How to Manage a Special Disability Trust as Trustee | HFI

Special Disability Trusts · HFI Guidance

How to Manage a
Special Disability Trust as Trustee

Managing a Special Disability Trust as trustee carries specific legal obligations. The tax and social security concessions the trust receives depend entirely on those obligations being met. This guide explains what is required.

By Health & Finance Integrated  ·  Updated 2 June 2026  ·  General information only

2
Trustees minimum
31 Mar
Annual reporting deadline
Indexed
Discretionary spending limit
Loss of status
Consequence of non-compliance

Understanding the structure

What Is a Special Disability Trust?

A Special Disability Trust (SDT) is a trust established for the primary purpose of providing for the reasonable care and accommodation needs of a person with a severe disability. The principal beneficiary must be the only beneficiary during their lifetime.

SDTs are regulated by the Social Security Act 1991 (Cth) and administered by the Department of Social Services (DSS). They receive concessional treatment under social security and tax law, provided the trust and its administration comply with the legislative requirements.

Those concessions are not automatic. They depend on the trust being correctly established and correctly managed from year to year. Non-compliance can result in the trust losing its SDT status, with significant consequences for the beneficiary’s Centrelink entitlements and for family members who have gifted to the trust. Trustees should not assume a breach can simply be corrected after the fact.

SDT concessions available

  • Assets held in the trust are exempt from the beneficiary’s Centrelink assets test up to the concessional asset limit
  • Gifts to the trust by eligible family members are exempt from the gifting rules up to the concessional gifting limit
  • Concessional tax treatment applies where the trust qualifies
  • Superannuation death benefits can be contributed to the trust within three years of receipt

Consequences of non-compliance

  • Loss of SDT status — the trust is then assessed under normal private trust rules
  • Trust assets may become assessable under the beneficiary’s Centrelink tests
  • Gifts made within the preceding five years may be reassessed
  • Loss of status can have serious consequences and trustees should not assume a breach can simply be corrected after the fact
  • In some circumstances, waiver provisions may be considered, but compliance should be maintained proactively rather than repaired later
  • Assessed by a complex assessment officer — the process is serious

Eligibility requirements

Who Can Act as Trustee of a Special Disability Trust?

An SDT must have at least two individual trustees, or a professional trustee. The eligibility rules are specific and all trustees must meet them throughout their time in the role.

Individual trustees

  • At least two individual trustees required if no professional trustee
  • Must be an Australian resident
  • Must not have been convicted of an offence involving dishonest conduct under Commonwealth, State, Territory or foreign law
  • Must not have been disqualified from managing a corporation under the Corporations Act
  • Family members can act as trustees
  • Family member trustees cannot be paid from the trust for providing services or care to the beneficiary

Professional trustees

  • A professional trustee means a trustee corporation or an Australian legal practitioner
  • A single professional trustee satisfies the trustee number requirement
  • Professional trustees are often considered where individual trustees are aging, have limited financial experience, or where trustee succession is a concern
  • Professional trustees charge fees, which are a permitted trust expense
Property acquired by the trust cannot be purchased from or rented from an immediate family member. Paid care and maintenance services must be provided by arm’s-length workers. These rules apply regardless of who acts as trustee.

Legal obligations

What Trustees Are Responsible For

Trustees of a Special Disability Trust carry specific legal responsibilities. Each obligation must be met on an ongoing basis, not just at establishment.

1

Managing trust assets for the benefit of the principal beneficiary

All expenditure must serve the beneficiary’s care, accommodation or permitted discretionary needs. Expenditure that benefits family members or third parties is not permitted, with limited exceptions for incidental and irregular benefits. This obligation is ongoing and applies to every transaction the trust makes.

2

Operating within the permitted expenditure rules

The trust can pay for reasonable care needs such as medical costs, professional care and mobility aids. It can pay for reasonable accommodation needs such as property purchase, rent and modifications. There is also an indexed annual discretionary spending limit for additional items including food, clothing, communication devices, recreation and utilities.

3

Establishing and maintaining a written investment strategy

The trust must have a written investment strategy that addresses risk and return, diversification, liquidity, and tax. The strategy must be aimed at achieving the primary purpose of the trust. The trust cannot lend to or invest in a related party. It cannot acquire assets from a related party except for listed securities at market value or unconditional donations.

4

Lodging annual financial statements with DSS

By 31 March each year, the trustee must provide written financial statements to DSS covering the previous financial year. The statements must be prepared by an appropriately qualified person, such as a member of CPA Australia, Chartered Accountants Australia and New Zealand, the National Institute of Accountants, an eligible employee of a trustee corporation, or another person approved by the Secretary. They cannot be an immediate family member of the principal beneficiary or trustee. The statements must include a statutory declaration confirming that expenditure was used for permitted purposes and that no payments were made to immediate family members.

5

Responding to audit requests

DSS may request an audit report at any time. An audit report can also be requested by the principal beneficiary, an immediate family member, a legal guardian, or a financial administrator. The same independence requirements that apply to the accountant preparing annual statements also apply to the person preparing the audit.

For the 2025 to 2026 financial year, trustees may spend up to $14,750 on discretionary items not directly related to care and accommodation, provided the expenditure remains compliant with SDT rules. This limit is indexed and should be checked each financial year before relying on it.

One of the most overlooked issues

Trustee Succession Planning

Most SDTs are set up by parents who act as trustees. Over time, their capacity to manage trust obligations diminishes. If a trustee dies or loses capacity and no succession arrangements are in place, the trust can face an administration crisis.

What good succession planning involves

  • Nominating successor trustees in the trust deed before the need arises
  • Considering whether a professional trustee or trustee corporation should be involved from the outset or at a future point
  • Ensuring enduring powers of attorney are in place and are consistent with trustee responsibilities
  • Reviewing the succession arrangements periodically as circumstances change

What happens without succession planning

  • If a trustee dies or loses capacity with no succession plan in place, the trust administration can stall
  • Court intervention may be required to appoint a replacement trustee
  • Annual reporting obligations continue regardless of trustee capacity issues
  • Non-compliance during a trustee succession gap can threaten SDT status
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Address trustee succession before it becomes urgent

Trustee succession is significantly easier to plan when all parties have capacity and the trust is running well. Once a trustee has lost capacity or died without succession arrangements in place, the options are much more limited and often more costly. This is a conversation to have with your lawyer and financial adviser now, not when a crisis arises.

The broader picture

The SDT and the Broader Estate Plan

An SDT does not operate in isolation. It needs to be understood alongside the beneficiary’s will, superannuation death benefit nominations, and any enduring powers of attorney.

Superannuation death benefits can be contributed to an SDT within three years of receipt by the principal beneficiary or their partner. This means the estate plan and superannuation nomination strategy need to be coordinated with the SDT structure from the outset, not as an afterthought.

Family members who have gifted to the trust also need to understand what happens on their death and whether the trust’s residual beneficiary arrangements match their estate plans. These questions rarely have simple answers and require careful coordination between financial, legal and accounting advisers.

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Wills and the SDT

The will of a family member who has gifted to the trust needs to be consistent with the trust’s residual beneficiary arrangements. Mismatches can create disputes and unintended outcomes on death.

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Superannuation nominations

Super death benefit nominations need to be coordinated with the SDT structure. Where a nomination is intended to result in a contribution to the trust, the three-year contribution window and trust deed provisions need to be considered.

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Powers of attorney

Enduring powers of attorney held by trustees or family members need to be consistent with their trustee responsibilities. Powers of attorney that conflict with trustee duties can create legal complexity.

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Family gifting strategy

Eligible family members can gift to the SDT within the concessional gifting limits without the gifts counting under the Centrelink gifting rules. These gifts need to be documented correctly and within the relevant limits. Verify current limits before making any gift.

Working with HFI

How HFI Can Help SDT Trustees

HFI advises SDT trustees on investment strategy, permitted expenditure, compliance obligations, trustee succession planning, and the interaction between the trust and the broader family financial structure.

A compliant, well-managed SDT is one of the most effective financial structures available for a family supporting a person with a permanent disability. Getting the administration right from the start protects the concessions and protects the beneficiary.

We work with lawyers and accountants to coordinate SDT establishment and administration with estate planning and superannuation decisions — ensuring all three are aligned rather than planned in isolation.

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Investment strategy

Preparing and maintaining the written investment strategy required by law, including addressing risk, return, diversification, liquidity and tax in the context of the trust’s primary purpose.

Permitted expenditure review

Reviewing proposed expenditure to confirm it falls within the permitted categories and advising on how to document it correctly for the annual financial statements.

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Annual compliance support

Supporting trustees with the annual compliance cycle, including coordination with accountants preparing the financial statements and statutory declaration for DSS.

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Trustee succession planning

Advising on trustee succession arrangements, including reviewing the trust deed, identifying successor trustees, and coordinating with lawyers on powers of attorney and related documents.

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Estate planning coordination

Working alongside lawyers to coordinate the SDT with wills, superannuation nominations and family gifting strategies so the estate plan and the trust work together as intended.

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Full situation review

Reviewing the SDT in the context of the broader family financial structure, including Centrelink entitlements, superannuation, and the interaction with other assets and income sources.

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Related: Special Disability Trusts — investing and governance

For a broader overview of SDT structure, eligibility and the investment and governance framework, see our existing guide. Special Disability Trusts: investing and governance.

Frequently asked questions

Common Questions About Managing a Special Disability Trust as Trustee

An SDT must have at least two individual trustees, or a professional trustee such as a trustee corporation or Australian legal practitioner. Each individual trustee must be an Australian resident, must not have been convicted of an offence involving dishonest conduct, and must not have been disqualified from managing a corporation. Family members can act as trustees but cannot be paid from the trust for providing services or care to the beneficiary.
An SDT can pay for the beneficiary’s reasonable care needs such as medical costs, professional care and mobility aids, reasonable accommodation needs such as property purchase, rent and modifications, and ancillary costs. There is also an indexed annual discretionary spending limit for additional items including food, clothing, communication devices, recreation and utilities. All expenditure must benefit the principal beneficiary. Paid care must be provided by arm’s-length workers and family members cannot be paid.
By 31 March each year, the trustee must provide written financial statements to DSS covering the previous financial year. The statements must be prepared by an appropriately qualified person, such as a member of CPA Australia, Chartered Accountants Australia and New Zealand, the National Institute of Accountants, an eligible employee of a trustee corporation, or another person approved by the Secretary. They cannot be an immediate family member of the principal beneficiary or trustee. The statements must include a statutory declaration confirming expenditure was used for permitted purposes and that no payments were made to immediate family members.
An SDT that fails to meet legislative requirements loses its SDT status and is then assessed under normal private trust rules. This can affect the principal beneficiary’s Centrelink entitlements, trigger attribution of trust income and assets, and affect family members who have made gifts to the trust within the preceding five years. Trustees should not assume a breach can simply be corrected after the fact. In some circumstances, waiver provisions may be considered, but compliance should be maintained proactively rather than repaired later.
Yes. Superannuation death benefits can be contributed to an SDT within three years of receipt by the principal beneficiary or their partner. This means the estate plan and superannuation nomination strategy need to be coordinated with the SDT structure. HFI works with lawyers and accountants to coordinate these decisions.
Trustee succession planning means nominating successor trustees in the trust deed before the need arises, considering whether a professional trustee or trustee corporation should be involved, and ensuring powers of attorney are in place and consistent with trustee responsibilities. This is one of the most overlooked issues in SDT administration. Most SDTs are set up by parents who act as trustees, and their capacity to manage trust obligations can diminish over time.

Establishing or managing an SDT?
Speak with HFI about your obligations.

A compliant, well-managed Special Disability Trust protects the beneficiary’s Centrelink entitlements and preserves the concessions the trust is designed to provide. HFI works with trustees, lawyers and accountants to keep SDTs on track.

General information only. This content does not constitute personal financial, legal or taxation advice. SDT obligations are set out in the Social Security Act 1991 and associated legislative instruments. Thresholds and spending limits are indexed annually and must be verified before use. Obtain specialist legal and financial advice before establishing or making decisions about a Special Disability Trust.

Health & Finance Integrated is a Corporate Authorised Representative of Able Financial Services (ABN 27 646 319 164) AFSL 530596. Shop 6, 23 Hassall St, Parramatta NSW 2150. Any advice in this website is general in nature and has been prepared without considering your objectives, financial situation or needs.