Great news! Seniors Health Card income thresholds indexed, finally

Effective from 20 September 2014, the income test thresholds for the Commonwealth Seniors Health Card have increased for the time in 13 years. The new indexed income test thresholds appear later in the article.

Since we started SuperGuide nearly 6 years ago, I have highlighted the lack of indexation associated with the Commonwealth Seniors Health Card, which had the (probably intended) effect of fewer people each year being eligible for the CSHC.

The CSHC is available to retirees who are not eligible for the Age Pension, that is, Australians who are fully self-funded retirees, and earn income below a certain threshold. The income thresholds had not been indexed since 2001, more than 13 years ago.

The Liberal government promise, to index the income thresholds for the CSHC every year in September (effective from 20 September 2014), in line with the Consumer Price Index, is now a reality. The legislation enabling the CSHC indexation to happen, is currently awaiting royal assent. The cost of this new measure will be $91 million over the next 3 years. See this link for actual legislation.

I agree with this new measure. In my experience, over the past 25 years of dealing with pre-retirees and retirees, many of those individuals who are now self-funded retirees have lived within their means, and went without certain lifestyle items during their working lives, and are now in a position that they can fund their own retirement. The past 6 years of uncertain sharemarkets, rocketing energy costs and increasing health costs have hit self-funded retirees very hard, as have the lower interest rates on term deposits. I believe it is a small cost to the federal budget for a huge benefit to the older segment of the Australian population.

What is the 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.

Until 19 September 2014, the current ‘adjusted taxable income’ thresholds for CSHC eligibility are:

  • $50,000 for singles
  • $80,000 for couples (that is, $40,000 per member of couple)

From 20 September 2014, the adjusted taxable income thresholds have increased as follows:

  • $51,500 for singles
  • $82,400 for couples (that is, $41,200 per member of couple)

Important: The Government is making significant changes to the CSHC income test which may affect your eligibility for the CSHC. See SuperGuide article Seniors Health Card (CSHC) changes to hit retirees.

Are you eligible for a Commonwealth Seniors Health Card?

You can read our very popular SuperGuide article, Are you eligible for a Commonwealth Seniors Health Card? to discover if you’re eligible for the CSHC.

History of the CSHC

The CSHC was introduced to help self-funded retirees with health costs in retirement; costs which can substantially reduce living standards. The current thresholds were set in 2001 and at the time did provide a generous scheme for middle-income retirees, as well as lower-income self-funded retirees. According to Coalition, “self-funded retirees have made a significant contribution to the success of the nation over their life-time, and we should not be discouraging seniors from being self-reliant by constantly reducing entitlement to the CSHC.”

Originally, the CSHC was introduced in 1994 to provide assistance to low-income retirees who were asset-rich but income poor, such as farmers. In 1999, the income test for the CSHC was changed to taxable income, and the income limits were increased to allow more self-funded retirees to access the CSHC. In 2001, the income thresholds were set at $50,000 for singles and $80,000 for couples, and these thresholds remained in place until 19 September 2014. From 20 September 2014, the income test thresholds increased to $51,500 for singles, and $82,400 for couples.

According to the Liberal Party 2013 election policy statement, when the Howard government came to power in 1996, only 33,000 retirees held CSHCs. By the end of the Howard government, in 2007, there were 318,000 retirees with CSHCs.

In his September 2014 media release, Minister for Social Services, Kevin Andrews states that 290,000 Australians currently receive the CSHC, and the annual indexing of the CSHC income tests will allow an additional 27,000 Australians to become eligible over the next 4 years.

What is ‘adjusted taxable income’?

For the convenience of readers, I have included an extract from the Department of Human Services website that explains the current definition of ‘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:

Taxable income

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.

Foreign 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

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.

© Copyright Trish Power 2009-2014

Copyright for this article belongs to Trish Power, and cannot be reproduced without express and specific consent.

IMPORTANT: SuperGuide does not provide financial advice. SuperGuide does not answer all questions posted in the comments section. SuperGuide may use your question or comment, or use questions from several readers, as the basis for an article topic that we publish on the SuperGuide website. We will not disclose names or personal information in these articles. Comments provided by readers that may include information relating to tax, superannuation or other rules cannot be relied upon as advice. SuperGuide does not verify the information provided within comments from readers. Readers need to seek independent advice about their personal circumstances.

Comments

  1. If you currently hold a CSHC but are going overseas for more than 6 weeks, will your Card be withdrawn and you need to reapply for it, or has the absence from the Country without losing the privilege been increased to nineteen weeks, as in the initial Budget proposal.

    • Hi John
      Thanks for your comment. The extension to 19 weeks for overseas travel for CSHC holders is not yet law – we will update the relevant articles when it does become law.
      Regards
      Trish

  2. richard dobosz says:

    thank you a great web site god health to all richard

  3. Finally some common sense on indexing but its still lacks in providing an adjusted threshold.

  4. Bruce Burrow says:

    Hi,

    Thank you for this information.

    I can understand that the income limit has been index linked now but not sure if I saw that the means test using the “adjusted taxable income” has been changed.

    Currently , some super pensions are exempt from inclusion in the “adjusted
    taxable income” – is it still the case that changes to the calculation of the adjusted
    taxable income has not yet been passed in legislation ?

    • Hi Bruce
      Thanks for your comment. The changes to the CSHC income test, in terms of including deemed pension income, have not yet become law. Within this article, I include a link to another explaining those proposed changes, and we will update that related article when the proposals become law.
      Regards
      Trish

  5. Using the rba inflation calculator, the $50000 figure (which was set in 2001) would by the end of 2012 have been changed to $67688, had indexation been applied. This corresponds to inflation of 2.5% to 3% per year.

    • Surely, in view of how much money we have saved the government in pension payments over the years since 2001, a fair thing for the government to do would be to raise the limit of income to $65,000 p.a., subject to annual c.p.i. adjustment, as from September 2014.

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