Super fund members are being warned about two common strategies that could wipe out their eligibility for the Commonwealth Seniors Health Card (CSHC).
SuperGuardian education manager Tim Miller outlined the issues at a webinar last week.
Mr Miller said the first change involved amending an existing pension to make it reversionary when it was not when commenced before 31 December 2015.
“The terms of [one of these pensions may] suggest you can nominate a reversionary now so you can alter the terms of the contract,” Mr Miller told SMS Magazine.
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“But by doing that, you [will be] changing the original terms of this particular pension. Hence, it would no longer be eligible for the [grandfathering provisions] for the CSHC.
“Remember, with respect to the CSHC, the income stream has to have been in place before 31 December 2015.
“To qualify for the grandfathering provision, you had to have been in receipt of the CSHC at the time. You have to still be in receipt of it and not change the terms of the pension.”
A reversionary pension is a superannuation income stream that automatically continues to someone else after you die.
It can only be paid to a spouse, a child under 18, a permanently disabled child, a child aged under 25 who is financially dependent on you and someone with whom you are in an interdependency relationship. Under superannuation law, you are regarded as being in an interdependent relationship with another person if you live together, have a close personal relationship or rely on them for financial support or personal care.
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Advisers and their clients also need to be wary about making additional contributions to a SMSF if the fund is in pension phase and the income stream was established before 31 December 2015.
In that instance, the fund owner would lose the grandfathering rules making them eligible to qualify for the CSHC.
Mr Miller said a member wishing to make further contributions should start a new pension fund.
The CSHC provides people of Age Pension age with cheaper healthcare including prescriptions, dental and bulk billing and discounts for public transport and utilities. The discounts vary from state to state and a list of concessions is listed here.
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Even if you don’t qualify for a pension, you may qualify for a CSHC.
To be eligible for the card, as well as reaching pension age you must also meet residence rules, provide a tax file number or be exempt from doing so, meet identity requirements and meet the income test. See the rules here.
If you are a veteran or war widow, the rules for eligibility are slightly different and are available here.
Do you have a SMSF? Were you aware that certain changes could affect your eligibility for the CSHC? Why not share your experience in the comments section below?
