NDIS Special Disability Trusts

With the NDIS rollout in Queensland approaching there is a new available form of trust to know about. A special disability trust is focused around assisting family and carers in providing care and accommodation to a person with a severe disability.

There are specific responsibilities in completing a trust tax return for the special disability trusts. The special disability trust uses the principal beneficiary's marginal tax rate for the taxation rate of the net income. This tax rate for special disability trusts replaces the usual rates under legislation, to overall open up more funds for care.

Unlike other trusts, where taxation of net income depends on a beneficiary being actually presently entitled to trust income, a principal beneficiary is deemed to be presently entitled to all of the income of a special disability trust (even if there is none). The principal beneficiary of the trust is also taken to be under a legal disability. This means the entire net income of the trust is assessed to the trustee on behalf of the beneficiary.

If the principal beneficiary is a beneficiary in more than one trust or derives income from other sources, the net income of the special disability trust should also be included in the beneficiary's assessable income. Any tax payable by the trustee of the special disability trust should be claimed as a credit on the beneficiary's individual tax return (to prevent double taxation).

Example

Lisa set up a disability trust Lisa M Trust, which is a special disability trust. Lisa has a casual job and earned $10,000 a year through this employment. This is under the $18,000 threshold for taxable income brackets, setting it at a tax rate of 0%. The Lisa M Trust in the same year earned an income of $10,000. This means that the net income for distribution within the Lisa M Trust is $10,000.

The trustee is responsibly for reporting the use of funds from the special disability trust for the purposes of reasonable care and accommodation. In this scenario $8,000 of the $10,000 received into the trust during the income year, was listed by the trustee as used for reasonable care and accommodation. This left $2,000 in the special disability trust.

The sum of all the amounts going into the special disability trust, as well as Lisa's income, are included in her assessable income. However she is able to offset any tax payable by the trustee of the Lisa M Trust against her assessable income.