Tax Treatment Reform for Special Disability Trusts
17 August 2009 at 4:06 pm
The Federal Government has released a consultation paper on proposed reforms to the tax treatment of special disability trusts to ease the financial burden on people with disabilities as well as their carers and families.
The proposed reforms were announced in the 2009-10 Budget and the Government says they are aimed at ensuring the taxation of special disability trusts is fairer and more equitable.
In the 2009-10 Budget, the Government announced it would ensure the unexpended income of a special disability trust is taxed at the beneficiary’s personal income tax rate, rather than automatically at the top personal tax rate plus Medicare Levy; and extend the capital gains tax main residence exemption to special disability trusts.
The Assistant Treasurer, Senator Nick Sherry, says that taxing the income of the trust at the personal tax rate of the beneficiary, rather than at the top rate of tax (46.5 per cent including the Medicare levy), will ensure these trusts are not penalised when income is retained to pay for the future care and accommodation needs of the beneficiary.
For example, if there was $20,000 of unexpended trust income and the beneficiary’s marginal tax rate was 16.5 per cent (including the Medicare levy), the savings would be $6,000.
Special disability trusts were established in 2006 to help families and carers provide for the current and future care and accommodation needs of a family member with a severe disability.
The Government has called on people with disabilities who wish to express an opinion on the future development of these trusts to get involved in the consultations.
The consultation period ends on 31 August, 2009 and copies of the consultation paper can be obtained from www.treasury.gov.au