Planning for the future care of a loved one with a severe disability can be both emotional and complex. A Special Disability Trust (SDT) is one way families can provide for long-term care and accommodation needs while protecting eligibility for Centrelink and other government benefits.
At Ferraro & Singh Lawyers, we help families create trusts that provide financial security, peace of mind, and legal protection for those they love most.
What Is a Special Disability Trust?
A Special Disability Trust allows family members or carers to contribute money or property into a trust for the reasonable care and accommodation needs of a person with a severe disability.
One of the biggest advantages of an SDT is that assets held in the trust don’t count as the beneficiary’s personal assets. This means the trust funds generally won’t affect the person’s eligibility for the Disability Support Pension (DSP) or other government benefits.
Key Benefits of a Special Disability Trust
Special Disability Trusts provide unique financial, social security, and taxation advantages, including:
- Gifting concession: Eligible family members can jointly contribute up to $500,000 without it being treated as a gift for Centrelink purposes.
- Assets test exemption: Up to $832,750 (indexed annually on 1 July) held in the trust is exempt from the beneficiary’s Centrelink assets test.
- Tax advantages: The trust may receive concessional tax treatment on certain income.
- Peace of mind: Ensures that funds are managed responsibly for your loved one’s care — even after you’ve passed on.
These benefits make SDTs an important part of broader estate and disability planning strategies for Australian families.
How Does a Special Disability Trust Work?
Unlike ordinary family or discretionary trusts, a Special Disability Trust must meet strict legal requirements to qualify for concessions under Australian social security law.
Key features include:
- Only one principal beneficiary (the person with the disability).
- The beneficiary must meet Services Australia’s eligibility criteria.
- The trust’s main purpose must be to provide for the beneficiary’s care and accommodation needs.
- The trust deed must follow the Model Trust Deed prescribed by Services Australia.
- Trustees must spend trust funds strictly in accordance with the legislation and within specified spending limits.
Who Can Be the Principal Beneficiary?
The principal beneficiary is the individual the trust is designed to support. Each trust can have only one principal beneficiary, although residual beneficiaries (such as siblings or charities) can be named to receive any remaining funds after the principal beneficiary’s death.
To qualify, the person must meet the definition of severe disability under Services Australia’s criteria, which fall under three categories:
1. Adults Living Independently or with a Carer
A person aged 16 or over who:
- Qualifies for the Disability Support Pension (or receives a DVA invalidity payment);
- Has a disability that would qualify a carer for the Carer Payment or Carer Allowance; and
- Is unable to work more than seven hours per week in the open labour market.
2. Adults Living in Supported Accommodation
A person aged 16 or over who:
- Meets the same impairment criteria as above;
- Lives in a funded institution, hostel or group home under a Commonwealth, state, or territory disability agreement; and
- Is unable to work more than seven hours per week in the open labour market.
3. Children Under 16
A child who:
- Has a severe disability or medical condition; and
- Has a carer with a “qualifying rating of intense” under the Disability Care Load Assessment (Child) Determination.
A treating health professional must also confirm that the child requires personal care for at least six months or that care must be shared between multiple people due to the child’s condition.
What Can a Special Disability Trust Pay For?
Funds in a Special Disability Trust can only be used for the reasonable care and accommodation of the beneficiary. Trustees can:
- Pay for medical, dental and allied health expenses (including private health insurance);
- Cover maintenance, insurance, and repairs for trust-owned property (for example, the beneficiary’s home); and
- Spend up to $14,750 per financial year (for 2025–26) on discretionary items not directly related to care or accommodation — such as holidays, clothing, or entertainment — provided the spending complies with legislative rules.
Why Set Up a Special Disability Trust?
A Special Disability Trust offers families the ability to:
- Secure their loved one’s financial future;
- Ensure that care continues even after carers pass away;
- Maintain eligibility for Centrelink and DVA benefits; and
- Provide reassurance that funds will be used responsibly.
- When established correctly, an SDT becomes a lasting legacy of care and protection.
Speak to Our Wills and Estates Lawyers in Melbourne
Setting up a Special Disability Trust is a significant step — and while it can offer powerful protection, it’s also a complex legal structure that requires expert advice.
Our experienced Wills and Estates team at Ferraro & Singh Lawyers can:
- Help you determine whether an SDT suits your situation;
- Prepare a trust deed that complies with Services Australia’s requirements; and
- Ensure the trust aligns with your broader estate planning and Centrelink eligibility goals.
If you are considering a Special Disability Trust for your family, contact our team on (03) 9311 8911 or email info@ferraro.com.au to arrange a confidential discussion.
Protect your loved one’s future with the guidance of a trusted disability estate planning lawyer in Melbourne.
The information provided in this article is general in nature and does not constitute legal advice. Each situation is unique, and we recommend obtaining tailored advice from our experienced Wills and Estates lawyers before making any decisions.
