Nick Bruining: Centrelink’s September rate changes mean more can get coveted Commonwealth Seniors Health Card

The September hike in Centrelink payment rates also heralds an increase in thresholds to access the popular Commonwealth Seniors Health Card.

The card is issued to those aged 67 and older who fail to qualify for an age pension under the means-testing system.

While an income test applies, the new indexed levels, combined with a unique method of calculating assessable income, means many seniors qualify — but some aren’t aware.

From September 20, the cut-off threshold for singles increases to $101,105. For couples, it’s a combined $161,788. In the case of couples, all or most of the income can be generated by only one member of the couple.

CSHC thresholds are linked to increases in the consumer price index.

The card entitles holders to buy Pharmaceutical Benefits Scheme-listed medicines for $7.70 per prescription with an annual safety net limit of $277.20. Once you reach this limit, subsequent medications are free.

Unique to WA, people who hold both the CSHC and the State Government-issued State Seniors Card receive similar discounts to people holding the Pensioner Concession Card. That means substantial discounts on State Government services and utilities, as well as reductions in local government charges.

For example, a person who holds both cards is entitled to a 50 per cent discount on most local government charges, capped to a limit of $750. Driver’s licences are free, as are motor vehicle licence fees, but the concession does not extend to the third-party insurance component.

The Association of Independent Retirees has previously valued the discounts as being worth up to an annual $7000 for each household.

The assessable income used to calculate eligibility includes taxable income from employment, foreign income and special defined benefit superannuation pension income. Added to that is income from investments like bank interest, net rental income, and share dividends.

However, withdrawals from super for those over 60 and regular payments and lump sum withdrawals from account-based pensions are ignored.

Instead — and specifically for the CSHC — Centrelink applies the deeming rate system to ABP balances. The first $64,200 of the balance for singles is deemed to be earning 0.75 per cent a year. For couples the 0.75 per cent threshold is a combined $106,200. All amounts above these levels are deemed to be earning 2.75 per cent a year.

A couple with a combined $1.5 million in ABPs would have Centrelink-assessable income of $39,126 a year attributed to the ABPs. With a $161,788 upper limit, that gives them a further $122,622 of assessable income to play with.

For a single with $1.5m in an ABP, the deemed income would be $39,966. In this case, the “wriggle room” is $61,139 of additional income that can be earned in addition to the deemed ABP income.

The easiest way to apply for a CSHC is via my.gov.au when it is linked to the Centrelink services portal. Someone who is within 13 weeks of becoming eligible can lodge their application for the card.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association.