The question is a popular one among prospective retirees, and the answer can be best explained by dividing the question into four parts:
- What is the Commonwealth Seniors Health Card (CSHC)?
- Who is eligible for the CSHC?
- What year of income does Centrelink use when testing for CSHC eligibility?
- Where can I find more information about the CSHC and eligibility?
A. What is the Commonwealth Seniors Health Card (CSHC)?
The CSHC gives you access to cheaper prescriptions via the Pharmaceutical Benefits Scheme, and an increase in benefits for medical expenses above a certain threshold via the Medicare Safety Net. You may also be eligible for bulk-billing for doctor’s appointments (at the doctor’s discretion).
As a CSHC holder you can also travel on the Ghan, Indian Pacific and the Overland rail services at concessional rates. Depending on the state that you live in, you may also be entitled to concessions from your state government and, from some private businesses. You can find out about the other discounts that you’re entitled to by reading the Centrelink guide to concession cards on the Department of Human services website. I have included the link for the guide at the bottom of the article.
As a CSHC holder, you will also receive a Seniors Supplement of around $210 each quarter for a single person, and around $160 each if partnered (every 3 months), and this supplement is not taxable and doesn’t count towards the income threshold for the CSHC. (The Seniors Supplement replaces the Seniors Concession Allowance and Telephone Allowance.)
Background: The CSHC was introduced in 1994 to encourage individuals to become self-funded retirees. The income thresholds for eligibility steadily increased from 1994 to 2001 to reflect cost of living increases. Since 2001 however, the income thresholds for eligibility have not changed, even though the cost of living has increased over the past 12 years.
B. Who is eligible for the Commonwealth Seniors Health Card (CSHC)?
The CSHC is available to Australians of Age Pension age or older (at least 65 for men and since 1 July 2013, at least 65 years for women), and who don’t qualify for the Age Pension or who don’t qualify for a Department of Veterans’ Affairs pension. You must also be an Australian resident and currently living in Australia.
You must satisfy an income test (based on ‘adjusted taxable income’), but you do not have to satisfy an assets test to be eligible for the CSHC.
Income thresholds for CSHC: Your annual adjusted taxable income must be less than $50,000 (for a single person) or less than $80,000 (for a couple, combined). If a couple is separated due to illness, respite care or prison, then the combined income threshold rises to $100,000.
What is annual adjusted taxable income (ATI)?: ‘Adjusted taxable income’ is an individual’s taxable income plus total net investment losses, plus foreign income not normally taxed in Australia, plus employer-provided fringe benefits (if worth more than $1,000), and plus reportable superannuation contributions. I explain what all of these items mean later in the article.
Super benefits not counted as taxable income (except for payments from some public sector funds): Any super benefits paid to individuals aged 60 or over are tax-free and, importantly, do not form part of an individual’s taxable income. As a consequence, the removal of super benefits (from a taxed source) received by over-60s from the income tax system since July 2007 means that a greater number of retirees are eligible for a CSHC. The one exception to the exclusion of superannuation benefits from taxable income (since July 2007), however, is where an individual receives pension income from an untaxed source, which is the case for some retired public servants. Pension income from an untaxed source is still counted when considering CSHC eligibility because this income forms part of a person’s taxable income. This is another example of retired public servants missing out under the tax-free super rules.
Salary sacrifice super contributions count for adjusted taxable income: For the 2008-09 year and earlier years, salary sacrificing didn’t count when determining eligibility for the CSHC. Since July 2009 however, the definition of income for the purposes of the CSHC, includes salary sacrificed contributions.
You can confirm your CSHC eligibility with Centrelink.
For the convenience of readers, I have included an extract from the Department of Human Services website that explains ‘adjusted taxable income’:
Adjusted taxable income is a combination of taxable income, foreign income, total net investment losses, employer-provided benefits, and reportable superannuation contributions:
This is income that you would pay tax to the Australian Government on, for example bank interest and earnings. Although you may not be required to lodge a taxation return due to the level of your income, you may still have taxable income.
This is income from overseas that you do not pay Australian income tax on.
Total net investment losses
Total net investment losses are the sum of net losses from rental-property income plus net losses from financial investment income. The losses will be added back on to adjusted taxable income.
A net loss from rental property income is the amount by which the expenses of owning the property (e.g. mortgage-interest payments and maintenance costs) exceed the gross rental income from it.
A net loss from financial-investment income is the amount by which the expenses of owning the investment (e.g. interest payments on the money lent to purchase the investments) exceed the income that the investments are earning. Such investments are often referred to as ‘negatively geared’.
Employer-provided benefits that are taken into account for the Commonwealth Seniors Health Card include benefits such as cars, school fees, loans, housing, and health insurance. Employer-provided benefits in excess of $1000 form part of a person’s adjusted taxable income.
Reportable superannuation contributions
Reportable superannuation contributions are discretionary or voluntary contributions. They can also be referred to as ‘concessional’ or ‘before-tax contributions’. They include:
- reportable employer superannuation contributions, such as voluntary salary-sacrificed contributions (which are on top of those required by law, such as those included in industrial awards or by the superannuation guarantee levy—currently 9 per cent), and
- personal deductible superannuation contributions, if they can be claimed as a tax deduction on a personal tax return.
Note: Post-tax contributions to superannuation are not reportable superannuation contributions
C. What year of income does Centrelink use when testing for CSHC eligibility?
This is where it gets tricky. The income assessment for the CSHC is based on the verified taxable income from one of the two financial years prior to the year the claim is lodged. For example, if the claim is lodged in the 2013/2014 year, the CSHC assessment is based on the taxable income for the 2012/2013 year or the 2011/2012 year. “Verified taxable income” generally means the taxable income shown on a person’s Tax Notice of Assessment.
Note: For the thousands of Australians who have just retired and hoping to receive a CSHC for the first time in the 2013/2014 year, based on an income that you no longer receive, then your entitlement to the CSHC could be problematic. Fortunately, Centrelink has anticipated this issue. If the verified taxable income for the previous year is above the CSHC income limits, then it is possible for an individual to supply an estimate of their taxable income for the current financial year using the calculation table (see pages 7 and 8) provided in Centrelink’s ‘Information you need to know about your claim for Commonwealth Seniors Health Card’booklet (the link is at the bottom of this article).
Warning: When you do receive your Tax Notice of Assessment for the year that you used for testing your CSHC eligibility, and if you discover that your estimate is incorrect and that your taxable income is in fact above CSHC income limits, then you must notify Centrelink immediately.
D. Where can I find more information about the CSHC and eligibility?
Your first port of call is the Department of Human services website (which now manages all Centrelink information). The Centrelink section of the DHS website contains plenty of information about the CSHC, or you can contact them by phone on 13 23 00. I suggest you write down this phone number because when I first searched for this phone number it took me 20 minutes to find it on the DHS website, and it was hidden away in a 19-page booklet. More recently however the number is more prominent on the website although it only invites you to use the number if you have lost your CSHC, when it is the main phone number for any CSHC question.
For more information on the CSHC, check out the following documents:
- A Guide to Centrelink Concession Cards
- Information you need to know about your claim for the Commonwealth Seniors Health Card booklet
- Claim for a Commonwealth Seniors Health Card form