Nick Bruining: New limits give more cashed-up senior access to coveted Commonwealth Seniors Health Card

September 20 heralds the annual increase to limits allowing access to the popular Commonwealth Seniors Health Card. This Centrelink-issued concession card allows multimillionaire retirees to get prescription drugs for less than $8 a script. When combined with the WA Seniors Card, discounts on utilities and other expenses can add up to thousands. The CSHC is usually available to people who are pension age but are ineligible to receive a pension because of means testing. Pensioners don’t receive the CSHC but instead get a Pensioner Concession Card when they are granted the pension. The basic nationwide concession for CSHC holders is an ability to access PBS-listed drugs at just $7.70 a script, with an annual maximum of $277.20. Once you reach the limit, they’re free. While no asset test applies to the CSHC, it is subject to an income means test. The cut-off thresholds will increase from September 20. The new limit for singles will be annual Centrelink-assessable income of $99,025 and for couples, a combined income of $158,440. Assessable income for CSHC purposes is a mishmash of taxable and deemed income, but only on certain assets. This is a different set of calculations to those used for pension means-testing. Like the Australian Taxation Office, all pre-tax employment income and income from investments including rent counts towards the CSHC-assessable income. But also like the ATO, allowable tax deductions can be applied including interest on investment loans, and office and other expenses. Other popular tricks used to reduce taxable income won’t work. This includes tax-deductible voluntary contributions to super, negative gearing arrangements where there is a net investment loss and reportable fringe benefits from an employer. All of these will be added back to your Centrelink-assessable income. Dividend income from Australian shares is included at the “grossed-up” amount, which is simply the cash dividend plus any franking credits. Foreign pension income is included, but those receiving a British state pension get an 8 per cent tax deduction. Income including any withdrawals from a normal “taxed” superannuation fund is completely ignored, including regular account-based pension payments. If any of your money is still in super accumulation phase, the account balance and any withdrawals are completely ignored. Only money invested in an ABP is assessed but in this case, under the complicated deeming system. For singles, the first $62,600 in an ABP is deemed to be earning just 0.25 per cent. Anything above this is deemed to be earning 2.25 per cent. For couples, the lower 0.25 per cent applies to the first $103,800 and then the remainder at 2.25 per cent. It means a couple that have maxed out the super system could each have $1.9 million in super. The deemed income on the $3.8m total works out to be $83,424 a year. With a new upper limit of $158,400, they still have an additional $74,976 of “wriggle room” they could earn in other income before losing the card. At the age of 67, our maxed-out couple would be compelled to draw 5 per cent a year — or more than $15,800 a month — tax free. They are still entitled to the CSHC, getting their pills for $7.70 a prescription. With the WA Seniors Card, they can also catch the train to Mandurah between 9.30am and 3.30pm each day for free and get a discount of up to $750 on their local government charges. For a single, the deemed amount on a $1.9m ABP would be $84,248, still leaving them with an additional $14,777 they could earn before losing the card. You can lodge a claim for the CHSC online via myGov.au after linking the Centrelink service to your account. The WA Seniors Card is available to WA residents aged over 65 who work less than 25 hours a week. There is no income or asset test. You can apply online through seniorscard.wa.gov.au. Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association