4.14.3.60 Waivers for special disability trusts

Summary

This topic contains information on the following:

• overview
• circumstances when a waiver notice cannot be given
• circumstances when a waiver notice can be given for trust deeds created before 1 January 2011 that can be varied & all trusts created from 1 January 2011
• circumstances when a waiver may be provided when assets are not transferred to a special disability trust within the required 3-year period
• trusts established before 1 January 2011, and
• waiver notices.

Note: These waivers may apply where the trust or trustee cannot meet one or more specific legislative requirement for a special disability trust.

Overview

For a trust to be a special disability trust it must meet the legislated requirements. However, in certain circumstances a waiver can be given if it is considered appropriate.

Circumstances when a waiver notice cannot be given

For all trusts, regardless of when they were established, a waiver notice CANNOT be given if any of the following provisions of a special disability trust are not met:

• the beneficiary requirements
• the trustee requirements
• the trust property requirements
• the preparation of financial statements, and
• the audit requirements.

In addition to the above, a waiver CANNOT be given for the trust deed requirements for all trusts established after 1 January 2011.

Circumstances when a waiver notice can be given for trust deeds created before 1 January 2011 that can be varied & all trusts created from 1 January 2011

A waiver notice can only be given to the trustee in certain circumstances and only for a limited time.

While the financial statements must be prepared and provided to Centrelink to protect the interests of the principal beneficiary, if there is a delay in providing the financial statements (section 1209S(1)) of the special disability trust and the delay is not due to the actions of the trustee, a waiver notice can be given for a limited period of time up to 3 months from 31 March in the relevant year. This waiver cannot be extended.

In certain circumstances a waiver notice may be issued if the special disability trust purpose requirements are not met. Consideration must be given to the nature of the breach and the number of times a similar event has occurred.

A waiver notice can only be given if the non-compliance relates to total expenditure in a financial year of no more than $5,000.

A waiver notice CANNOT be given where the purpose requirements are not met because of fraudulent behaviour.

Circumstances when a waiver notice may be provided when assets are not transferred to a special disability trust within the required 3-year period

The principal beneficiary and their partner (if any) cannot contribute to their own special disability trust unless funded by a bequest or superannuation death benefit within 3 years of receipt of the bequest or superannuation death benefit. The 3-year period begins once the funds or assets are received, able to be received, or able to be contributed.

A waiver notice may be issued in exceptional circumstances where:

• the transferor has been unable to transfer assets to a special disability trust within the required 3-year period due to court proceedings relating to the asset
• the transfer was within the required 3-year period to a trust intended to be a special disability trust, but is not due to a contravention of the requirements, and the asset is transferred from the first trust to a special disability trust before the end of the required period, or
• it can be shown that assets were intended to be transferred to a special disability trust before the end of the required period.

Trusts established before 1 January 2011

If a trust was established before 1 January 2011 which was not originally created as a special disability trust, it may not be possible to alter the trust deed to comply with the clauses of the amended model trust deed that comes into effect from 1 January 2011.

Where a trust deed cannot be altered and the trustee provides a statutory declaration that they will comply with the special disability trust requirements under SSAct Part 3.18A Division 1, including:

• the trust has only one beneficiary, not including any residual beneficiary
• the trustees have made reasonable inquiries to determine whether the beneficiary of the trust meets the requirements under SSAct section 1209M(2) or (4)
• the trust will primarily be used to meet the care and accommodation needs of the beneficiary, and
• the trust will comply with the terms of a special disability trust as set out in the Model Trust Deed.

A waiver can be given in the above circumstances. However, the waiver can only apply for the period that the trustee continuously complies with the agreed conditions in the statutory declaration. The waiver must be reviewed every 12 months.

Waiver notices

The waiver notice must be in writing and contain:

• the start and end date of the period of the waiver
• the matter to which the waiver applies, and
  
  • Example: The lodgement of the trust's financial statements by 31 March.
• the conditions, if any, that the trustee must comply with.
  
  • Example: The trustee must provide the trust's financial statements.