Tax Tip 159: No CGT on Transfer to a Special Disability Trust

Discussion in 'Accounting & Tax' started by Terry_w, 10th Jul, 2017.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Plus Member

    9th Jun, 2006
    Australia wide
    Tax Tip 159: No CGT on Transfer to a Special Disability Trust

    Where there is a person in the family with a disability it maybe possible for a “Special Disability Trust” to be set up and a property transferred into this trust with that property being exempt from Capital Gains Tax (where the disability meets a strict definition).
    S 118-185 ITAA97
    INCOME TAX ASSESSMENT ACT 1997 - SECT 118.85 Special disability trusts

    Furthermore, where the property becomes the main residence of the beneficiary of the trust this property is able to qualify for the main residence CGT exemption – this is not normally available for trust property but it can be in this case.

    There may even be stamp duty concessions on the transfer of the property in some states. In NSW for example the transfer or declaration of trust can be fully exempt from duty under s65(22) Duties Act (NSW)
    DUTIES ACT 1997 - SECT 65 Exemptions from duty

    Naturally there are many rules about these transactions so seek proper legal advice before proceeding.
  2. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

    18th Jun, 2015
    These trusts have very limited application and VERY substantial rules determined by Dept of Human Services

    The income from the trust may be excluded from counting by Centrelink up to a specific threshold and some assets may be exempted up to a specific threshold from assets tests. A SDT can own the home the disabled child may reside in and it is an exempt asset despite being in a trust. It also accesses the CGT MR exemption. The gifting of $500K to the trust made be excluded from gifting too.

    Its a very effective Centrelink strategy for parents of a disabled child where they have asets and seek to preserve benefits for the disabled child.

    Legal and financial advice are recommended and with the NDIS a co-ordination with Dept of Human Services regarding benefits is important