Commonwealth Seniors Health Card

The Commonwealth Seniors Health Card (CSHC) provides concessional benefits to self-funded retirees who aren’t entitled to the Government Age Pension.

Some of the benefits provided include:
•    Concession rates for medication (Pharmaceutical Benefits Scheme)
•    An additional Seniors Energy Supplement payment
•    Other concessions provided by State, territory and local governments as well as private businesses, in the areas of health, transport, education and recreation

To be eligible for CSHC a person must meet the following criteria:
•    Have reached the age of Pension entitlement
•    Not qualify for pension payments from the Department of Human Services or Department of Veterans Affairs
•    Meet residency requirements
•    Meet the income test which is based on your Adjustable Taxable Income

The income test is as follows:

Changes from January 1st 2015

Any person, who commenced a superannuation income stream from the 1st January 2015, will have their Account Based Pension deemed as income. This means your account based pension income is now subject to a rate of income (deeming rate) for calculation purposes rather than the previous calculation of reducing the gross annual pension payments by the relevant deductible amount which is actually a return of the original capital. This could make it more difficult to meet the income test.

The deeming rates are as follows:

Anyone who has commenced a super income stream prior to the 1st January 2015 will be exempt from the new rules as long as they became holders of the CSHC before 1st January 2015 and continue to be eligible in the future.

Example 1
John is 66 years old, married, and a holder of the CSHC before the 1st January 2015.  John and his wife have a combined annual income of $70,000 per year.  John also has $600,000 in a tax free account based pension, which he commenced before the 1st January 2015 and draws $45,000 per annum.  Because of the grandfathering rules, John’s Account Based Pension will not be subject to deeming rules as it was commenced before the 1st January 2015.  The pension is subject to the old rules, giving him a deductible amount of $33,784 on the $45,000 he’s withdrawing from his Account Based Pension.  This means that only $11,216 will be assessed as income.  This amount together with John and his partner’s income of $70,000 brings their total annual income to $81,216, meaning he will be eligible for the CSHC.

Example 2
Cath is 66 years old, married and a holder of the CSHC before the 1st January 2015.  Cath and her partner have a combined income of $70,000 per annum.  On the 2nd February 2015, Cath decides to move her account based pension, which is worth $600,000 to a new product.  As a result, Cath loses the grandfathering provisions and her new account based pension will be deemed to earn $19,806 worth of income.  Together with Cath and her partner’s taxable income of $70,000, brings their combined total income to $89,806.  In this scenario, Cath would fail the income test, as their combined income is over $82,400 meaning Cath will not be eligible for the CSHC.

This is why it is very important to seek advice before considering re-booting an existing pension. The benefits that you currently receive from holding the Commonwealth Seniors Health Card must be considered as part of the assessment in the strategy to re-commence any income stream to ensure that the strategy is right for you.

If you wish to discuss how these changes may affect you, please contact the JBS team.