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5.7.3 CSHC Income Test
CSHC income limits
The amount of income a person can have and still be eligible for the CSHC is subject to indexation on 20 September each year.
Current limit (Other Income Support Thresholds and Limits)
What is the CSHC income test?
To satisfy the CSHC income test, the total of a person's:
- adjusted taxable income for their reference tax year, and
- income deemed on account-based income streams
must be within the CSHC income limit relevant to their relationship status.
Adjusted taxable income is the sum of the following income components:
- taxable income
- employer provided fringe benefits
- target foreign income
- net financial investment loss
- net rental property loss
- reportable superannuation contributions.
Note: The above components must all be for the same reference tax year. Members of a couple must use the same year.
Reference tax year
The reference tax year is usually the tax year immediately preceding the current tax year. If the person has not received a Tax Notice of Assessment for the reference tax year, the tax year immediately preceding will be their reference tax year.
Taxable income is the income that the person (and their partner) received for the last financial year, as shown on their Tax Notice of Assessment. If the person, or their partner, does not have a Tax Notice of Assessment because the person or partner was not required to lodge a tax return, then the person may provide an acceptable estimate for the current financial year.
Employer provided fringe benefits
Employer provided benefits are benefits that a person receives from their employer in addition to their wage or salary (eg. private use of car, assistance with accommodation or rent). If the total value of the employer provided benefits received is more than $1,000 per year, the amount above $1,000 will be included as CSHC income.
Target foreign income
Target foreign income is foreign income on which the person is not required to pay Australian income tax and is not a fringe benefit. Foreign income is amounts received from a source outside Australia that are:
- income earned, derived or received; or
- a gift or allowance by periodic payment or benefit.
Note: Foreign income that meets the requirements of excluded income under the VEA, such as a restitution payment for Nazi persecution, is also exempt for CSHC purposes.
Total net investment loss
A person's total net investment loss for a particular year is the sum of their net losses from financial investments and property for that year. It is the amount of deductible expenses that exceed the gross income from those investments. From the 2009-10 financial year a person's total net investment loss will appear on their Tax Notice of Assessment.
Net financial investment loss
Net financial investment loss occurs when allowable deductions in respect of the particular financial investments exceed gross income from those investments. The term financial investment includes shares, managed funds, managed forestry schemes, as well as a right or option over any of these and similar investments. The deductions must be those allowed by the Australian Taxation Office. Examples of expenses include, but are not limited to, the costs of borrowing to invest in the financial investment, managed fees charged on the investment.
Net rental property loss
Net rental property loss occurs when the expenses incurred on a rental property exceed the gross rental income during a financial year. Rental property includes any residential or commercial property for which the person receives rent. It includes a person's share of rent from property that is part of a partnership, but excludes cases where the property is owned by a trust or company.
Reportable superannuation contributions
A person's reportable superannuation contributions is the sum of any reportable employer superannuation contributions and any personal deductible superannuation contributions. These are discretionary or voluntary contributions. Post-tax contributions to superannuation are not reportable superannuation contributions.
Reportable employer superannuation contributions
Reportable employer superannuation contributions are those contributions an employer (or an associate of the employer) makes at the discretion of the employee that could have been received as income. The contribution must be in addition to legally required contributions such as those that must be made under the superannuation guarantee laws or an industrial award. A common example is a contribution an employer makes on behalf of an employee to a superannuation fund under a salary sacrifice arrangement. Such contributions are identified by employers and included on an employee's Payment Summary.
Taxation Administration Act 1953 Schedule 1 Section 16‑182
Personal deductible superannuation contributions
Personal deductible super contributions (generally for the self-employed) are the amounts a person contributes to a superannuation fund for which an income tax deduction is claimed on a personal tax return. Personal contributions which are not claimed as a tax deduction are not included in the definition of reportable super contributions.
Income Tax Assessment Act 1997 Subdivision 290-C Deducting personal contributions
A person's Tax Notice of Assessment (TNA) will provide their actual taxable income figures. For CSHC purposes, the most recent TNA is required, preferably from the recently completed tax year.
A person may choose to satisfy the CSHC income test on the basis of their estimated adjusted taxable income for the current financial year if:
- their actual adjusted taxable income (for the period covered by their most recent tax notice of assessment) exceeds the CSHC income limit, but
- their estimated adjusted taxable income for the current financial year will be below the CSHC income limit.
Accepting an estimate
The Commission must be satisfied that the estimate is reasonable. For example, in the year following a person's retirement from the workforce, closure of a business, the estimated reduction in the person's income should be commensurate with their previous earnings, or business income.
Tax assessment required for estimated CSHC income
If a person is entitled to a CSHC on the basis of their estimated CSHC income, they must send a copy of their tax notice of assessment to DVA within:
- twelve months of the end of the tax year, and
- three months of the day on which they receive the tax notice of assessment from the Australian Taxation Office.
Account-based income streams
An account‑based income stream (also known as an allocated pension or transition to retirement pension):
- is a retirement income stream product purchased with superannuation money;
- requires the owner to draw a minimum pension payment amount each year or elect to draw an amount of pension payment above the required mimimum amount;
- provides the owner with access to withdraw some or all of the account balance;
- may be purchased from a financial provider or paid from a Self Managed Superannuation Fund (SMSF) or Small APRA Fund (SAF); and
- is tax free from age 60.
Income deemed on the current account balance of the account‑based income stream will be included in the CSHC income test where:
- the account‑based income stream commenced on or after 1 January 2015; or
- the account‑based income stream commenced before 1 January 2015 and the owner has not been a continuous CSHC holder since 31 December 2014.
Account-based income streams will not be included in the CSHC income test if:
- the account‑based income stream commenced before 1 January 2015; and
- the owner has been a continuous CSHC holder since 31 December 2014.
Reverted account-based income streams will not be included in the CSHC income test if:
- the account‑based income stream commenced before 1 January 2015; and
- the account‑based income stream was not included in the CSHC income test at the time of the death of the original owner; and
- the account‑based income stream reverted to a reversionary beneficiary under the income stream contract following the death of the original owner; and
- the reversionary beneficiary has been a continuous CSHC holder since the reversion of the income stream.
Family Law split account-based income streams will not be included in the CSHC income test if:
- the account‑based income stream was not included in the CSHC income test; and
- the account‑based income stream was commuted on or after 1 January 2015 as part of a divorce/separation settlement (a court order under Part VIIIAA or Part VIIIB of the Family Law Act 1975); and
- a new account‑based income stream was purchased by direct rollover of the proceeds; and
- the owner has been a continuous CSHC holder since commencement of the new income stream.
For CSHC assessment purposes, income will be deemed on the total of the current account balances of assessable account‑based income streams using the same rates and thresholds under which income is deemed on financial assets for income support pension assessment purposes. The income deemed on account‑based income streams will be added to the adjusted taxable income and compared to the relevant CSHC income limit to determine whether a person satisfies the CSHC income test.
For more information see Deeming Provisions →
Indexation is the action of adjusting pension and allowance rates, limits and thresholds to maintain their value against increases in the cost of living and average earnings.
According to section 5J of the VEA, a financial investment means:
- available money,
- deposit money,
- a managed investment,
- a listed security,
- a loan that has not been repaid in full,
- an unlisted public security,
- gold, silver or platinum bullion,
- an asset tested income stream (short term) ; or
- an asset tested income stream (long term) that is an account‑based pension within the meaning of the Superannuation Industry (Supervision) Regulations 1994; or
- an asset‑tested income stream (long term) that is an annuity (within the meaning of the Superannuation Industry (Supervision) Act 1993) provided under a contract that meets the requirements determined in an instrument under subsection (1G);
but does not include an investment in an FHSA (within the meaning of the First Home Saver Accounts Act 2008) or a designated NDIS amount.
Reportable superannuation contributions is a term defined in the Income Tax Assessment act 1997