Legal Tip 210: What is a Special Disability Trust?

Where a child is severely disabled and over the age of 16 a special type of discretionary trust can be set up for them, these are known as a Special Disability Trust (SDT). The disabled person becomes the sole beneficiary of the trust (while alive) with the trustee having discretion on how to spend money on their behalf.

Property and other assets can be transferred into the trust with stamp duty, income tax and land tax concessions plus social security concessions too.

The trustee can accumulate income with this income taxed at the marginal tax rate of the Principal Beneficiary – generally discretionary trusts would be taxed at the top marginal tax rate plus the Medicare levy if this were to happen.

Any person who gifts assets to the trust can potentially get these assets back if the beneficiary were to die as their death will bring the trust to its end and any unexpended income or capital must then come out of the trust.


Setting up a SDT is worth considering if you have a disable child, or grandchild. They can be set up under a will or while you are still alive.