Special disability trusts: providing for a family member with a disability

What is a special disability trust?

The Department of Social Services describes a special disability trust as a way for families and carers to provide funds for a family member with severe disability, for their current or future care and accommodation needs.

It's a private trust that follows strict rules in Part 3.18A of the Social Security Act 1991. In return, it gets generous treatment in the means tests for pensions such as the Disability Support Pension. A Veterans' Affairs version works the same way.

Each trust has one principal beneficiary, and each person can have only one special disability trust.

Who can be the beneficiary of a special disability trust?

The beneficiary must meet a severe disability test. For someone aged 16 or over, all three of these must apply:

• Their impairment would qualify them for the Disability Support Pension, or they get the Veterans' Affairs equivalent.
• A carer looking after them alone would qualify for Carer Payment or Carer Allowance, or they live in a funded institution, hostel or group home.
• They're unlikely to work more than 7 hours a week at or above the relevant minimum wage.

For a child under 16, the carer must have an 'intense' rating under the child care-load assessment, and a treating health professional must certify the disability in writing.

The person doesn't have to be receiving a payment already. Services Australia (Centrelink) or Veterans' Affairs assesses whether they qualify.

How does a special disability trust affect the pension?

These are the concessions, as at October 2026:

The trust can hold more than the limit. Assets above it are simply counted as the beneficiary's own assets for the means test.

The gifting concession for family members

Normally, a pensioner who gives assets away can still be assessed on them under Centrelink's gifting rules. Gifts to a special disability trust are an exception for immediate family members who receive a social security pension and have reached Age Pension age (or receive a Veterans' Affairs service pension or income support supplement at the matching age).

Immediate family means parents (natural, adoptive or step), legal guardians, grandparents and siblings, including half and step siblings but not foster siblings. Together they can give up to A$500,000. The trust must already exist when the gift is made, and a gift made before the giver qualifies can still count if they qualify within 5 years.

What can a special disability trust pay for?

Its primary purpose is the beneficiary's reasonable care and accommodation needs during their lifetime. Within that, the trust can pay for:

• Care, and a home for the beneficiary to live in.
• Medical and dental costs, including private health insurance membership.
• Up to A$15,250 in 2026-27 on discretionary items that aren't about care or accommodation, indexed every 1 July.

It can't pay immediate family members for providing care, or for repairing or maintaining the beneficiary's home, and it can't be spent mainly for someone else's benefit.

What rules must a special disability trust follow?

The trust's terms must include every compulsory clause of the model trust deed published by the Department of Social Services (the current version is dated 5 January 2021). The department says all compulsory provisions must be included for the trust to get the concessions. The main rules:

• One beneficiary. During their life, the trust is held for the principal beneficiary alone.
• At least two trustees. Two or more individuals acting jointly, unless the trustee is a company or a professional trustee (a trustee company or a lawyer). Individual trustees must be Australian residents without convictions for dishonesty or social security offences.
• Limits on what goes in. No conditional gifts and no compensation payments. Nothing from the beneficiary or their partner either, except an inheritance or super death benefit they received within the previous three years.
• No borrowing or related-party deals. The trust can't borrow, lend to the beneficiary, buy property from family, or make uncommercial deals with related people.
• Yearly accounts. Financial statements prepared by an accountant who isn't an immediate family member go to the department by 31 March each year. The beneficiary, family, a guardian or the department can ask for an audit.
• How it ends. The trust ends 12 months after the beneficiary dies, when the money runs out, or just before 80 years, whichever is first. On the beneficiary's death it stops being a special disability trust, and what's left goes to the residual beneficiaries the trust names.

How is a special disability trust taxed?

The ATO taxes the trust's net income at the beneficiary's own marginal rate, rather than the higher rate that applies to some trust income. Giving an asset to a special disability trust for nothing doesn't trigger capital gains tax, and the trust can use the main residence exemption as far as the beneficiary could have.

Should you set one up during your life or in your will?

Both are possible. The Department of Social Services confirms a special disability trust can be a testamentary trust set up through a will, which doesn't come into effect until after the will-maker's death.

A trust set up by a will starts from the date all the Social Security Act requirements are met, which may be later than the death. Trustees should contact Services Australia soon after the death so the trust can be assessed.

Because a person can have only one special disability trust, couples making mirror wills need them to fit together: whichever will takes effect first sets up the trust, and the other should add to it rather than start a second one.

How the Willies Complete Will handles a special disability trust

In the Complete Will you tell us who relies on you for support and whether you'd like their share held in a special disability trust. If you answer yes or not sure, the will:

• Stops anything they'd inherit going to them outright, whether directly, as a backup beneficiary or through another trust in the will.
• Adds it to a special disability trust that already exists for them (for example, one set up by the other parent's will), if that trust's trustee accepts it.
• Otherwise sets up a new trust on terms in a schedule to your will (Schedule 2 when your will also has testamentary trust terms). The terms follow the compulsory clauses of the 2021 model trust deed, and adopt those clauses directly in case anything is missed.
• Names the trustee you choose alongside your executors, and requires at least two individual trustees, or a company or professional trustee, while it's a special disability trust. The beneficiary can never be a trustee or appointor.
• Falls back to a protective trust if, at your death, your family member doesn't meet the severe disability test or the trust can't qualify for another reason.
• Gives the beneficiary the right to live in any home the trust holds, and on their death passes what's left to their children, or otherwise to whoever would have inherited if they'd died before you. Anyone who added money later, such as the other parent, gets their proportion back, or it goes where they nominated.

If you'd rather not use a special disability trust, the will holds their share on a protective trust instead. It has no spending limits, but none of the means-test concessions either, so how Centrelink treats it depends on who controls it and how it's used.

The Complete Will (A$399) includes extra review of complex wishes like this, and a real person checks every will before it's sent. Disability planning can also involve the NDIS, housing and family dynamics, so if your situation is complicated, a lawyer or financial adviser who works with special disability trusts can help. Our guide to testamentary trusts covers the trusts for your other children.