Q&A – Change to taxable income and CSHC assessment

Find out what your peers are asking – based on real-life questions submitted to TechConnect.

By Stuart Sheary, Senior Technical Manager

Q: My client is currently in receipt of the Commonwealth Seniors Health Card (CSHC) and has just realised a large capital gain. The increase in adjusted taxable income because of the gain will result in my client exceeding the CSHC income threshold.

When should my client advise Centrelink of this anticipated increase in adjusted taxable income and when will they lose their card?

A: CSHC holders are required to notify Centrelink within 14 days if their income exceeds the CSHC income limit. The current income limit is $57,761 for a single client and $92,416 combined for members of a couple (current at 20 September 2021). The CSHC income test includes both adjusted taxable income and any deemed income from (non-grandfathered) account-based pensions (ABPs). If the client is a member of a couple, then the couple's combined adjusted taxable income and deemed income on any ABPs is assessed against the higher CSHC income test threshold regardless as to whether one or both members are eligible for the card.

Whilst your client may be aware that their income, because of the gain, may exceed the threshold it is dependent upon the ATO making the assessment. If upon lodging their income tax return and receiving their ATO tax notice of assessment, their income exceeds the CSHC limit, clients are required to notify Centrelink within 14 days. If the income exceeds the CSHC income test limit they will then lose the card.

This differs to any additional deemed income in consequence of commencing an ABP. This event would need to be reported within 14 days of purchasing the ABP.

In some limited circumstances Centrelink may ignore a one-off increase in income. In these situations, your client may give an estimate of their income for the current tax year provided it is within the CSHC income limit, see Guide to Social Security Law - Assessment of Income for CSHC.

More information

If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.

The information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.