Commonwealth Seniors Health Card (CSHC) income test and reference tax year 065-06030020

Taxable income is included irrespective of whether it is above or below the tax free threshold.

For example, a customer may have income below the income threshold and not be required to lodge a tax return, but any taxable income they receive during the reference year must be included in their ATI for the Commonwealth Seniors Health Card e.g. income from investments such as bank accounts or shares, a small wage or salary, any taxable payments received from the department etc.

See the Resources page for a link to the Services Australia website for adjusted taxable income.

If a customer is not required to lodge a tax return either because their taxable income is below the tax free threshold or as a result of an ATO tax offset and therefore does not have a Notice of Assessment, they will need to provide an estimation of this income. This must be coded as income type 'not required to lodge' (NRL) on either:

• Seniors Health Card income summary and details (SHIS/SHID) screen in Process Direct
• SHC Income Details (SHID) screen in Customer First

If a person's taxable income is negative, it is taken to be zero before adding any investment losses and other ATI components.

When a customer's notice of assessment indicates the income is over the CSHC income threshold it should still be collected and coded.

Customers are only permitted to estimate their income in very specific circumstances. For details see Processing Commonwealth Seniors Health Card (CSHC) claims.

From 1 July 2009, the concept of total net investment losses was included in the ATI for CSHC. Total net investment losses are the sum of net financial investment losses and net rental property losses. Net financial investment losses were not previously included in the ATI for CSHC.

The Australian Taxation Office (ATO) allows a person's net rental property and financial investment losses to reduce their taxable income. For CSHC purposes, these are added back to their taxable income. By including net investment losses in the ATI for CSHC, it means that such losses cannot be offset against other taxable income.

On tax returns: for Total Net Investment Losses, Items IT5 - Total Net Financial Investment Losses, and IT6 - Net Rental Property Losses.

Income from investments can be offset

For example, a person has two rental properties and one makes a profit of $3,000 and the other a loss of $4,000. The assessable net investment loss would be $1,000.

Total net investment losses do not include capital gains or capital losses from financial investments or rental property.

See the Resources page for more information about financial investments and an example of how to calculate investment income and capitals gains/losses.

This is referred to in legislation as 'target foreign income' and is any income:

• earned, derived or received from a source outside Australia, that the customer is not required to pay Australian income tax on, and
• that is not taxable in Australia or received in the form of a fringe benefit

Examples of applicants who may receive this income are:

• Residents employed outside Australia whose foreign income is not taxable in Australia, for example, foreign based airline pilots or United Nations (UN) employees
• Residents who receive income from foreign business interests which are exempt from Australian tax
• Non-residents, partnered to Australian residents, working in Australia for overseas organisations
• Customers who regularly receive gifts or allowances from a foreign source. This can include money or gifts regularly received from family members who are living outside Australia
• Customers who receive foreign pension/income that is exempt for income support payments under subsections 8(1), 8(4), 8(5) and 8(8) of the Social Security Act. Examples of these payments include the Holocaust Survivor Pension and German Restitution Payments

Note: for income estimates, Target Foreign Income must be entered using Australian dollars (AUD).

The Resources page contains a link to the ATO's website for information on converting foreign income to Australian dollars.

On tax returns: see Item IT4 - Target Foreign Income. All Foreign Income needs to be converted and is reported in Australian dollars.

The Resources page contains a link to the ATO's website for Foreign income.

'Blocked' foreign income

If foreign income cannot be accessed in Australia, it is not income for social security purposes.

For Commonwealth Seniors Health Card purposes, a person's fringe benefits value for a particular tax year, is the total grossed up value (as shown on the payment summary/ ATO income statement) amount of the person's employer provided benefits minus $1,000. Examples of assessable employer provided fringe benefits are:

• personal use of a car
• school fees, private health insurance and low interest loans
• housing assistance
• financial investment and expense benefits

From 1 July 2009, reportable superannuation contributions are included in ATI for the Commonwealth Seniors Health Card.

Reportable superannuation contributions are made up of two components:

Reportable employer superannuation contributions - super contributions that an employer makes on an employee's behalf under a voluntary salary sacrifice arrangement.

From the 2009-10 tax year, employers must report the total of these contributions on the employee's payment summary/ATO income statement.

These contributions are in addition to the minimum contributions employers must make under one of the following:

• super guarantee law
• an industrial agreement
• the trust deed or governing rules of a super fund
• a federal, state, or territory law

and

Personal deductible superannuation contributions - those for which an individual can claim a deduction on their personal tax return. These will typically apply to the self-employed.

The following are not reportable superannuation contributions:

• contributions to a superannuation fund made under superannuation guarantee law, an industrial award or the trust deed of a superannuation fund
• post-tax contributions to a superannuation fund
• contributions made to superannuation under the Australian Taxation Office (ATO) concession - Retirement exemption - capital gain tax concession for small business (this would normally occur on the sale of the business)

On tax returns: see Item Reportable Employer Super Contributions and Item Personal Deductible Super Contributions of the Supplementary section.

See the Resources page for examples of reportable superannuation contributions.

Account Based Income Streams - from 1 January 2015 deemed income from account-based income streams will be included in the CSHC income test.

Deemed income will be calculated from the current balance of account-based income streams. Deeming will apply to account-based income streams:

• purchased or changed from 1 January 2015
• purchased before 1 January 2015 by customers who commence receiving a CSHC on or after 1 January 2015
• owned by a card holder's partner who is aged 60 or more and who is not the holder of a CSHC

The deemed income is added to the ATI amount, with the combined total used in the CSHC income test. Deeming will only be applied to account-based income stream(s) and not any other financial assets they own.

The Financial Investment Summary (IVIS) screen in the SHC system will display deemed income amounts for CSHC holders.

The following screens include a Deemed Income Amount field. This is a protected field that cannot be updated manually:

• Seniors Health Card income summary and details (SHIS/SHID) screen in Process Direct
• SHC Income Details (SHID) screen in Customer First

Defined benefit income streams - these items will be included in the customers ATI as they are taxable and therefore do not need to be individually updated for a CSHC claim. For more information regarding defined benefit income streams, see Adding or updating a defined benefit or military invalidity pension income stream.

Note:

• For new income streams it is a requirement to provide a full Centrelink/DVA schedule or Details of Income Stream product (SA330)
• For existing income streams where an ISP update has been received from the provider within the previous 12 months, a full Centrelink/DVA schedule or Details of Income Stream product (SA330) is not required
• For all other income streams, a full Centrelink/DVA Schedule or Details of Income Stream product (SA330) is still required
• A link to the form is available on the Resources page