New rule for Commonwealth Seniors Health Card

Recent changes have increased the income test to qualify for the Commonwealth Seniors Health Card (CSHC).  The changes are as follows:

               Old Threshold       New Threshold

Singles          $61,284                  $90,000

Couples        $98,054                 $144,000

The thresholds are calculated on 2 items:

1. “Adjusted taxable income” – similar to your taxable income plus any losses from business or superannuation contributions; and
2. An amount relating to your superannuation pensions.

If you are a member of a superannuation fund, the amount relating to superannuation includes:

• Absolutely nothing for withdrawals from “accumulation accounts”; and
• A calculated amount known as deeming for account-based pensions started on or after 1 January 2015. The deeming rate is 0.25% on the first $56,400 for singles and $93,600 for couples and 2.25% thereafter.

Based on this, a single person with a $1.7m account-based pension in a superannuation would have a deemed income amount from that pension of:

$56,400 x 0.25% + 2.25% x ($1.7m – $56,400) = $37,122

This means that a single person can have other taxable income up to $52,878 and still be eligible for CSHC.  A couple can earn other income of $69,372 before not being eligible for the CSHC.

When it comes to the CSHC, having assets in superannuation (rather than invested personally) is incredibly beneficial (your overall financial circumstances need to be considered):

• As mentioned above, accumulation balances don’t impact income for this card at all. In contrast, exactly the same amount invested in (say) a personal share portfolio would result in taxable income being taken into account,
• Many couples focus only on the “couples” threshold, without remembering that once one of them dies, they will have the same asset base but with the singles income threshold. Again, it can be ideal to have as much as possible of those assets in superannuation to minimize income taken into account for the income test. In some cases, the death of a partner means the surviving spouse has no choice but to take money out of superannuation. Given the higher thresholds, it might still be possible to retain the CSHC.

If you would like us to assess your entitlement to the CSHC, please contact our office.