1209ZEffect of certain transfers to special disability trusts

1209Z  Effect of certain transfers to special disability trusts

 (1) If a person transfers an asset (the transferred asset) to a special disability trust, the transfer is taken not to be a disposal of the asset (within the meaning of section 1123) if:

 (a) the person is an immediate family member of the principal beneficiary of the trust; and

 (b) the person, or the person’s partner:

 (i) is receiving a social security pension and has reached pension age; or

 (ii) is receiving a service pension and has reached pension age within the meaning of the Veterans’ Entitlements Act; or

 (iii) is receiving income support supplement and has reached qualifying age within the meaning of subsection 45A(2) of the Veterans’ Entitlements Act; and

 (c) the person receives no consideration, and is not entitled to any consideration, for the transfer; and

 (d) the transfer is unconditional; and

 (e) the value of the transferred asset does not exceed $500,000; and

 (f) in a case where there has already been a transfer to which this section has applied (an exempt transfer), by that person or any other person, to the trust or any other special disability trust that had the same principal beneficiary—the sum of:

 (i) the values of all of the assets transferred, by exempt transfers that have already been made, to the trust or any other special disability trust that had the same principal beneficiary; and

  does not exceed $500,000.

Note 1: For special disability trust, see section 1209L.

Note 2: For immediate family member, see subsection 23(1).

Note 3: For pension age (except for the purposes of subparagraph (1)(b)(ii) of this section), see subsections 23(5A) to (5D).

Note 4: For social security pension, service pension and income support supplement, see subsection 23(1).

 (2) This section has effect subject to sections 1209ZA and 1209ZD.

 (3) In this section:

other special disability trust includes a special disability trust within the meaning of the Veterans’ Entitlements Act.

value, of an asset transferred to a special disability trust, means the market value of the asset at the time of the transfer.

1209ZA  The effect of exceeding the $500,000 limit

 (1) If section 1209Z would apply to a transfer of an asset except for the fact that the value of the transferred asset exceeds $500,000, that section does not prevent the transfer from being a disposal or disposition of the asset, but the amount of the disposal or disposition is taken to be the amount of the excess.

 (a) section 1209Z would apply to a transfer of an asset but for the fact that the sum of:

 (i) the values of all of the exempt transfers that have already been made to the trust or any other special disability trust that had the same principal beneficiary; and

  exceeds $500,000; and

 (b) that sum would not exceed $500,000 if the value of the transferred asset were disregarded;

that section does not prevent the transfer from being a disposal of the asset, but the amount of the disposal or disposition is taken to be the amount of the excess referred to in paragraph (a).

 (3) This section has effect subject to section 1209ZD.

 (4) In this section:

other special disability trust includes a special disability trust within the meaning of the Veterans’ Entitlements Act.

value, of an asset transferred to a special disability trust, means the market value of the asset at the time of the transfer.

1209ZB  Transfers by the immediate family members prior to reaching pension age etc.

 (a) an immediate family member of the principal beneficiary of a special disability trust transfers an asset to the trust; and

 (b) at the time of the transfer, neither the immediate family member nor the partner of the immediate family member is a person who:

 (i) is receiving a social security pension and has reached pension age; or

 (ii) is receiving a service pension and has reached pension age within the meaning of the Veterans’ Entitlements Act; or

 (iii) is receiving income support supplement and has reached qualifying age within the meaning of subsection 45A(2) of the Veterans’ Entitlements Act;

the immediate family member is taken for the purposes of this Division only to transfer the asset to the trust at the earliest time at which subparagraph (b)(i), (ii) or (iii) applies to the immediate family member or partner.

Note 1: For immediate family member, see subsection 23(1).

Note 2: For special disability trust, see section 1209L.

Note 3: For pension age (except for the purposes of subparagraph (1)(b)(ii) of this section), see subsections 23(5A) to (5D).

Note 4: For social security pension, service pension and income support supplement, see subsection 23(1).

 (2) However, if under subsection (1) transfers of assets to the trust by different immediate family members are taken to have been made on the same day, the transfers are taken to have been made on that day in the order in which they would have been taken to be made but for this Division.

 (3) This section does not affect the operation of Part 3.12 or any other provision of this Act outside of this Division.

1209ZC  Transfers by principal beneficiaries or partners

 (1) If a person transfers an asset to a special disability trust, the transfer is taken not to be a disposal of the asset (within the meaning of section 1123) if:

 (a) the person is the principal beneficiary of the trust, or the principal beneficiary’s partner; and

 (b) the person receives no consideration, and is not entitled to any consideration, for the transfer; and

 (c) the transfer is unconditional.

Note 1: For special disability trust see section 1209L.

Note 2: Section 1209R limits the circumstances in which the principal beneficiary or the principal beneficiary’s partner can transfer assets to the trust.

 (2) This section has effect subject to section 1209ZD.

1209ZD  Cessation of special disability trusts

 (a) a special disability trust ceases to exist or ceases to be a special disability trust; and

 (b) a person had transferred an asset to the trust during the period of 5 years immediately preceding the cessation; and

 (c) section 1209Z, 1209ZA or 1209ZC applied to the transfer;

then the transfer is taken, after the cessation, to be a disposal or disposition of the asset that occurred at the time of the transfer.

 (2) The amount of the disposal or disposition is taken to be the amount worked out using the formula:

View image in the official source

where:

asset value means:

 (a) if section 1209Z or 1209ZC applied to the transfer—the value of the asset at the time of the transfer; or

 (b) if subsection 1209ZA(1) applied to the transfer—$500,000; or

 (c) if subsection 1209ZA(2) applied to the transfer—the difference between the value of the asset at the time of the transfer and the amount that was taken under that subsection to be the amount of the disposal or disposition of the asset.

final value of trust assets means the value of all of the assets of the trust at the time of the cessation.

initial value of trust assets means the value of all of the assets of the trust at the time of the transfer.

subsection 1209ZA(2) amount means the amount (if any) that was taken under subsection 1209ZA(2) to be the amount of the disposal or disposition of the asset.

 (3) If the special disability trust ceases to exist, or ceases to be a special disability trust, because the principal beneficiary dies, the value of the asset at the time of the transfer is taken for the purposes of this section to be the value of so much (if any) of the asset as has not been returned to the person who had transferred the asset to the trust.

 (4) This section does not affect the application of section 1209Z, 1209ZA or 1209ZC to the transfer prior to the cessation.

1209ZE  Effect of this Division

  This Division (other than section 1209ZB) has effect despite Division 2 of Part 3.12 and any other provisions of this Act.

14  Transitional—trusts created before 20 September 2006

(1) For a trust created before 20 September 2006, a failure to comply with a requirement of Division 1 of Part 3.18A of the Social Security Act 1991 concerning a particular matter does not prevent the trust being a special disability trust if:

 (a) the Secretary, by written notice (an exemption notice) to the trustees, exempts the trust from the requirement as it concerns that matter; and

 (b) in a case where the exemption notice requires the trustees to comply with any conditions relating to the matter—the trustees comply with those conditions within the period (if any) stated in the exemption notice.

Note: For special disability trust, see section 1209L of the Social Security Act 1991.

(2) A period stated in an exemption notice for the purpose of paragraph (1)(b) must end at or before the end of 30 June 2007.

(3) An exemption notice has effect, subject to any conditions mentioned in paragraph (1)(b):

 (i) the start of 20 September 2006; or

 (ii) if the exemption notice states a time for the start of its period of effect that is after 20 September 2006—the stated time; and

 (b) until:

 (i) the end of 30 June 2007; or

 (ii) if the exemption notice states a time for the end of its period of effect that is before the end of 30 June 2007—the stated time.

(4) If guidelines are made under subitem (5), a decision in relation to giving an exemption notice to the trustees of the trust must be made in accordance with the guidelines.

(5) The Secretary may, by legislative instrument, make guidelines for deciding any or all of the following:

 (a) whether or not to give exemption notices to trustees of trusts;

 (b) what conditions to include in exemption notices;

 (c) the periods for compliance with conditions in exemption notices;

 (d) the periods during which exemption notices are to have effect.

Part 2—Amendment of the Veterans’ Entitlements Act 1986

15  Section 5 (index of definitions)

| | immediate family member | 5Q(1) |

16  Section 5 (index of definitions)

| | principal beneficiary | 5Q(1) |

17  Section 5 (index of definitions)

| | sibling | 5Q(1) |

18  Section 5 (index of definitions)

| | special disability trust | 5Q(1) |

19  Subsection 5Q(1)

immediate family member, of a person, means an individual:

 (a) who is a natural parent, adoptive parent or step‑parent of the person; or

 (b) who is, or was when the person was under 18 years of age, a legal guardian of the person; or

 (c) who is a grandparent of the person; or

 (d) who is a sibling of the person.

20  Subsection 5Q(1)

principal beneficiary, of a special disability trust, has the meaning given by subsection 52ZZZWA(1).

21  Subsection 5Q(1)

sibling, of a person, except for the purposes of sections 123 to 123E, 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.

Note: For the meaning of sibling in sections 123 to 123E, see subsection 123(1).

22  Subsection 5Q(1)

special disability trust has the meaning given by section 52ZZZW.

23  Subsection 52E(1)

Omit “(1)”.

24  Subsection 52E(1) (note)

Repeal the note, substitute:

Note 1: If Division 8 or 8A applies in relation to the transfer by a person of a qualifying interest or an eligible interest in a farm or relevant farm asset, that transfer and certain transfers by the person’s partner are taken not to be disposal of assets (see sections 49C and 49S).

Note 2: Under Subdivision B of Division 11A of Part IIIB, certain transfers of assets to special disability trusts can be taken not to be disposals of the assets (but this can be subject to a limit on the aggregate value of the transfers).

25  At the end of section 52F

Add:

Note: If subsection 52ZZZWM(2) applies in relation to the transfer of an asset to a special disability trust, that subsection has the effect of reducing the amount of the disposal or disposition.

26  After subsection 52ZZJ(2)

 (2A) The only attributable stakeholder of a special disability trust is the principal beneficiary of the trust.

Note 2: For principal beneficiary of a special disability trust, see subsection 52ZZZWA(1).

27  At the end of subsection 52ZZK(1)

Add:

Note: For attribution of the income of a special disability trust, see section 52ZZZWI.