The Commonwealth Seniors Health Card (CSHC) provides self-funded retirees and workers over pension age with concessions on prescription medicines and a range of other benefits. It is a sought-after benefit, and whilst no asset test applies, it is subject to an income test which has undergone significant amendments.
On 1 January 2015, changes to the way the income test is applied made it a little more difficult for new applicants to qualify for the CSHC.
Who is affected?
The changes apply to:
- New applicants for a card who have an account based pension.
- Current card holders who start a new superannuation pension or change pension providers.
- Existing card holders who travel overseas for longer than 19 weeks.
Current card holders who do not make changes to their account based pensions are not affected.
What has changed?
From 1 January 2015 account based pensions are included in the CSHC income test in the same way as non-superannuation financial investments. The income is calculated using Centrelink’s deeming rates, not the actual payments received from the account based pension.
The aim of these changes is to ensure that people with similar incomes are treated consistently. Prior to these changes it was possible for retirees to hold very large sums of money in account based pensions and still be eligible for a CSHC.
Who is now eligible?
Single retirees are eligible for a CSHC if their annual income is less than $51,500. For couples combined, the limit is $82,400. Account based pensions are now included in the calculation of this income.
For a single person relying entirely on financial investments for their income, the first $48,000 of their investments is deemed to earn 2% per annum, and any amount above this, 3.5% pa. At these rates, a retiree can have total financial investments of up to $1,492,000 and be eligible for the card.
For a couple, and assuming investments are split reasonably evenly, the first $79,600 is deemed to earn 2% pa and the remainder 3.5% pa. So combined, a couple will need to have less than $2,388,400 in financial assets to qualify.
Be aware that figures quoted may not be so clear cut. Other factors can come into play when determining eligibility, including which year’s income Centrelink will apply the test.
Current holders of a CSHC who go overseas for more than 19 consecutive weeks will lose the card. On their return they will have to apply for a new one, and the new rules will apply.
Retirees who commenced an account based pension before 1 January 2015 and who transfer this to a new pension will also be assessed under the new rules.
Another aspect to be cautious of is that deeming rates can change. If rates increase so will the amount of deemed income and card holders who are close to the income thresholds may lose their cards.
While it is possible to construct financial strategies that can help people qualify for a CSHC, these may be detrimental to their long-term financial position. It is therefore important to talk to a licensed financial planner who can examine your overall situation, and advise on the best course of action. Contact us today on (07) 3040 4840
Human Services website www.humanservices.gov.au “Budget 2014-15: Commonwealth Seniors Health Card – include untaxed superannuation income in the eligibility assessment”
Human Services website www.humanservices.gov.au “Commonwealth Seniors Health Card”
Human Services website www.humanservices.gov.au “Deeming”
The advice on this site may not be suitable to you because it contains general information that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information. Please also refer to our general advice warning under contact us tab on our website. The article is based on information available at the time of writing only and therefore care should be taken as to the accuracy of the content.
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