Since we started SuperGuide nearly 5 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 have not been indexed since 2001, more than 12 years ago.
If the Liberals win the election in September 2013, they promise to index the income thresholds for the CSHC every year, in September, starting from September 2014, in line with the Consumer Price Index. The cost of this new measure will be $100 million over the next 3 years, with an expected 20,000 retirees becoming eligible for the CSHC by the 2016/2017 year, due to the new indexation measure.
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 5 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.
The current ‘adjusted taxable income’ thresholds for CSHC eligibility are:
- $50,000 for singles
- $80,000 for couples.
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
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 remain in place.
According to the Liberal Party 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.
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.