Taking effecting from 20 September 2018, the income test thresholds for the Commonwealth Seniors Health Card (CSHC) have increased again, in line with the federal government’s promise to index the thresholds annually.
CSHC income thresholds are now indexed annually in line with CPI (inflation). The first indexation under the new rules took place from September 2014 (the first time since 2001), and then again from September 2015, and from September 2016, and from September 2017, and now the thresholds have been indexed again, effective from 20 September 2018.
The practical impact of increasing the thresholds for the CSHC income test is that more Australians will be eligible for the CSHC, but this opportunity is tempered by the fact that since January 2015, previously excluded income (deemed income from super pensions) is now counted towards the income test.
How do the CSHC income test rules work?
How the CSHC works: Effective from 20 September 2018, an individual can apply for a CSHC if they earn an adjusted taxable income below the income thresholds of $54,929 (for a single person) or $87,884 for a couple (that is, $43,942 each). A couple separated due to illness, respite or jail are each subject to the single income threshold of $54,929 ($109,858 combined). For an explanation of adjusted taxable income, see SuperGuide articles Are you eligible for a Commonwealth Seniors Health Card? and Great news! Seniors Health Card income thresholds increase, again.
Background: From 20 September 2017 until 19 September 2018, the CSHC income test thresholds are $53,799 (for a single person) or $86,076 for a couple (that is, $43,038 each). A couple separated due to illness, respite or jail are each subject to the single income threshold of $53,799 ($107,598 combined). From 20 September 2016 until 19 September 2017, the CSHC income test thresholds were $52,796 (for a single person) or $84,472 for a couple (and $105,592 combined for a couple separated due to illness, respite or jail). From 20 September 2015 until 19 September 2016, the CSHC income test thresholds were $52,273 (for a single person) or $83,636 for a couple (and $104,546 combined for a couple separated due to illness, respite or jail). For more information on thresholds applicable for earlier years, see SuperGuide article Great news! Seniors Health Card income thresholds increase, again.
Since January 2015, retirees can spend up to 19 weeks overseas without losing CSHC. Previously, if you spent more than 6 weeks overseas, your CSHC was cancelled, and you were required to lodge an application for a new card. The government has extended this timeframe to 19 weeks, effective since 1 January 2015, which is great news for existing CSHC holders who do not wish to lose access to the grandfathering provisions for the CSHC income test (for information about the significant change to the CSHC income test, that is the introduction of deemed income from super pensions, continue reading).
Note: Certain CSHC holders will receive the Energy Supplement, if they became eligible for the CSHC before September 2016. CSHC holders who became eligible for the card because they lost their Age Pension entitlements on 1 January 2017 will also be paid the Energy Supplement (provided they applied for the CSHC within 6 weeks of losing the Age Pension) (for more information on this special rule, see SuperGuide article Done deal! Lost Age Pension, got new Seniors Health Card). The Energy Supplement, which remains fixed at the September 2014 rate, is $551.20 for a couple ($275.60 for each member of couple), and $366.60 for a single person, typically paid in quarterly instalments.
Tip: Both current and new CSHC holders continue to remain eligible for concessional prices for medicines on the Pharmaceutical Benefits Scheme (PBS), free prescriptions once they reach the PBS Safety Net, bulk-billed GP appointments (at discretion of doctor), and a reduction in the cost of out-of-hospital expenses via the reduced threshold applicable to the Extended Medicare Safety Net.
What other changes affect CSHC eligibility?
The Commonwealth Seniors Health Card income test has been changed significantly, effective since 1 January 2015, so that new applicants on or after 1 January 2015, must include superannuation pension income (deemed income based on super pension assets).
More specifically, quoting directly from the Budget documents, “To ensure people with similar incomes are treated consistently from 1 January 2015, superannuation will be treated for new recipients in the same way for the CSHC income test as it is for the Age Pension (for the equivalent changes to the Age Pension income test, see SuperGuide article Income test changes (January 2015) mean less Age Pension forever).
This radical change to the CSHC test has applied since 1 January 2015, but only for new applicants (‘new’ means applicants on or after 1 January 2015). Existing CSHC holders as at 1 January 2015 do not have their superannuation pension income counted towards the CSHC income test (unless they start a new super pension – see note below). Allowing existing CSHC holders this concession is known as ‘grandfathering’ which means that the previous laws apply to current holders of the CSHC, but the new rules apply only to new applicants, applying for the CSHC since 1 January 2015.
Note: Before these special CSHC holders (that is, those that were CSHC holders as at 31 December 2014, and continue to be holders) breathe a sigh of relief, note that the rules are not that simple. Even if you were a CSHC holder prior to 1 January 2015, but you start a new super pension after that date, including changing pension providers, then you will be subject to the new rules, and your deemed pension income will count when assessing your eligibility for the CSHC. Also, if you plan to spend extended time overseas, your CSHC may be cancelled which means the new income test will apply (see later in the article for more information).
How does the new CSHC income test work?
Testing superannuation pension in the same way as it is tested for the Age Pension income test means that the super pension is subject to deeming provisions when testing for the CSHC, rather than the actual earnings on your pension assets, or the actual amount that is withdrawn from the super account (and what you would traditionally consider as income).
Deeming assumes a certain rate of return on your super pension assets, rather than the actual earning on your pension assets. (Deeming of superannuation pensions for the Age Pension income test also commenced on 1 January 2015).
Outlined below are the main changes to the CSHC income test rules that affect both current holders (where indicated), and new holders:
- Existing CSHC holders (pre-January 2015) receiving super pensions started before January 2015, are subject to the grandfathered (old) rules, that is, superannuation pension income is not included when assessing against the CSHC income thresholds.
- Existing CSHC holders (pre-January 2015) who change pension providers on or after 1 January 2015, are subject to the new income test rules.
- Existing CSHC holders (pre-January 2015) who travel for extended periods (19 weeks or longer) on or after 1 January 2015, and have their CSHC cancelled, will need to re-apply and will be subject to the new income test rules.
- Note that super pension income from certain public sector schemes does count, and has always counted, towards the CSHC income test, and continues to do since 1 January 2015.
- Deemed income from superannuation pensions commenced from 1 January 2015, to be included as income for both current and new CSHC holders.
Under the old rules, what is counted as income for CSHC? Under the grandfathered (old) rules, your ‘adjusted taxable income’ is counted when assessing your eligibility for the CSHC. Your ATI includes your taxable income, foreign income for which you have not paid Australian income tax, total net investment losses, employer-provided benefits and reportable super contributions (salary sacrifice and personal tax-deductible super contributions). For more information on the meaning of ‘adjusted taxable income’, see the SuperGuide article Are you eligible for a Commonwealth Seniors Health Card?.
Why has the government included superannuation pension income?
The reason the government gave for including superannuation pension income in the CSHC income test is: “to ensure people with similar incomes are treated consistently (from 1 January 2015), superannuation will be treated for new recipients in the same way for the CSHC income test as it is for the Age Pension.”
Before the introduction of tax-free superannuation pension benefits for over-60s in 2007, super pension income was always included in the CSHC income test. Before July 2007, a tax-free amount (representing a return of an individual’s after-tax contributions over a period of time) of an income stream from a pension was not counted under the CSHC rules. The pension income that formed part of an individual’s taxable benefit, or what we now call the taxable component, had been counted.
When the Government introduced tax-free super for over-60s in July 2007, an apparent unintended consequence was that thousands of Australians became eligible for the CSHC for the first time, because super pension income no longer formed part of an individual’s ‘taxable income’.
Why is the government using the term ‘untaxed superannuation income’?
If technical information is too heavy a topic for you, then scroll down the page to the next section of this article.
Technical information: Under the tax-free super changes introduced in 2007, pension income from a taxed source paid to over-60s was not part of a person’s taxable income – it is this type of super benefit that the Liberals describe as ‘untaxed superannuation income’. In 2009, the government made a conscious decision to exclude superannuation pension income from a taxed source from the CSHC income test. Confusingly, in super land there are super benefits known as benefits from an untaxed source’ which have always counted for the CSHC test, and have always been treated as taxable income. If you’re a long-term public servant, or were a public servant, then you’re likely to be receiving pension income from an ‘untaxed source’, which is not the same thing as untaxed superannuation benefits, as the government chose to use in the 2014 Budget papers.
The government announced that superannuation pensions from a taxed source (what the government describes as ‘untaxed superannuation benefits’) would be counted towards the income test of the Commonwealth Seniors Health Card for new applicants, from 1 January 2015. Note that any super pension income from an ‘untaxed source’ (generally public service pensions, and included in taxable income) has always counted towards the CSHC test.
It is unfortunate that the government has used the term untaxed in its policy papers because it has a special meaning in super, which is different from how the government has used it. According to the government, ‘untaxed superannuation benefits’ means super from a taxed source, and super pensions from these sources are tax-free on or after the age of 60, and previously were not included in the CSHC test, but are now included since 1 January 2015. I explain the government’s confusing use of the terms ‘untaxed superannuation benefits’ and ‘taxed superannuation benefits’ in the SuperGuide article CSHC income test: What is untaxed superannuation and taxed super?
Tax-free superannuation pensions continue to be excluded (including on or after 1 January 2015) from the CSHC income test for existing cardholders as at 31 December 2014.
An individual starting a new super pension on or after 1 January 2015, even if they have held a CSHC since before January 2015, will have deemed income from that super pension included in the CSHC income test.
An individual applying for the CSHC on or after 1 January 2015 will have deemed income included for the CSHC income test from his or her super pension.
For simpler information on the current CSHC rules, and how you apply, see the following SuperGuide articles: