Special Disability Trusts · HFI Guidance
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
Understanding the structure
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.
Eligibility requirements
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.
Legal obligations
Trustees of a Special Disability Trust carry specific legal responsibilities. Each obligation must be met on an ongoing basis, not just at establishment.
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.
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.
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.
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.
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.
One of the most overlooked issues
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.
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
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.
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.
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.
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.
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
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.
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.
Reviewing proposed expenditure to confirm it falls within the permitted categories and advising on how to document it correctly for the annual financial statements.
Supporting trustees with the annual compliance cycle, including coordination with accountants preparing the financial statements and statutory declaration for DSS.
Advising on trustee succession arrangements, including reviewing the trust deed, identifying successor trustees, and coordinating with lawyers on powers of attorney and related documents.
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.
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.
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
Key references
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.