Disability Tax Reform Introduced into Parliament
26 May 2010 at 5:09 pm
The Rudd Government has introduced legislation to provide tax law reforms for people with severe disabilities along with their families and carers.
In particular, the legislation will reform the tax treatment of 'unexpended income' as it applies to a special disability trust.
The reforms, announced in the 2009-10 Budget, are contained in the Taxation Laws Amendment (2010 Measures No. 3) Bill 2010 introduced into Federal Parliament today (Wednesday 26th May).
The amendments are set to assist families and carers to provide financially for the care and accommodation of people with severe disability, by ensuring that taxation is not a disincentive to the establishment of a special disability trust.
Assistant Treasurer, Nick Sherry says that under the new rules, the unexpended income of a special disability trust will be taxed at the principal beneficiary’s marginal income tax rate, rather than automatically at the top personal rate of tax.
Under the existing tax law, income of a special disability trust that is spent on the care and accommodation needs of the principal beneficiary could be taxed to the beneficiary and the unexpended income is taxed to the trustee of the trust at the top personal tax rate plus Medicare Levy.
The Government plans to introduce legislation shortly that will extend the capital gains tax main residence exemption to residences that are owned by a special disability trust and used by the principal beneficiary as their main residence.
The Government also announced in the 2010-11 Budget it would expand the eligibility requirements for beneficiaries and extend the allowable uses for special disability trusts.
Parliamentary Secretary Shorten says Special Disability Trusts have great potential in planning for the future care and accommodation of people with a severe disability.
He says the Government wants to make sure that the legislation covering these trusts reflects the real world people with disability live in and does not stop people with a genuine need from using them.
The Legislation can be viewed here.