Superannuation and Special Disability Trust (SDT) seem to be unrelated, however from a financial planning point of view there is a connection. The connection point is the Assets and Income Test exemption for Centrelink’s means test benefits. The superannuation benefits in its accumulation mode is exempt from the Asset and Income Test up to the aged pension age of the member. Also one of the benefits of using the SDT is that it has a full exemption under the Income Test, while the Assets Test is exempt up to a threshold.  The current threshold as of 1st July 2019 is $681,750 (it is indexed every year).

The SDT is about providing cash flow for the care of the beneficiary. If the money is placed in superannuation (within the contribution limitation) instead of the SDT it may provide the same outcome of  Assets Test and Income Test exemption, however the superannuation preservation rule may prevent the cash flow required to look after the disabled person.

There are a few scenarios in which the use of superannuation can provide benefits.  First is when the sum involved is bigger than the SDT Assets Test threshold ($681,750).   In this scenario a combination of SDT and superannuation may provide a better outcome from the means test exemption point of view.  In other words, the Centrelink entitlement will not be affected. From a cash flow point of view the SDT will be used for the short-term needs, and the superannuation will be used for the long-term needs.

Superannuation has a better tax treatment than SDT. Therefore, in cases where the preservation rule is not an obstacle (unrestricted non-preserved) the use of superannuation may provide a better outcome.

As a specialist accounting firm we can provide your clients with advice and financial modelling for better financial outcomes. Our sister company Forman Financial Services can provide advice regarding superannuation.

If you would like more information, please contact us.

Disclaimer and Warning:

The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.