C58/1998 CHANGES TO THE ELIGIBILITY CRITERIA FOR THE COMMONWEALTH SENIORS HEALTH CARD (CSHC)

Purpose

The purpose of this Departmental Instruction is to advise of new application procedures and changes to the eligibility criteria for the Commonwealth Seniors Health Card (CSHC) effective from 1 January 1999.

History & concession provided

The CSHC was introduced on 1 July 1994.  It is intended to assist those retirees and other eligible veterans of pension age who fail to qualify for an income support pension or a social security pension or benefit.

The CSHC entitles beneficiaries to pharmaceuticals listed on the Pharmaceutical Benefits Scheme (PBS) at concessional rate.  The concessional rate is $3.20 for each PBS medicine.  When the total eligible expenditure exceeds the safety net (currently $166.40) then the pharmaceuticals are free for the remainder of the calendar year.  For medicines which are not listed on the PBS or which are only partially covered, the CSHC holder will have to pay more than $3.20.

The cardholder's eligibility to access dental treatment through the Commonwealth Dental Program ceased from 1 January 1997.  Access to hearing aids through the Australian Hearing Services was discontinued from 1 July 1997.

The CSHC does not give the cardholder access to any state or local government concessions, although some state and local governments recognise the CSHC for some additional concessions.

Eligibility criteria

To be eligible for a CSHC from the Department of Veterans' Affairs (DVA) a person must meet one of the following criteria.  They must be:

• an Australian, Commonwealth or allied veteran with qualifying service;

• an Australian, Commonwealth or allied mariner of World War 2 with qualifying service;

• a partner (including widow or widower) of a veteran or mariner with qualifying service; or

• a war widow or widower.

To qualify the person must also:

• be of pension age (for veterans with qualifying service 60 years for men and 56 for women.  For partners of veterans 65 years for men and 61 for women as of 1 January 1999);

• not be receiving a service pension or income support supplement from DVA;

• not be receiving a pension or benefit from Centrelink; and

• meet the seniors health card income test.

Current income test and income limits

Currently, to be eligible for a CSHC a person must satisfy the ‘ordinary income' test.  The income limits are:

• $21,460.40 per year for a single person

• $35,859.20 per year for couples; and

• $42,296.80 per year for couples separated due to ill health.

These limits are indexed quarterly.

The income limits increase for each dependant child by $624 per year.

Changes to the income test and income limits

From 1 January 1999 the income test will change from ‘ordinary income' to ‘taxable income'.  The income limits applied to the income test will also increase to:

• $40,000 per year for a single person

• $67,000 per year for couples; and

• $73,396 per year for couples separated due to ill health.

These limits will not be indexed from 1 January 1999.  The $624 per year for each dependant child will remain unindexed.

Amendments to VEA

Part VIIC of the Veterans' Entitlements Act 1986 (VEA) has been amended to include changes to the eligibility criteria for CSHC from 1 January 1999.  These amendments are similar to amendments made to the Social Security Act 1991 (SSA).  The criteria for obtaining a CSHC apply equally to both the veteran community and the general community.

CSHC income test

From 1 January 1999 the income test for CSHC will change from ‘ordinary' income to ‘taxable' income adjusted to include:

• the person's taxable income as per their tax assessment notice; plus

• the value of the person's net rental property loss; plus

• the value of the person's target foreign income; plus

• the value of the person's employer provided fringe benefits.

Net rental property loss

Net rental property losses occur when the expenses incurred by a person on rental property during a financial year (tax year) exceed the gross rental income for that year.  The amount of net rental property loss is treated by the Australian Taxation Office (ATO) as a deduction from a person's other assessable income in deriving the person's taxable income.

For CSHC purposes, a person's income for a particular tax year includes their net rental property loss amount.  This amount is added to the person's taxable income when working out their income for CSHC purposes.

·Example:  A person made a net loss on a rental property of $5,000.  The ATO assessed their taxable income as $25,000.  For CSHC purposes the $5,000 is added back to the person's taxable income to give income of $30,000.

Purpose of Instruction (continued)

Net rental property losses incurred by partnerships and trusts are not included in the assessment of income for CSHC.  Partnership or trust net rental property losses are those that are declared to the ATO as a loss as part of a partnership or trust on the person's income tax return.

There may be cases where a person has more than one property, one of which produces a net gain and one that produces a net loss.  In these cases gains and losses can be offset and the net rental property loss provisions apply if there is an overall net rental property loss.

·Example:  A person has two rental properties, one made a profit of $3,000 the other made a loss of $4,000.  In this case the gain of $3,000 is offset against the loss of $4,000 giving a net rental property loss of $1,000.  This $1,000 would be the loss declared to the ATO and is the amount that would be assessed as the net rental property loss for CSHC income purposes.

Proof of estimates of current year net rental property losses are not required unless the examiner considers that a reasonable estimate has not been given.

Foreign income

Foreign income includes any amount of income earned, derived or received from sources outside Australia that is not taxable income under the Australian Income Tax Assessment Act 1997 or received in the form of a fringe benefit.

The person is asked to state the amount of any foreign income received (in the reference year) which is not taxable income in Australia.  Refer to the Australian tax year even if this differs from the tax year of the source country.  The foreign income amount is to be converted to Australian dollars and added to the person's assessable income.

Examiners will need to use their discretion about verification of the amount of foreign income declared.  If a person is unsure whether their foreign income is taxable income in Australia they should contact the Australian Taxation Office to clarify their taxation status.

A person with income from foreign business interests will be able to deduct business expenses from that income amount.  Allowable business deductions will be broadly the same as those allowed under the Australian Tax Act 1936 (ie. those expenses that arise from activities directed toward the production of income).

Employer provided fringe benefits

The 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 rental).  If the total value of the employer provided benefits received is more than $1,000 per annum, the amount above $1,000 should be added to their income.

Examiners should note that on the Application for CSHC (E-D3056) the person is asked to provide the amount of fringe benefits in excess of $1,000.

Reference tax year

The reference tax year will usually be the tax year immediately preceding the current tax year.  If the person has not received a Tax Notice of Assessment (TNA) for that year, the tax year immediately preceding will be the reference tax year.  For example, the current tax year is 1998/1999, details should be provided for 1997/1998 or, if TNA is not yet available, the 1996/1997 tax year is acceptable.

Alternatively if this would not give an accurate reflection of a person's current financial situation an estimate of income in the current tax year can be provided by the person.  Where such an estimate is provided, the client will be required to supply a TNA for the year within 3 months after the day on which they receive the TNA and in any case no later than twelve months after the end of that tax year.

The following are examples of possible reference tax year scenarios that will be used from 1 January 1999.

·Example A:  Fred lodges an Application for CSHC (E-D3056) on 15 March 1999.  He has received his TNA for the 1997/1998 tax year.  Therefore the applicable reference tax year in this instance is 1997/1998.

·Example B: Fred has not received his TNA for the 1997/1998 tax year.  He is able to include his TNA from the tax year immediately preceding that year.  In this case the reference tax year would be the 1996/1997.

Purpose of Instruction (continued)

·Example C:  Husband and wife, Fred and Jenny lodge a claim.  Fred has received his TNA for the 1997/1998 tax year.  Jenny has not yet received her TNA for the 1997/1998 tax year, however she does have her TNA for 1996/1997.  In this instance Fred would supply his TNA for the 1997/1998 tax year and Jenny would supply her TNA for the 1996/1997 tax year.

·Example D:  Husband and wife, Fred and Jenny lodge a claim.  Fred has received his TNA for the 1997/1998 tax year.  Jenny does not have to complete a tax return due to low income.  In this instance Fred would supply his TNA for the 1997/1998 tax year and Jenny would estimate her income for the 1998/1999 tax year.

·Example E:  As Fred has recently retired, his TNA from the tax year 1997/1998 does not accurately reflect his current financial situation.  Fred can test his eligibility by providing an estimate of his income for the current financial year in the Application for the CSHC (E-D3056).  Fred would also have to supply his TNA for that year within 3 months of the day on which he receives the notice of assessment from the Taxation Office and within 12 months of the end of the tax year.

No tax return lodged clients

If the income of a person applying for a CSHC is too low to file a tax return, they should be assessed to determine their eligibility for an income support payment.

CSHC application form

From 1 January 1999 claims for the CSHC can only be made on the Application for CSHC (E-D3056).  This form is available in electronic format on the On-Line Fact Sheet System through the DVA Intranet.

Documents accompanying the application form

A copy of the CSHC Fact Sheet (IS 126) should accompany the Application for CSHC (E-D3056) to the applicants.

State Offices, depending on the applicant's circumstances, may need to forward a copy of one or more of the following to applicants:

• Qualifying Service Fact Sheet (IS 56);

• Dependent Student Claim Form (E-D514);

• Application to Determine Qualifying Service by a Veteran or Mariner (E-D2673); or

• Qualifying Service for Partner/Widow(er) or Non-pensioner Veteran or Mariner (E-D502).

Transition of existing card holders

It will be assumed that the income of current CSHC holders will be within the new income limits and they will be transferred to the new system on that basis.  They do not need to complete a CSHC application form or provide updated income details.

Applicants who are entitle to pension

Where a claim for a CSHC on the Application for CSHC (E-D3056) shows possible pension eligibility, the person should be advised to claim for pension on the appropriate form.

TFN & privacy requirement

The tax file number on the copy of a tax assessment notice received from applicants should be obliterated before it is put on file.

Proof of identity

The proof of identity (POI) required from CSHC applicants is stated in Part F of the Form E-D3056.  For applicants who have lodged a tax return a copy of the Tax Notice of Assessment is also requested in Part G.  If the applicant is a veteran or a war widow(er), they are required to answer to questions in Part D of the Form E-D3056.  No additional POI is required.

Who can certify copies

Attachment 2 of the DI 41/98 provides examples of persons before whom a statutory declaration may be made.

Fact sheets

The CSHC Fact Sheet (IS 126) has been updated on the On-Line Fact Sheet System through the DVA Intranet.

Standard letters

The following letters on the Standard Letters System relate to a claim for a CSHC:

• CSHC accept & oblig +M;

• CSHC accept + oblig.+ S;

• CSHC rej – income + M; and

• CSHC rej – income + S.

These letters have been reviewed and only the first two letters required amendments to reflect changes to the income test from 1 January 1999.  The updated letters are now available on the Standard Letters System.

Application forms

The form Claim for Service Pension by a Veteran or Mariner (E-D503) has been amended and the reference to CSHC has been deleted.

Daily issue of CSHC

A system trigger has been set by the Information Management Unit to activate the new limits to be printed on the CSHC for the daily issue from 1 January 1999.

1999-2000 bulk issue

Currently the annual bulk issue program set the CSHC eligibility to ‘Off' if the eligibility for a Gold Card is ‘On'.  Therefore CSHC is not issued to an eligible Gold Card holder.  Changes will be made to this program for the 1999 bulk issue to allow the issue of a CSHC to an eligible Gold Card holder.

General system changes

Whenever pension is reduced to nil for asset tested cases the screen ‘Calculate Pension' displays the following message ‘Client assessed at NIL pension, may be eligible for a Commonwealth Seniors Health Card'. System changes will be made so that when the pension is reduced to nil under either income or assets test, this message will display.  However the system change will not take place until later in 1999.  In the meantime examiners will need to be aware that the client could be eligible for a CSHC as soon as their pension is reduced to nil.

Recording of eligibility

Due to changes to the income test criteria for CSHC it is no longer necessary to process the case through PIPS PC.  CSHC eligibility will continue to be recorded through CMS/EATERS.

Contact officer

The contact officer for this Departmental Instruction is Ferri Ghazi on (02) 6289 6436.