New rules mean you can get a Commonwealth health card on $90,000
What you need to know if you want cheaper medicines, medical expenses and other concessions that will save you money as a self-funded retiree.
The increases in the income test allowances for the Commonwealth Seniors Health Card (CSHC) for self-funded retirees in the recent budget provide many more eligible cardholders, but many have found it difficult to clarify the succinct definitions of what is included as income in the test. Such as, why are there rules like adjusted taxable income and deemed income for account-based super pensions when working out an entitlement to the CSHC? How are they different from taxable income and account-based pension income?
With attractions like paying only $7.30 for a chemist prescription compared to at least $30 (plus a host of other non-medical concessions), it’s hardly surprising tens of thousands of budget-conscious self-funded retirees who haven’t previously qualified are now checking their eligibility for the CSHC given a more generous income test allowance that now applies.
Since November last year, single self-funded retirees who have reached the government age pension age of 66.5 years can now qualify for a concessional seniors health card where their annual income is $90,000, while couples can get cards where their joint annual income is $144,000.
These higher income test allowances are more than 50 per cent greater than entitlements before the increases were confirmed in Labor’s October budget.
They preceded Labor’s New Year’s announcement of cheaper prescriptions for all Australians who don’t have a concession card. This was a federal election promise.
Since January 1, the maximum co-payment these Australians are now asked to pay for prescriptions available under the government’s Pharmaceutical Benefits Scheme is $30, a 29 per cent reduction to the previous $42.50.
Income test
How deeming works
Also counted under the CSHC income test is the concept of having a deemed value placed on the account balances of any account-based superannuation you have.
Deeming means any super in pension and accumulation accounts will be counted according to a value placed on account balances, whether or not a pension is being withdrawn.
The current deeming rates for a single retiree are 0.25 per cent on the first $56,400 of the account balances then 2.25 per cent on amounts greater than this. For couples, the same rates apply to amounts below and above $93,600.
While this applies to account-based super and the CSHC, superannuation classified as defined benefit pensions is treated differently. The income is not subject to the deeming rules, nor are the account balances. It’s only where part of the income received is required to be included for tax purposes that a defined benefit pension can have an impact on the seniors health card.
This will only be where the income exceeds what is described as the defined benefit income stream cap. This cap is related to the general transfer balance cap introduced on July 1, 2017, to restrict the amount of super entitled to tax-free retirement income.
It started at $1.6 million and has since increased to $1.7 million. The current cap is equal to annual income of $106,250, calculated as 1/16th of the $1.7 million cap.
Where a pensioner has a capped defined income stream that is greater than this, then 50 per cent of the pension payments over the cap will be included in your taxable income for the health card means test.
Where a pension is lower than the $106,250 cap, no amount will be included in the health card taxable income allowance.
Parts of this article were first published in the Financial Review by John Wasiliev. Read article
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