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Do you qualify for this help in the crisis?

Among the many stimulus measures introduced by the federal government, deeming rates have been cut. This means a couple with up to $4 million in superannuation could be eligible for the Commonwealth Seniors Health Card (CSHC) and all the associated benefits. It also means that some age pension recipients will get a boost.

Many more qualify for this benefit

Consider this scenario:

1. A couple have the bulk of their savings held equally in super, and they are drawing a pension. The money they draw out of super is not taxable so it does not appear on their tax statement (this confuses a lot of people, as only account-based pensions are assessable for the income test).

2. This couple also has a smaller amount of savings in their joint bank account earning negligible interest. So although interest received is taxable, in reality, tax is close to zip.

3. For the CSHC eligibility test, the couple can receive a total combined income of $89,290.

As they receive zero income from their bank account, we then look at how big their super can be, before their deemed income is more than the threshold of $89,290.

The maths works like this:

  • The first $86,200 is deemed to earn 0.25% under the new deeming rates, so the first $86,200 of super savings contributes only $215.50 to the threshold of $89,290.
  • The balance is deemed to earn 2.25%. Working backwards from the capacity still left in the test, $89,290-$215.50=$89,074.50.
  • So at 2.25%, $89,074.50 is the interest on a sum of $3,958,866.66. Put these super balance amounts together, then the upper limit is $4.045 million.

Note, that the Transfer Balance Cap (TBC) on account-based pensions is $1.6 million (soon to be indexed to $1.7 million), so a couple is only likely to hold a combined account-based pension balance of more than $4 million if their investment performance has delivered a solid increase.

How many people realise they can have over $4 million in assets (other than their family home) and be eligible for a CSHC?

Additional context

Here is some extra perspective:

  1. Prior to deeming rate changes in 2019, the upper limit for a couple’s super savings (assuming no other taxable income) was about $2.8 million, then with the July 2019 changes it went to $3.03 million, and now $4.045 million (and $2.526 million for a single person)
  2. Meanwhile, the stimulus payment of two lots of $750 is available to holders of the CSHC. New applicants will miss the first payment, however they will be eligible for the second payment if they hold the card as at 10 July.
  3. Application is via myGov or using a downloadable form.
  4. Note that new applicants will have to go through a process to establish identity, but this can be done by phone, which makes things a bit easier.

Essentially, a couple with no other assessable income can have very high account-based pension balances (after May 1) and still be eligible for the CSHC and they may be able to receive the card before 10 July and collect the $750 stimulus payment.

Also, by my calculation, a CSHC offers savings of up to $1,180 a year due to a lower Medicare safety net, potentially more than $1,300 in support via the Pharmaceutical Benefits Scheme, and more savings based on the likelihood of bulk billing via medical practitioners who receive a higher payment if they bulk bill concession card holders (like CSHC).

Other benefits add up

From state to state there are other benefits such as the $250 Regional Seniors Travel Card and a $200 energy rebate in NSW, both of which have to be applied for).

Combined with the stimulus payment, a NSW couple in a regional area could receive more than $2,500 each in medical cost support, $250 each in Regional Seniors Travel Card, stimulus payments of $1,500 (each), and a $200 rebate on energy costs.

That could add up to more than $8,700 worth of support this calendar year, even with a superannuation balance of more than $4 million.

Consider also that if a couple has cash at the bank earning 2% (which is ambitious), they need to have about $4.5 million to get an income to the threshold amount to exclude them from eligibility for the card.

Throw in reduced dividends this year, reduced rental income from rental properties, reduced part-time work opportunities etc—and a lot of retiree couples who do not receive the age pension could easily be eligible for the Commonwealth Seniors Health Card.

 

Brendan Ryan is a financial adviser and Founder of Later Life Advice. This article is for general information purposes only and does not consider the circumstances of any person. People should make their own enquiries to confirm eligibility for anything described in this article.

 

20 Comments
Justine
April 30, 2021

I have read and re-read these words many times over the past year "The first $43,100 of each of your own and your share of joint financial assets has a deemed income of 0.25% per year. Anything over $43,100 is deemed to earn 2.25%"
and optimistically thought "each of your own and your share" could mean you get a deemed rate of 0.25% for the first $43,100 of assets in just your name AND 0.25% for the first $43,100 of assets in joint names. I guess that's not the case!

Dave S
December 09, 2020

It seems there is another loophole.
My wife and I have CHSC cards, account-based income streams and some bank accounts.
Centrelink knows about these.

We also have significant amounts in managed investment products which generate plenty of income.
I have twice tried to tell Centrelink about these but they say they do not need to know as the test is on income only and they are not considered as relevant to income.

So it seems you could have as much as you want in managed funds, say $10 million returning $500,000 or more in income, and still get the CSHC.

Graham Hand
December 09, 2020

Hi Dave, I think your advice is incorrect. The income test for CSHC (Commonwealth Seniors Health Card) includes "Taxable income is your gross income minus allowable deductions. It’s the income you have to pay tax on. It includes income from wages and salaries, a business, investments, any taxable payments you get from us, any taxable payments you get from the Department of Veterans' Affairs, JobKeeper Payment from your employer."

Dave S
December 09, 2020

But I don't see what more I can do. Centrelink staff on the phone have twice told me that I do not need to notify them of these investments. Nor have they suggested that I enter the amount of ACTUAL income received anywhere else on the online form. It has these categories:
Banking
Home contents, personal effects, vehicles and other assets
Annuities, income streams and superannuation pensions
Real estate
Managed investments and superannuation
Shares
Foreign pensions
Other Income
Gifting
Sole trader, partnerships, private trusts and private companies
Other government payments
Compensation

They won't let me add it under Managed investments and superannuation.
One might think it could go under "Other Income" but it is not in the list at that location nor is it like any of those.
In fact there is nowhere on the form to declare income from a job, if we had one.

Perhaps it is an omission from the online system that if, after receiving a CHSC card, you receive an inheritance and place it into a managed fund, or you go back and do some part-time work, neither of these can be notified to Centrelink so they cannot affect your eligibility. Yet obviously they OUGHT to do so.

Unless they are getting this information from the Taxation Office via my TFN - which is fine by me. If so then hopefully they are keeping track of whether I am exceeding the income test limits.




Jan Rickert
December 03, 2020

Jan R December 2020: Our application for a CSHC has recently been denied because we have been told our joint income is too high. We are confused over apparent double treatment of our income from investments in shares. Why does our adjusted taxable income which is almost totally comprised of share dividend income and some capital gain get added to deemed income based on the capital value of those same investments from which we earn the taxable dividends. We had thought that income on investments is deemed regardless of actual dividends received but this is not the case if both actual dividends and deemed earnings on shares are included in the eligibility . test. What is taken as the value of share capital for the calculation of deeming? Is it the cost price of purchase or current market value at the date of application.

Julian
October 17, 2020

Is the payment from a Defined Benefit Pension (over 60 and tax-free) included in the income calculation?

Alastair Lamont
June 11, 2020

Can you please clarify for me what assets are deemed and what are treated as income. Assume $2000000 all invested directly in shares and fixed interest none in account based pensions, all investments owned directly. Assume actual income of $100000 from these investments. Would the owner qualify (assuming meets the age requirements). ie is the income (mainly dividend and capital gains from share sales) treated as income or is it deemed?
Alastair

Russell Langusch
June 04, 2020

Brendan

I have just been rejected for a CSHC following your article.
We are a couple with a superfund totally in pension mode.
After spending over an hour on the phone with Centrelink, it seems that our super pension income (although tax-free) has been included in the income calculation. It seems impossible to avoid declaring this income as it is included as Item 21 (Gross Payment) on the SA330 form (Details of income stream product).
What roils me most in Centrelink's ruling is the double counting - including actual tax-free pension income plus a deemed income from the pension fund balance!
It has pushed us well above the $89,290 limit.

Brendan Ryan from Later Life Advice
June 05, 2020

Hi Russell,

This doesn't seem right to me - and it sounds like you have heard the answer from Centrelink that could be incorrect.

Here are the reasons why I think you should try again:

1. A look at the Australian Government Guide to Social Security Law clearly states that Account Based income streams come under the income test for the CSHC, and they are deemed. You can see this detail here :

https://guides.dss.gov.au/guide-social-security-law/3/9/3/31

Note that this refers to applications for the CSHC since Jan 2015 - some pre-existing CSHC holders may be assessed in a different way - but new applicants don't have to consider this complexity.

2. In the CSHC form (SA296) itself - Q74, there is a specific reference to making a deeming calculation for your account based income stream. If there was more complexity than this - it would be stated here.

I think the problem comes from the assessment of account based income streams for the age pension can be slightly different (depending on a range of factors) - where as for the CSHC, it is quite a blanket provision that all applications from 1 January 2015 are deemed. The same form is used to provide details of the income stream product for both the age pension application and for the CSHC - so it can be misleading.

Possibly you spoke to someone at Centrelink who wasn't clear on this - and let's face it, this is all pretty fiddly.

Welcome to the world of Centrelink applications.

I would suggest completing the forms and submitting them, if you think your account based deemed income + adjusted taxable income is below the limit.

Note that there are provisions for you to get a Centrelink Reference Number over the phone as opposed to fronting up to Centrelink in person. This means the whole process should be able to be completed by mail.

I hope this information helps. I am not a lawyer or Social Security Law expert - just an enthusiastic financial advisor who wants to distil as much of the complex system into its basic parts to help my clients make the most of what they are entitled to.

Years working as a financial analyst in the Macquarie Bank Equities team in my youth have schooled me in organising information and getting to the nub of the story. I have applied this to age care financials, age pension eligibility and seeking out more than 40 associated entitlements that are under utilised but very helpful to retired Australians. I also like pulling all of this together to help work out the financial viability of retirement for my clients - much like you would do for working out the financial viability of a company - except harder!

The CSHC application end eligibility story is one that I have put in a bit of time to get to the bottom of - and I hope my efforts can help.

Best of luck!

Brendan

Russell Langusch
June 05, 2020

Many thanks Brendan for your detailed reply.
Yes, we are correct that pension income does not form part of "adjusted taxable income" and only deeming is applied to the superfund balance.
My accountant verified this and his firm has seen the same error for several of its clients already. His solution was to ring Centrelink hoping to get a more informed person.
I did this today and received a much better hearing. My application is now to be reassessed under an appeal process and if I disagree with the decision, I can appeal further.
Fingers crossed,
Russell

John
May 24, 2020

Brendan,
Very good article. Most helpful once you review guidelines and understand your point on deeming rates applied.

Mikhail Tupitsyn
May 22, 2020

Bryan, thanks for taking the time to add these clarifications in the article. We are on the same page regarding your main message - CSHC has value for retirees and the test criteria for the card are very generous (even more so after the recent deeming rate changes). My point was to highlight some of the specific but important details about CSHC assessment. Because of the significant differences between CSHC and age pension eligibility assessment, many people misunderstand how CSHC works and incorrectly think they are not eligible.

Harty
May 21, 2020

For the CSHC eligibility test, the couple can receive a total income of $89,290.
My understanding is that $89,290 refers to taxable income, which for dividend income earners includes franking credits, thus reducing the actual income to considerable less.

Brendan Ryan
May 22, 2020

Harty,

The income test includes your taxable income - which would include franking credit as you mention, and also includes other ways that taxable income may be reduced - such as by adding back rental losses, employer benefits and superannuation contributions.

Note that if you were receiving franking credits as part of dividend income in your investments in an account based pension - this income is not counted, as the balance is deemed.

Brendan

Mikhail Tupitsyn
May 21, 2020

This article is confusing several things.
1. The only asset which is deemed for CSHC eligibility is the account-based pension (ABP). The cap on the ABP is $1.6M. It is impossible to have $4M in the ABP.
2. If super is still sitting in the accumulation account, it is not assessed at all for CSHC purposes.
3. All other investments are not deemed. Rather, the actual income generated from these investments is assessed.
In summary, new deeming rates only change deemed income from $1.6M of the maximum ABP amount and allow retirees to have slightly more investment or other income.

Peter
May 21, 2020

If the ACB was set up prior to the introduction of the cap you could have an unlimited amount I believe.

Mikhail Tupitsyn
May 21, 2020

Not really. "If you were receiving a retirement phase income stream(s) on 30 June 2017, you should have reduced the combined value to the $1.6 million cap otherwise you would have been liable to pay penalty tax on any excess. The new cap applies to everybody that has taken their superannuation as an income stream. If you were already in retirement with an income stream when the cap was introduced on 1 July 2017, your transfer balance cap will apply to the amount of superannuation interests that supported your retirement income stream as at 30 June 2017." https://www.superguide.com.au/retirement-planning/liberals-1-6-million-cap-pension-start-balances

Brendan Ryan
May 21, 2020

Mikhail,

You make a good point about the ABP cap of $1.6m. However, it is actually feasible, that investment returns could have increased the value of the ABP above the cap - subsequent to the transferral. I agree it is unlikely that a couple could have more than $4m in combined ABP holdings - an outlier case, but possible (and I have heard of a few cases of ABPs greater than the cap based on investment performance).

I also take your point about not being clear about super in accumulation not being counted - this is a really good opportunity to reduce assessable income for the test.

As for your third point, I think I am clear on that.

My point for the article is to draw attention to the fact that high superannuation balances can co-exist with eligibility for the CSHC - and recent changes leave more room for income outside of super.

I am passionate about helping later life Australians make the most of all entitlements - and I think the test for the CSHC is often misunderstood, or people can be confused with the impact of their assets upon their eligibility.

My focus is encouraging people to clarify why they ARE NOT eligible, if they think they are not, in order to mobilise should things change - and things are certainly changing currently.

Further - the Commonwealth Seniors Health Card is had to value for a lot of people - and I put some effort into doing that in this article. It is a very important part of the government support piece for a lot of people - and I think many more people who are confused about eligibility.

Finally - holding a Commonwealth Seniors Health Card allows more than just a lower Medicare Safety Net and access to the Pharmaceutical Benefits Scheme. However finding out about what the card can offer is difficult. As an example, in NSW the State Government offers a $200 rebate for electricity account holder who have a Commonwealth Seniors Health Card. Recent figures show only a 10% take-up - because people are not finding out about these programs, and making it through the application process. This is a focus of my business - the task of making sure all entitlements are understood and claimed - and getting to the bottom of CSHC eligibility is an important part of this.

Bruno Firriolo
May 21, 2020

Based on the information on the Services Australia website the deeming calculation in this article only applies to a couple who already receive an eligible government pension (in which case they would already get the same benefits as the CSHC). For non-government pensioners the Services Australia website says :
"If you’re a member of a couple and neither of you get a pension
The first $43,100 of each of your own and your share of joint financial assets has a deemed income of 0.25% per year. Anything over $43,100 is deemed to earn 2.25%."
Therefore, the reader needs to apply the correct deeming calculation to determine if they are entitled to the CSHC

Mick Ryan
May 21, 2020

The calculation of the deeming rate is if you’re a member of a couple and neither of you get a pension the first $43,100 of each of your own and your share of joint financial assets has a deemed income of 0.25% per year. Therefore if you are a couple you get $43,100 each which is $86,200 for a couple as long as you have at least $43,100 in assets each.

 

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