Purpose of the Bill

The purpose of Bill is to amend the Social Security Act 1991 and the Veterans’ Entitlements Act 1986 to increase the income limits for eligibility for the Commonwealth Seniors Health Card:

• the income limit for a single person would increase from $57,761 per annum to $90,000
• the income limit for a couple would increase from $92,416 per annum to $144,000
• the income limit for couples separated by illness, respite care or prison would increase from $115,522 per annum to $180,000.[1]

The Commonwealth Seniors Health Card assists certain seniors with the cost of prescription medicines and other health services and provides access to some concessions from state, territory, and local governments.[2] The card is targeted at self-funded retirees of Age Pension age who do not qualify for the Age Pension because of their level of income or assets.

The proposed income limits would apply from 20 September 2022.[3]

The measure was first announced as a Coalition election commitment on 2 May 2022 and was matched by the Australian Labor Party on the same day.[4]

The changes are expected to cost $69.4 million over the forward estimates and lead to an extra 52,000 cardholders by 2026–27.[5]

Background

Overview of the Commonwealth Seniors Health Card

The Commonwealth Seniors Health Card (CSHC) allows older people with high incomes or asset levels access to some of the concessions that pensioners can access through the Pensioner Concession Card (PCC).[6] The card has an income test but no assets test.

Eligibility

To be eligible for a CSHC an individual must:[7]

• be permanently living in Australia and be an Australian citizen, a holder of a permanent visa or a holder of a special category visa (and not subject to a newly arrived resident’s waiting period—currently 4 years for new migrants)
• have reached Age Pension age (currently 66.5 years) but not qualify for the Age Pension, other income support payments or a Veterans’ Affairs income support payment
• have an adjusted taxable income of less than:
• $57,761 for singles
• $92,416 for couples (combined income)
• $115,522 combined for couples separated by illness, respite care or prison.[8]

An amount of $639.60 per year is added to the allowable income amount for each dependent child. There is no assets test for the CSHC.[9]

Adjusted taxable income includes taxable income, foreign income, total net investment losses, employer provided benefits and reportable superannuation contributions (concessional or before-tax contributions).[10] Since 1 July 2015, deemed income from account-based superannuation accounts is included in the income test (deemed income applies an assumed rate of return on the value of an asset rather than assessing actual income).[11]

An individual must be in Australia to retain eligibility for the card, or temporarily absent for not more than 19 weeks.[12]

Veterans with qualifying service and those on related partner payments aged 60 or over who do not qualify for any social security or Veterans’ Affairs income support payments are also eligible for a CSHC under the same conditions.[13] For that reason the Veterans’ Entitlements Act 1986 contains equivalent provisions to those in the Social Security Act 1991 regarding the CSHC.

Benefits of the CSHC

Benefits for CSHC holders include:

• access to Pharmaceutical Benefit Scheme medicines at concessional rates
• doctors receive incentive payments to bulk bill cardholders
• a lower (concessional) extended Medicare safety net threshold
• states, territories and local governments may provide some concessions to CSHC holders on services such as utilities, rates and public transport.[14]

Payments

Those who have been holders of the CSHC since September 2016 are eligible for the Energy Supplement. The annual rate of the Energy Supplement for CSHC holders is $366.60 for singles and $275.60 for partnered holders (each).[15] The Energy Supplement is paid quarterly to CSHC holders.[16]

The Turnbull Government closed eligibility for the Energy Supplement to new CSHC holders from 20 September 2016.[17]

Prior to June 2015, CSCH holders received a Seniors Supplement payment worth $1,261.00 per annum for singles and $1,898.00 per annum for couples (combined).[18] The Abbott Government abolished the Seniors Supplement from June 2015.[19]

Holders

As at March 2022 there were 441,544 CSHC holders.[20]

History of the CSHC

The CSHC was introduced in July 1994.[21] The card was available to people of Age Pension age who were not eligible for the Age Pension for reasons other than the income test—for example, insufficient length of residence or high asset holdings.

The original purpose of the CSHC was to provide assistance to retired persons who were on a low-income. When introduced, the income limits for the CSHC were the same as for the Age Pension, so the majority of retired persons issued with a CSHC were those who were asset rich but income poor. In 1996–97 there were 35,244 cardholders and by 1997–98 there were 42,461 cardholders.[22]

During the 1996 Election, the Coalition promised to extend the income test thresholds and use taxable income rather than income as assessed for the Age Pension to assess eligibility for the CSHC. In her 1998 Budget media release, then Minister for Social Security, Jocelyn Newman said that this recognised ‘the important contribution made by people who save for their own retirement’.[23] These changes were implemented from January 1999 and by August of that year an additional 163,000 people had become cardholders.[24] These changes, and further increases to the threshold in 2001, changed the target group for the CSHC from low income self-funded retirees to middle income retirees.[25] Annual indexation of the income test cut-offs ceased in July 2001.[26]

In 2001, CSHC holders became entitled to receive the Telephone Allowance (worth around $17.20 per quarter).[27] In 2004, an additional payment for CSHC holders, the Seniors Concession Allowance worth $200 per annum was introduced. In 2006 and 2007, the Howard Government made one-off payments to those eligible for the Seniors Concession Allowance.[28] In 2008 the Rudd Government increased the rate of the Seniors Concession Allowance to $500 per annum and also made a one-off payment of $500 to recipients of the Allowance.[29] In December of 2008, recipients of the Seniors Concession Allowance also received a $1,400 lump sum as part of the Rudd Government’s stimulus response to the Global Financial Crisis.[30]

In the 2008–09 Budget, the Labor Government announced that it would adjust the income test to include reportable superannuation contributions, such as income that is salary sacrificed to superannuation, as well as gross tax-free superannuation income. The budget papers stated that:

… the measure will increase fairness by ensuring that, in applying the existing income test, all income received by seniors – whether from superannuation or another source such as a managed fund or interest from a bank account, is treated in the same way.[31]

However, in the 2009–10 Budget, the Government announced that it would not proceed with the measure to include gross tax-free superannuation income in the income test but would still include reportable contributions in income assessments from July 2009.[32]

In September 2009, as part of the Rudd Government’s pension reforms, the Senior Concession Allowance and Telephone Allowance were combined to form the Seniors Supplement, paid at the annual rate of $785.20 for single people and $692.80 for partnered people.[33]

On 20 March 2013, the Clean Energy Supplement was added to CSHC holders’ Seniors Supplement payment. The Clean Energy Supplement was renamed the Energy Supplement in 2014.[34]

In 2014, the Abbott Government passed legislation so that the income test limits for the CSHC would be adjusted in line with Consumer Price Index movements on 20 September of each year.[35] 

From 1 January 2015, untaxed superannuation income was included in the CSHC income test (with products purchased by cardholders prior to this date exempt from the arrangements) and the allowable overseas absence period was increased from 6 to 19 weeks.[36] Under the changes, long-term superannuation assets became subject to deemed income assessment.[37]

The Abbott Government abolished the Seniors Supplement from June 2015.[38]

The Turnbull Government closed the Energy Supplement to new CSHC holders from September 2016.[39]

CSHC holders were eligible for four lump sum Economic Support Payments paid as part of the Morrison Government’s COVID-19 Economic Response in 2020 and 2021.[40]

Changes to the income test limits

Table 1 sets out changes to the CSHC income test limits.

Table 1      Income test limits for Commonwealth Seniors Health Card ($ per annum)

(1) Respite and partner in gaol couples eligible from 1 July 2001.
(2) Indexation ceased on 1 January 2001.
(3) Indexation resumed on 20 September 2014.

Source: DSS, ‘4.10.7.50 Historical Income Limits for CSHC’, Social Security Guide; ‘Commonwealth Seniors Health Card—Who can get it—Income test’, Services Australia; Explanatory Memorandum, Social Services and Other Legislation Amendment (Lifting the Income Limit for the Commonwealth Seniors Health Card) Bill 2022, 1.

Committee consideration

Senate Community Affairs Legislation Committee

The Bill has been referred to the Senate Community Affairs Legislation Committee for inquiry and report by 24 August 2022.[41] Details of the inquiry are at the inquiry homepage.

Policy position of non-government parties/independents

The Coalition was the first to announce the proposed increase in the CSHC income limits during the 2022 Election.[42] Then Prime Minister Scott Morrison stated:

Now, that is going to mean there are 50,000 additional Australians aged 67 and above, people who've saved for their retirement who don't ask for much, but as they move into their senior years and they have to access more and more medications, this makes a difference to their cost of living. There's not a lot we can do about things that are happening overseas that are impacting on our economy, but these practical things that we're doing as a government makes those cost of living pressures just that bit more able to be dealt with, whether it's in tax relief, whether it's in the direct support to those on fixed incomes and pensions, or easing the burden of the cost of medications and the eligibility for the Commonwealth Seniors Health Card.[43] 

Labor matched their commitment the same day with a media release stating: ‘We’re not interested in playing politics when we see a good idea’.[44]

Other non-government parties and independents had not stated a position on the Bill at the time of writing.

Position of major interest groups

Major interest groups and stakeholders have not commented directly on the measures in the Bill. Paul Versteege, policy manager with the Combined Pensioners and Superannuants Association, was quoted in The New Daily saying the change ‘will benefit those self-funded retirees who are currently unable to get a card and protect the positions of those who have just squeezed in’.[45]

Financial implications

The changes are expected to cost $69.4 million over the forward estimates.[46]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[47]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights had not considered the Bill at the time of writing.

Key issues and provisions

Changes only benefit high income retirees

The changes will primarily benefit high-income and/or asset-rich retirees. The proportion of those aged 65 or above with incomes over the current CSHC income limits is small. 2021 Census data reported only around 15.5% of those aged 65 or more had total personal income of $1,000 or more per week.[48] The Australian Bureau of Statistics’ 2019–20 Survey of Household Income and Wealth found that average income for couple households where the reference person was aged 65 or over was $914 per week ($47,528 per annum), for lone-person households it was $721 per week ($37,492 per annum).[49]

In a media release, the Minister for Social Services Amanda Rishworth stated:

Like other Australians, self-funded retirees are also under pressure in the current economic environment … Cost of living pressures are hurting and we are determined to do what we can as a Government to assist.[50]

Allowing higher income retirees to access cheaper medicines and other concessions will ease their cost of living. However, the Government has not announced cost of living measures targeted at lower income retirees. Labor’s other election commitments relating to pensioners involved adopting two other Coalition election announcements: incentives for pensioners to downsize their home and a commitment to not adjust the deeming rates used to assess income from financial investments.[51]

Numbers affected

According to the Minister for Social Services Amanda Rishworth, ‘More than 44,000 newly eligible CSHC holders are expected to benefit within the first year of implementation. This is projected to increase to an additional 52,000 card holders by 2026–27’.[52]

Key provisions

Items 1–4 of Schedule 1 propose amendments to the CSHC income limit table at Point 1071-12 of the Social Security Act 1991:

• the income limit for a single person (‘not a member of a couple’) will be set at $90,000 per year
• the income limit for a partnered person will be set at $72,000 per year and
• the income limit for a member of an illness separated couple or respite care couple, or a partnered (partner in gaol) person will be set at $90,000 per year.

The additional amount for each dependent child will remain at $639.60.

The note at the bottom of the table is amended to state that these income limits are to be indexed annually on 20 September in line with CPI increases but indexation will be modified for 2022 and 2023 as set out in subsections 1192(5BA) and (5BB) inserted by item 5. Proposed subsection 1192(5BA) states that the income limits will not be indexed on 20 September 2022. Proposed subsection 1192(5BB) provides that the amounts to be indexed on 20 September 2023 are taken to be the new amounts set out in the income limit table (listed in the dot points above).

Items 6–10 of Schedule 1 make similar amendments to the CSHC income limits and indexation provisions in the Veterans’ Entitlements Act 1986.

Item 11 of Schedule 1 contains application provisions proposing that the Bill’s amendments to the income limits will apply in working out qualification or eligibility for CSHC on or after 20 September 2022.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.’