Sam Rubin
Technical

Commonwealth Seniors Health Card – Benefits whilst still working

By Sam Rubin

Many of your clients are most probably continuing to work past age pension age in an attempt to regain control over their retirement nest egg post the global financial crisis. Taking into consideration legislative changes affecting financial strategies available post July 2009, are there any Centrelink benefits still available to this group of clients?

The Commonwealth Seniors Health Card (CSHC) may be available. The CSHC is available to assist self funded retirees of age pension age in covering health costs and access to the Pharmaceutical Benefits Scheme and certain Medicare services at cheaper rates including:

  • bulk billed general practitioners;
  • a reduction in the cost of out-of-hospital medical expenses, through the Medicare Safety Net;
  • state based community services such as additional health, household, education and transport may be available at a concession rates which can vary state by state.

A client who obtains the CSHC may be entitled to receive the Seniors Supplement, which is a non-taxable payment made every three months to help with regular bills such as energy, rates and motor vehicle registration fees. More information can be found here.

To qualify for the CSHC, a person must:

  • not be receiving an income support from Centrelink or Department of Veterans Affairs (DVA);
  • be an Australian resident; and
  • meet the income test based on a person’s adjusted taxable income*:
    • under $50,000 per annum (single);
    • under $80,000 per annum (couple combined); or
    • under $100,000 per annum for a couple living separately due to illness.

* Note that the adjusted taxable income for the CSHC does not include income from a superannuation pension but does include reportable super contributions.

Clients who continue to work past age pension age, especially on a part time basis, may be interested to access the CSHC to assist with living costs.

The case study below focuses on accessing the CSHC whilst continuing to work part time post pension age.

Case study

Daniel and Jo, both of age pension age, are currently not eligible for the age pension given Daniel is still working on a part time basis (three days per week). His full time annual salary is $80,000 pa, so pro-rated to three days a week, it is $48,000 pa. They require $45,000 per annum to cover living costs which include around $5,000 of medical and pharmaceutical expenses.

Daniel’s Pursuit Select superannuation account is valued at $400,000, whilst Jo has $50,000 in her super account. They have minimal other retirement investments.

Currently, Daniel’s net income is around $40,000 pa, meaning they have been withdrawing $5,000 pa from their super to cover their living costs.

Daniel should consider the following recommendations to ensure they get maximum efficiency out of their investment assets, access to the CSHC and cover living costs.

  1. Commence a superannuation pension with his $400,000 Pursuit Select account.
  2. Apply for the CSHC which could save thousands on their medical and pharmaceutical bills, allowing them to reduce their cash flow required down from $45,000 to $40,000.
  3. Commence a pension of $8,000 pa to cover cash flow short fall.
  4. To cover the living costs of $45,000 per annum, they should utilise $35,000 (net income $32,000) of Daniel’s gross income and the remainder salary sacrificed to super ($13,000 net $11,050). Therefore, the maximum tax paid is 15 per cent. The remaining cash flow required can be covered by a tax free pension.

This recommendation provides Daniel and Jo with a tax effective income stream and provides cash flow savings due to accessing the CSHC.

The CSHC can be a valuable Government benefit that you can help your clients access whilst they are still working.