4.14.4.20 Gifting concession for special disability trusts
Summary
This topic contains information on the following:
- overview of the gifting concession
- immediate family members, and
- applying the gifting concession.
Overview of the gifting concession
The gifting concession limit is $500,000. This amount is not indexed.
The gifting concession is available per principal beneficiary for immediate family members of the person with severe disability provided:
- the gift is made to a special disability trust, and
- Explanation: A special disability trust must exist before the gift is made.
- the immediate family members are at, or over, age or service pension age and are receiving a social security pension (e.g. Age, DSP, CP).
Example: Joe is a person with severe disability and a special disability trust has been established for him. His mother, who is in receipt of Age, contributes $300,000 and Joe's granddad, who is in receipt of a Veterans' Affairs service pension contributes $200,000. Both can claim a gifting concession. This means the concession amount is fully used and no other immediate family member will be able to claim a gifting concession in respect of further gifts to Joe's special disability trust.
All gifts will be assessed in accordance with the gifting rules unless a gifting concession applies.
Act reference: SSAct section 1209Z Effect of certain transfers to special disability trusts
Immediate family member
An immediate family member of the person with severe disability is an individual:
- who is a natural parent, adoptive parent or step-parent of the person with severe disability
- who is, or was when the person with severe disability was under 18 years of age, a legal guardian of the person
- who is a grandparent of the person with severe disability, or
- who is a sibling of the person with severe disability. A sibling, of the person with severe disability, includes a half-brother, half-sister, adoptive brother, adoptive sister, stepbrother or stepsister of the person, but does not include a foster-brother or foster-sister of the person.
Act reference: SSAct section 23(1) Dictionary
Applying the gifting concession
The gifting concession is only available to an immediate family member who:
- receives a social security pension and has reached age pension age
- receives a service pension and has reached the veterans' pension age, or
- receives a veterans' income support supplement and has reached the qualifying age for the payment.
Where there is more than one immediate family member who makes a gift to the special disability trust, the concession first applies to those family members who are receiving a qualifying payment at the time of their gift.
If an immediate family member makes a gift prior to receiving a qualifying payment and the immediate family member will reach age or service pension age and receive a qualifying payment within 5 years of their gift, they may be eligible for the gifting concession at that time.
Explanation: This will depend upon whether there is still some of the gifting concession available.
The concession will apply to a couple and the gift will be exempt for both members of the couple even if one member of the couple is not on age/service pension.
The legislation does not preclude a blind pensioner from applying, and being granted, a gifting concession, even though they may not be affected by the means test. The pensioner would be assessed at the time that they informed Centrelink of their wish for their gift to be assessed under the gifting concession.
Example 1: David has a special disability trust. His parents Paul, age 65, and Lucy, age 63, are both receiving Age. When the trust was established in 2006, they contributed $300,000 to the trust. By 2012, most of the funds had been spent on care and accommodation, and Paul and Lucy contribute a further $300,000 to the trust. The gifting concession will only apply to the first contribution, and for $200,000 of the second contribution.
Example 2: Greg has a severe disability and his father John, aged 58, has established a special disability trust for him. On 1 October 2006, John gave $500,000 to the trust. John cannot apply to Centrelink for the gifting concession as he is below age pension age.
On 1 June 2011, John gives another $500,000 to the trust. The trust has not received any other contributions since John's initial contribution in 2006.
In 2013, John turns 65 and applies for Age. John's gift in 2006 is disregarded because it was more than 5 years prior to his claim for Age. His gift in 2011 is within 5 years of his claim, and as he is an immediate family member, his gift is eligible for the gifting concession. Therefore his gift in 2011 will be disregarded for social security means test purposes.
Example 3: A variation of example 2. In 2012, Greg's grandmother Marie puts $200,000 into Greg's trust. Marie is currently receiving Age. As Marie is an immediate family member, her gift is eligible for the gifting concession. Marie receives the gifting concession.
In 2013, John turns 65 and applies for Age. When he applies for Age, the available gifting concession is $300,000. John's gift in 2011 of $500,000 would be partially eligible for the gifting concession. The remaining $200,000 of his 2011 gift will be assessed under the normal gifting rules.
Example 4: A further variation of example 2. If the contribution in 2012 was from Paul, a close family friend (rather than Greg's grandmother), his gift would not qualify for the gifting concession as Paul is not an immediate family member. John would get the benefit of the full concession.