many parents in similar circumstances worry about. While some believe that government support or the NDIS may be enough, the reality is that future systems are uncertain.


From my own research and conversations with professionals, I have come to believe that a SDT can offer a reliable and secure form of long-term financial support. The purpose of this article is to raise awareness of SDTs among parents of children with additional needs and to encourage families who are able to consider whether this structure could help safeguard their child’s financial future.

 

What is a SDT?

A SDT allows parents or other family members to set aside assets for the long-term care, accommodation, medical needs, and limited discretionary spending of a person with a severe disability—without affecting their eligibility for the Disability Support Pension (DSP). (1)


Key Benefits (2)


·        Gifting concession: Eligible family members may collectively contribute up to $500,000 to the trust without triggering the usual Centrelink gifting rules.

·        Assets-test exemption: Up to $832,750 (indexed annually from 1 July 2025) held in the trust is exempt from the beneficiary’s Centrelink assets test.


Why Consider Establishing a SDT?


1. Funds Are Protected and Purpose-Driven

Money in an SDT may be used for:

·        accommodation and housing expenses

·        health and medical costs, including health insurance

·        other disability-related expenses

·        approved discretionary spending (up to $ $14,750, as at July 2025) (3)

A person with a severe disability can have up to $$832,750  (as at July 2025, indexed annually) held in the trust without impacting their social security entitlements. The income test does not apply to income generated by the trust.Family members who contribute up to $500,000 may also benefit from exemptions to Centrelink’s gifting rules, improving their own pension outcomes.¹


2. Unlimited Contributions From the Beneficiary (4)

The beneficiary may contribute unlimited funds to the SDT without affecting their Centrelink entitlements, provided the trust complies with SDT rules.


3. Concessional Treatment of Trust Assets (4)

Trust assets up to the exempt cap are not counted towards the beneficiary’s Centrelink assets test.This helps the beneficiary continue receiving:

·        Disability Support Pension (DSP)

·        Department of Veterans’ Affairs (DVA) benefits

·        Other income-support payments


4. Tax Advantages (4)

·        Certain trust income is taxed at ordinary beneficiary rates, not the penalty tax rates generally applied to minors.

·        With appropriate structuring, this can reduce overall tax liabilities.


When Is a Special Disability Trust Useful? (1)

A Special Disability Trust may or may not be suitable depending on the family’s circumstances:

·        It may not offer significant advantages for parents who plan to leave less than the Centrelink assets-test thresholds (approximately $556,000 if there is no home, or $314,000 if there is one — July 2024 figures).

·        It may also not be immediately beneficial for parents planning to leave significantly more than $$832,750 plus the part-pension asset threshold, although it may still provide long-term advantages as trust assets change over time.

·        A Special Disability Trust is often most useful for families in the middle range, whose child relies on the DSP and who need a structured way to provide for both care and accommodation.

In all cases, the usefulness of an SDT depends on individual financial circumstances, the level of disability support needed, and the long-term goals parents have for their child.

 

Final Thoughts

For many families, a Special Disability Trust provides peace of mind by helping secure a child’s financial future long after we are gone. If you share similar concerns and believe an SDT may be appropriate for your situation, I encourage you to seek advice from a solicitor and accountant with experience in disability trusts and estate planning.

 

 Author: Hugh Vo

Founder of Newcastle Support Coordination (NSC)



 
 
 

Comments

bottom of page