In your recent article about the Commonwealth Seniors Health Card (CSHC), you pointed out that eligibility depended on adjusted taxable income. But how is that calculated when a person does earn income, which is taxable but at a level where it is not enough to lodge a tax return? Also, how is a commonwealth government pension assessed for the card?
Services Australia general manager Hank Jongen says that any taxable Centrelink or Department of Veterans’ Affairs payments a person or their partner received in a prior financial year will count as taxable income for the CSHC income test.
The test looks at the adjusted taxable income of a customer and their partner, plus deemed income from any account-based income streams they hold.
Applicants must provide evidence of their income for the previous financial year and their account-based income streams, including if these have a grandfathered status. If they have a defined-benefit income stream(s), this will already be included in their adjusted taxable income.
As part of supporting documents required for a CSHC claim, applicants must provide an original notice of assessment, as issued by the Australian Taxation Office, their income tax return, and/or a payment summary for the previous financial year.
If they were not required to lodge an income tax return because they were either under the tax-free thresholds or they had an ATO tax offset, they will need to present other documents to verify these income amounts. They include a statutory declaration or non-lodgement advice from the ATO, their tax agent or accountant.
If this is not possible, they can use the prior financial year. If their income will be lower in the current financial year – for instance, if they have recently retired – they can provide an income estimate instead.
Many self-funded retirees have suffered a severe income reduction in the COVID-19 crisis. If they are over 65, they cannot transfer more contributions to a super fund, where tax is zero in the pension phase, unless they pass a work test. It is difficult for these people to obtain work, and I and many others would benefit greatly if this test could be abolished.
I think you need to keep in mind that the combination of various tax offsets means that a single person can earn $33,088 a year – and a member of a couple $29,783 a year each – before tax is payable. You would need to have a large portfolio in your own name to generate an income in excess of these figures.
Yes, if you could contribute to super, and then convert it to pension mode, you would be in a zero-tax environment but you would have ongoing fees, and the possibility of the death tax if you died and your super was left to a non-dependent.
I am confused about personal contributions to super. Suppose somebody salary sacrifices $20,000 into super and incurs the entry tax of 15 per cent. If they then contribute another $5000 in after-tax dollars, they would cop a 15 per cent entry tax, as well as the 32.5 per cent tax taken out by the employer before the money was paid over. It would appear their total tax bill becomes 47.5 per cent. It seems to me pointless to file an intention to claim a deduction for personal contributions on your tax return.
You are forgetting that the $5000 contribution you make becomes a tax deduction for you. This would result in a reduction in your taxable income of $5000 at 32.5 per cent. So, you effectively reduce the tax on that contribution from 32.5 per cent to 17.5 per cent when the 15 per cent entry tax to super is accounted for. The net saving to you is $875
I understand that to obtain the full pension as a single homeowner, I must have assets such as cash, super, furniture and car totalling no more than $263,250. Is there a limit on the cash in bank and super component within that amount?
The figure you mention is the assets test cut-off point. The income test cut-off point for a single is $174 a fortnight.
Suppose you had $250,000 in financial assets and the combined value of your car and furniture was $13,000. You would be under the cut-off point for the assets test but the deemed income for those financial assets would be $177 a fortnight and would take you just over the income test cut-off point.
It appears you are right on the boundary but, if you did exceed the cut-off point, the reduction in your pension would be minimal.
Just make sure your furniture is valued at garage sale rates and your car at the lowest wholesale price a cut-price car dealer would give you for it.