The Commonwealth Seniors Health Card is prized by self-funded retirees because it offers a range of concessions from the federal government. However, access to concessions from state and local governments is usually limited.
There is another card, the Low Income Health Card, which is not generally understood, but which can provide access to additional concessions.
These benefits vary from state to state, but in some cases can be valuable. There are also some private businesses that offer concessions to LIHC holders.
A person can have both cards if they meet the eligibility criteria.
For the LIHC, you must be an Australian resident who is living in Australia, and have income below the cut-off points. The same requirements apply for the CSHC, but, in addition, you must be of pensionable age, and not be receiving any income support payment from Centrelink or Department of Veterans Affairs. There is no assets test for either card.
Both cards are income tested, but the income limits and definition of income are different. The one factor common to both is that deemed income from account-based pensions is included. Because deeming rates have become so low, many retirees can hold substantial amounts in an account-based pension and still satisfy the income test.
The income limits are 57,761 for a single, $92,416 for a couple combined and $115,522 for a couple separated due to illness. The income includes Adjusted Taxable Income and deemed income from account-based pensions. If a couple had $2.5 million in superannuation in account-based pensions, and an ATI of $25,000 per annum, they would qualify easily because the deemed income would be $54,470 a year, which, when added to their $25,000 per annum, gives them a total income for CSHC purposes of $79,470. And remember that money in superannuation in accumulation mode is not counted.
Qualification is established by measuring assessable income over an eight-week period before the claim is made. The initial eight-week limits are $5152 for a single and $8856 for a couple. This equates to an annual figure of $33,488 and $57,564, respectively. The card is valid for one year, after which a fresh application must be made.
The income test is based on the Centrelink definition of income rather than taxable income and includes salary or wages, deemed income on financial investments on account-based pensions and income support payments. A quirk in the regulations is when couples are applying, and neither receive a pension, the deeming thresholds are applied to each member of the couple separately and are then added together.
Jack and Jill are of pensionable age. He has $1.4 million and she has $800,000 in an account-based pension. They receive no pension because they are over the assets test. They apply for the CSHC in January 2022. Their ATI was just $5000, being dividends from shares worth $60,000, which are owned by Jack. The deemed income from their $2.2 million in account-based pensions is $47,720 a year, making total income for CSHC purposes of $52,720. They under the cut-off figure for a couple and qualify for the CSHC.
They also apply for the LIHC to obtain additional concessions from state and local governments and some private businesses. To be eligible, their combined income in the eight-week period before claiming must be below $8856. Because they do not receive any age pension, the deeming is calculated on each member of the couple separately. For Jack, this includes his account-based pension and the shares, while for Jill, it is just her account-based pension. The deemed income is $30,428 for Jack and for $16,928 for Jill. This totals $47,356 a year or $910.70 per week. This means for an eight week period; their total income is $7,285.60. This is under the cut-off figure, so they qualify for the LIHC and the CSHC.
I appreciate this is somewhat complex but it could be worth taking the time to understand it. Everybody likes a concession.
Noel answers your money questions
We are retired and in our 70s and receive a monthly pension from our superannuation plus a part Centrelink Aged Pension. This requires us to report any changes in income and assets over $2000 to Centrelink within 14 days of those changes happening.
For about six months from November 2020, we sold some poor performing shares and purchased some cryptocurrency. I was able to modify my share holding online and was able to add the value of the first crypto we purchased as an asset; however, as I purchased more or the value varied, I was unable to modify the value online.
This meant going to my nearest Centrelink office or waiting 45 minutes on the phone to advise them every time the value changed over $2000, which meant fortnightly. I submitted feedback to Centrelink and asked if the cryptocurrency entry under assets could be made modifiable online just as other assets are.
A month later, I had a call from a woman from Centrelink who said I didn't have to report cryptocurrency, as they don't deem it, and she removed it from my record of assets. As our part pension is based on our assets, I would have thought that the assets rule would still apply but not according to the staff member.
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You are correct. A departmental spokesperson confirms that income support recipients are required to declare all their income and assets, including cryptocurrency holdings, to ensure they receive their correct entitlements.
Assessable assets include money, shares, financial investments, investment properties, vacant land, holiday homes, motor vehicles, caravans, boats, household contents, personal effects, businesses, farms and other personal assets (whether in Australia or overseas) and amounts held in superannuation funds for those over age pension age.
Cryptocurrency is assessed as an asset for the social security means test and is not subject to the income test deeming provisions, as it is not considered a financial product that produces income. However, as is the case with other assets, when the value of those assets change, payment recipients are required to notify Services Australia as it may affect the rate of their payment.
Let's hope that Centrelink will soon have a facility for online cryptocurrency information.
I have given two of my three adult children substantial sums to help them purchase a home. I want to do the same for my third child but he is not very good with money. What mechanisms are available for me to transfer funds into his name now, but control his access to the money until I deem him mature enough to handle the money sensibly?
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I agree that just giving him money without conditions will do nothing to help him learn about finance.
Maybe it's possible to get him on the right track by offering to subsidise his savings.
For example, you could agree that you will give him $100,000 or more to put towards a house if he can save $40,000. If he does achieve this, you could pay the money directly towards the house purchase, which means he would not have access to it. It's important that you take steps to ensure any money you give him is used for the house purchase, and not left in the bank where he could fritter it away. The added benefit of this is that he will learn to achieve a goal by setting his mind to it.
- Noel Whittaker is the author of Retirement Made Simple and numerous other books on personal finance. Email your money questions to: email@example.com