It would be unacceptable for any financial planner to overlook the basic rules of superannuation. It is part of the knowledge set which influences every Statement of Advice.
It is equally unacceptable that there is not widespread understanding of special rules and regulations applying to people with a disability. While there are issues of eligibility and definition, there are significant opportunities to improve the financial outcomes for millions of people with a disability in Australia.
Disability is not easy to define. According to the Australian Bureau of Statistics (ABS), approximately 20%, or 4 million, of the Australian population has some form of disability. However, a stricter definition, being people who require assistance with core daily activities because of severe or profound restrictions, is closer to 1 million. They are supported by an estimated 2.6 million carers.
Due to population ageing, the number of older persons with a severe or profound disability is expected to grow to 1.5 million in 2031. They need to plan for their financial support as soon as possible.
The Australian government has introduced a range of measures aimed at assisting disabled people and their families to look after themselves, so minimising the need for institutional support. The range of regulatory provisions and exemptions relating in people with a disability is generally not known to financial planners, disabled persons or their carers.
Summary of Legislation Applicable to Disabled Persons and Carers
This is not a definitive list and there are important eligibility criteria, but some important regulatory issues relating to disability include:
- Access to superannuation is available to permanently disabled persons under SIS legislation.
- On attaining 16 years of age, children with a disability become eligible for non-means tested pensions to assist in their care.
- Disabled children are taxed as adults and have access to adult tax-free thresholds and tax scales. Parents of children with disabilities may be able to reduce their tax payments by saving money in the name of the child without the usual low tax thresholds applying to children.
- Special Disability Trusts (SDT) carry exemptions from gifting and assets test rules under social security legislation, and certain expenses relating to care can be charged to the SDT. These rules encourage people to set up trusts for the future care needs of children with disabilities.
All people with disabilities and their financial planners should consider these rules in the design of a financial plan for the client, their carers and their family.
The Australian Taxation Office provides additional material for people with a disability, at http://www.ato.gov.au/Individuals/People-with-disability/.
If you are receiving a disability or carer’s support payment from the Australian Government, you may be eligible for tax and superannuation concessions and exemptions.
If you are managing the financial affairs of someone with a disability, you too will want to understand what concessions and exemptions apply.