Special disability trust gifting concession, Centrelink and tax

A special disability trust (SDT) touches two generations at once. For the person it's for, it protects the Disability Support Pension (DSP). For parents and grandparents of pension age, it can lift their own Age Pension, because money given to the trust can stop counting against them. On top of that sit income tax, capital gains tax and state duties, each with their own rules.

This guide sets out those rules with the 2026–27 figures and worked examples. If you're new to SDTs, read our guide to special disability trusts first, and check the beneficiary meets the tests in our eligibility guide.

How does a special disability trust affect the beneficiary's DSP?

Three concessions apply while the trust meets the rules.

The limit has risen each year: $813,250 from 1 July 2024, $832,750 from 1 July 2025, and $862,750 from 1 July 2026. It applies to the beneficiary's assessment only. The trust itself can hold more.

Because the excess is simply added to the beneficiary's own assets, going over the limit isn't a disaster. The beneficiary still has their own assets test free area for anything they hold personally plus the excess. But money above the limit is still bound by the SDT spending rules, which is why families with larger estates often split an inheritance between an SDT and a testamentary trust.

How does the $500,000 gifting concession work?

Normally, a pensioner who gives away more than $10,000 in a financial year (or $30,000 over five years) has the excess counted as a "deprived asset" for five years. It stays in their assets test and is deemed to earn income. The SDT gifting concession switches that off for up to $500,000.

Who can use it. An immediate family member of the beneficiary: a natural, adoptive or step-parent; a legal guardian (current, or while the beneficiary was under 18); a grandparent; or a sibling, including half, adoptive and step-siblings but not foster siblings. They must be at or over Age Pension age (or veterans' pension age) and receiving a social security pension, a service pension or the veterans' income support supplement.

The rules that matter:

• The trust must already exist when the gift is made.
• $500,000 combined, per beneficiary, not per giver. It isn't indexed.
• Couples are covered as a couple even if only one of them receives a pension.
• First in, first served. Where several family members give, the concession goes first to those receiving a qualifying payment at the time of their gift.
• Anything over the remaining concession is assessed under the normal gifting rules.
• Gifts made before pension age. If you give before you're on a pension, and then reach pension age and start receiving a qualifying payment within five years of the gift, the concession can apply at that point, if any is left. Gifts made more than five years before you claim don't count under the normal rules anyway.

How much can gifting to an SDT lift a parent's Age Pension?

Every $1,000 of assessable assets above the full-pension threshold reduces the pension by $3 a fortnight under the assets test. Moving assets into an SDT under the concession can therefore make a large difference for parents on a part pension.

Worked example

Hypothetical, rounded. Uses Age Pension rates from 20 September 2026 and assets test thresholds and deeming thresholds from 1 July 2026. Rates change each March and September. Confirm current figures with Services Australia before acting.

Say Helen and Arthur, both over pension age, own their home and have $940,000 in super and term deposits plus $30,000 of personal effects. Their son Liam, 36, receives the DSP and has been assessed as eligible for an SDT. Helen and Arthur set up the trust and give it $500,000 cash.

That's an increase of roughly $1,336 a fortnight, or about $34,700 a year, for as long as their circumstances stay the same. They'd also keep their Pensioner Concession Card. Inside the trust, Liam's DSP is unaffected because $500,000 is under the $862,750 limit and the trust's income isn't assessed.

The decision isn't only about the numbers. The $500,000 is gone from Helen and Arthur's control for good and can only be spent on Liam's care, accommodation and the discretionary allowance. Make sure what's left is enough for their own retirement and aged care.

What happens if the trust ends within five years of a concessional gift?

This is the rule families most often get wrong. If a trust stops being an SDT within five years of a concessional gift, deprivation can apply to the giver if they don't get back a share of the trust that's comparable to what they put in. This applies whatever the reason the trust ends, including the death of the beneficiary.

How it works, in short:

1. Work out each giver's proportionate share of the trust's final net assets (their gifts divided by total contributions).
2. Subtract anything actually returned to them on wind-up.
3. The balance becomes a deprived asset from the wind-up date, for the rest of the original five years.
4. Any amount that was already deprived when the gift was made keeps running as before.

If the trust's money has all been spent on the beneficiary, no deprivation arises for concessional gifts. If the trust becomes non-compliant, the concession ends from that date and the same calculation applies to concessional gifts made in the previous five years.

Key point: If parents name the beneficiary's siblings as remainder beneficiaries, and the beneficiary dies within five years of the parents' concessional gift, the parents' pension can drop again. A remainder clause that returns a share to living contributors within that window avoids this. Raise it with your solicitor when the deed is drafted.

How is a special disability trust taxed?

Ordinary trusts that keep income rather than distributing it are taxed at the top rate, 47% including the Medicare levy component. An SDT is treated differently under section 95AB of the Income Tax Assessment Act 1936:

• the principal beneficiary is treated as presently entitled to all of the trust's income, even if the trustee keeps it
• the beneficiary is treated as under a legal disability, so the trustee is assessed on their behalf
• the trustee therefore pays tax on the trust's net income at the beneficiary's personal rates, including the $18,200 tax-free threshold.

If the beneficiary has no other taxable income, that's the end of it. If they also have wages or other income, they include the trust's net income in their own return and claim a credit for the tax the trustee paid. A beneficiary under 18 is taxed at adult rates on SDT income rather than the penalty rates for minors.

In the trust's tax return: the trust type is "C", the principal beneficiary is shown at item 57 with assessment calculation code 45 (resident) or 145 (non-resident), and refundable offsets such as franking credits are claimed in the trust return, not the beneficiary's.

Worked example: tax on retained income

Hypothetical, 2026–27 resident rates, before Medicare levy.

An SDT earns $25,000 of net interest and rent. This year the NDIS covers most supports, so the trustees keep the whole $25,000 to build a buffer for later. The beneficiary's only other income is the DSP, which is generally tax-free for someone under Age Pension age.

The Medicare levy is likely to be nil at this income because of the low-income threshold, but the 2026–27 thresholds haven't been published yet.

Is there CGT when you give an asset to a special disability trust?

No, if it's done properly. A capital gain or loss you make from transferring an asset to an SDT for no consideration is disregarded.

• No dollar cap, and it isn't limited to immediate family. A grandparent, aunt or family trust can use it.
• Transfer the asset itself. Selling a property and gifting the cash doesn't qualify. The sale is taxed in the normal way.
• Timing. The exemption still applies if the trust becomes an SDT as soon as practicable after the transfer. In practice, get the beneficiary assessed first.
• Fresh cost base. The trust generally starts with the asset's market value at the time of the gift.
• From a deceased estate. Where an asset passes from an estate to an SDT, the trustee generally uses the market value at the date of death, if the trust becomes an SDT as soon as practicable.

The home inside the trust. The trustee can get the main residence exemption to the same extent the beneficiary could if they owned it, while it's their main residence and not used to produce income. After the beneficiary dies, a sale by the trustee, or by someone who receives the home and sells within two years of the death, can also be exempt.

Other investments held by the trust are taxed under normal CGT rules, at the beneficiary's rates.

Our CGT advice service models these transfers before anything is signed.

How do the 2027 CGT changes and the 2028 trust tax Bill affect an SDT?

The 1 July 2027 CGT changes are law. Under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, the 50% discount is replaced by cost base indexation for gains accruing from 1 July 2027, for individuals and trusts. Assets held on that date are treated as sold and bought back at market value, so earlier growth stays under the old rules, with the tax deferred until a later sale. For an SDT, the transfer exemption and the main residence exemption are exemptions, not discounts, so a gain they cover is still disregarded. Investments the trust sells after 1 July 2027 fall under the new rules. Our guide to CGT discount changes in 2027 covers the detail.

If a family plans to give a property that isn't going into an SDT anyway, the timing around 30 June 2027 can matter. If it is going into an SDT, the gift is CGT-free either way.

The 2028 minimum tax on discretionary trusts is a Bill, not law. The Treasury Laws Amendment (Tax Reform No. 3) Bill 2026, introduced on 14 October 2026, proposes a 30% minimum tax on discretionary trusts from 1 July 2028. The Government's materials carve special disability trusts out of the proposed tax; we'll confirm the final position if and when it passes. See our guide to the discretionary trust tax changes.

What about stamp duty and land tax?

These are state taxes, and the concessions differ.

Watch out: State exemptions usually depend on who transfers the land, whether anything is paid, and whether it becomes the beneficiary's home. Never sign a transfer assuming an exemption applies. Get it confirmed first. Our state taxes service can check it for your state.

How BPAG helps

We model both generations before any money moves, prepare the trust's tax return and Services Australia package each year, and check every asset transfer for CGT and duty. Our Centrelink entitlements agent estimates the pension effect of each option, our capital gains tax agent works through the transfer and the main residence position, and our state taxes agent checks duty and land tax for your state. Your accountant reviews every figure and explains it before you decide, and nothing goes to Services Australia, the ATO or a revenue office without a person approving it.

Your solicitor prepares the deed and any transfer documents. If you're weighing contributions from super or retirement income, a licensed financial adviser gives that advice and we work alongside them. For the full picture of your own estate, see our succession and estate planning service.

General information only, current as at 18 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.