Written by Ivan Fletcher
This year the government has significantly increased the thresholds for the Income test applied to the Seniors Health Care Card by approximately 50%. This means that a lot more people that are pension age but do not qualify for the Age Pension payment (due to the Assets or Income test) may qualify for the Commonwealth Seniors Health Card. No Assets Test is applicable for the CSHC.
The CSHC provides self-funded retirees with discounted health costs and various concessions from Australian, state and territory governments. The CSHC is valid for 12 months and is reissued on 1 August each year provided the CSHC holder continues to meet the eligibility criteria.
To qualify, you must:
- Be an Australian resident, living in Australia,
- Have reached age pension age but DO NOT qualify for a Centrelink or Veteran Affairs pensions/benefits,
- Be under the INCOME TEST threshold.
Income Test Exemption / Grandfathering
On 1 January 2017, there were changes to the assets test taper rate and thresholds for Centrelink and DVA. Pensioners who lost their entitlement and therefore, the Pension Concession Card as a result of the changes, were automatically issued with the CSHC without the income test requirement. These pensioners were also entitled to receive the Energy Supplement provided they continued to meet the eligibility criteria. From 9 October 2017, these pensioners were reissued with the PCC without an income and assets test and were able to retain the CSHC and the Energy Supplement.
WHAT ARE THE BENEFITS FOR CSHC HOLDERS
- Cheaper medicine under the pharmaceutical benefits scheme
CSHC holders pay a maximum of $7.30 for each medicine listed on the PBS.
When a CSHC holder reaches the PBS safety net threshold ($316.80 for CSHC holders), their medicine will be free for the remainder of the calendar year.
- Bulk-billed doctor visits, however, this is at the discretion of the doctor. Doctors receive higher payments from Medicare if they treat a CSHC holder, therefore some practices which do not bulk bill for a general patient may bulk bill for a CSHC holder.
- A bigger refund for medical costs when you reach the Extended Medicare Safety Net
threshold for out-of-hospital medical expenses. Out-of-pocket costs count towards this threshold throughout the calendar year. When a CSHC holder reaches the concessional EMSN threshold ($770.30 for CSHC holders), they are entitled to be refunded the lower of 80% of the out-of-pocket costs or the EMSN benefit cap for that medical item.
- CSHC holders receive discounts for stamps and mail redirection from Australia Post.
- CSHC holders receive various concessions from state and territory governments, however, they vary between each state and territory but may include discounts on some of the following :
- Electricity and gas bills
- Property and water rates
- Health care costs, including ambulance, dental and eye care
- Public transport
- A person who was the holder of the CSHC on 19 September 2016 and continuously thereafter is entitled to receive the Energy Supplement: Single $14.10 per FN and for a Couple $10.60 per FN each.
ELIGIBILITY CRITERIA – IN DETAIL
- Australian Resident
- Must be an Australian citizen, holder of a permanent visa, or a Special Category Visa holder;
• Must be in Australia on the day the claim is lodged for the CSHC;
CSHC holders can travel outside Australia temporarily without having their CSHC cancelled provided the period of absence is 19 weeks or less.
- Reached Age Pension Age – But DO NOT qualify for income support payments from Centrelink or Department of Veteran Affairs such as the age-based pension or service pension.
- Income Test Requirements
To qualify for the CSHC, a person’s Adjusted Taxable Income (ATI) plus deemed income from certain account-based income streams must be less than the income threshold. The income threshold depends on whether a person is single, a member of a couple or a member of an illness separated. couple:
Income Test thresholds – Per annum
Couple $144,000 (combined)
Couple illness separated $180,000 (combined)
The income thresholds are increased by $639.60 for each dependent child in the person’s care.
Adjusted taxable income – Includes ALL of the following :
- taxable income – usually taken from the prior year’s tax return (notice of assessment)
- reportable superannuation contributions (including salary sacrifice, and additional employer contributions above the Super Guarantee level of 11%);
- total net investment losses (including net rental property losses);
- foreign income (tax-exempt foreign income and income from sources outside Australia in which tax is not paid); and
- employer provided fringe benefits exceeding $1,000.
- Deemed income from non-grandfathered account-based pensions
Account-based Pensions / Income streams
Since 1 January 2015, account-based income streams (such as account-based pensions) have been DEEMED to earn an income for the CSHC income test unless the grandfathering provisions apply. The balance of a person’s account-based income streams which are not grandfathered will be deemed and added to their ATI.
Deeming Rates are currently locked in til 30/6/24 as follows :
- Amounts up to $60,400 are deemed to earn the lower deeming rate of 0.25%.
- That portion over $60,400 is deemed to earn the higher deeming rate of 2.25%
- Amounts up to $100,200 (combined) are deemed to earn the lower deeming rate of 0.25%
- That portion over $60,400 is deemed to earn the higher deeming rate of 2.25%.
Example of Income test Calculation – for a Couple
The example is a couple who receive income from several sources including part-time work, and their own account-based pensions (allocated pensions) currently valued at $1,500,000. They also still have some negatively geared property.
$15,000 Taxable Income Spouse 1
$25,000 Taxable Income spouse 2
$20,000 Add Back Negatively Geared Investment
$31,746 Deemed income of their combined Pensions
($100,200 x 0.25% = $250.5) + ($1,399,800 x 2.25%)
$91,746 Adjusted Taxable income
This is under the new threshold for couples ($144,000) and therefore each member of the couple provided they are pension age – would qualify for the Seniors Health Care Card.
GRANDFATHERING PROVISIONS :
Account-based income streams which are grandfathered will not be assessed for the income test.
A person must meet the following conditions for the grandfathering provisions to apply:
- The account-based income stream must have commenced before 1 January 2015, AND
- the person must have been a holder of the CSHC on 31 December 2014 and continuously thereafter.
Existing Grandfathering Will Cease :
- If a person with a grandfathered account-based income stream ceases to be a holder of the CSHC for any period of time since 1 January 2015, OR
- If a person rolls over an existing grandfathered account-based income stream to a new account-based income stream, the grandfathering provisions will not apply to the new account-based income stream.
If a grandfathered account-based income stream reverts to a reversionary beneficiary, the grandfathering provisions will continue to apply if the beneficiary was a holder of the CSHC on the date of reversion and continuously thereafter.