3.9.3.40 Treatment of Income Components for CSHC

Foreign income (1.1.F.160)

Applicants are asked to state the amount of any foreign income received in the applicable tax year that is not taxable income in Australia (1.1.A.320).

Explanation: The Australian tax year is used even if this is different to the tax year of the source country. Assessors will need to use their discretion about verification of the amount of foreign income declared. If an applicant is unsure whether their foreign income is taxable income in Australia they should contact the ATO to clarify their taxation status.

The foreign income amount is to be converted to Australian dollars and added to the applicant's taxable income.

Act reference: SSAct section 23(1)-'tax year', section 23(1)-'taxable income'

Policy reference: SS Guide 2.2.3 Verifying Financial Information

Taxation agreements

There are double taxation agreements between Australia and some other countries that are similar to the social security reciprocal agreements. These agreements avoid the dual payment of tax in each country on the same income. If a foreign Income amount has already been included in an Australian tax return as a result of a double taxation agreement, it is NOT to be counted again as foreign income.

Types of applicants with foreign income

There are numerous types of applicants receiving foreign income.

Examples: Examples of the types of applicants with foreign income include:

  • residents employed outside Australia whose foreign employment income is not taxable in Australia, such as foreign based airline pilots and engineers, those working for international organisations such as United Nations organisations and those working for approved overseas projects,
  • residents who receive gifts or allowances of money from any foreign source, such as from relatives living overseas, if they are made on a regular basis,
  • residents who received income from foreign business interests or investments which are exempt from Australian tax, such as migrants with business interests in their country of origin,
  • newly arrived migrants who received foreign income in the reference year that is not subject to tax in Australia,
  • non-residents, partnered to Australia residents working in Australia for overseas companies, organisations or governments, such as civil servants and defence personnel posted to Australia or non-residents working temporarily at Australian education institutions or who are visiting students,
  • residents who received an overseas pension or benefit that is not taxable income under the Australian ITAA.

Act reference: SSAct section 7(2) An Australian resident is a person who:…

Income from foreign business interests

Applicants 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 Taxation Act.

Explanation: Business expenses are those expenses that arise from activities directed toward the production of income.

Total net investment loss

For CSHC purposes, an applicant's income for the applicable tax year includes their total net investment loss amount. This amount is added onto the applicant's taxable income when working out their income for CSHC purposes.

Total net investment loss is comprised of 2 components. The first component is net losses from financial investments. The second component incorporates a person's net rental property loss which was already a component of the ATI prior to 1 July 2009.

The amount of total net investment loss is treated by the ATO as a deduction from a person's other assessable income in deriving their taxable income. This is not the case within the social security system.

In relation to a financial investment loss, the total net investment loss is the amount by which allowable deductions in respect of the particular financial investments exceed gross income from those investments.

In relation to net rental property loss, the total net investment loss is the amount by which allowable deductions in respect of the property exceeds the gross income from that property.

In determining an individual's 'total net investment loss' the amount of the deductions must be those allowed by the ATO. This does not include losses incurred by partnerships and trusts.

Act reference: SSAct section 1071 Seniors Health Card Taxable Income Test Calculator

Policy reference: SS Guide 3.9.3.37 Total Net Investment Loss - Net Financial Investment Loss, 3.9.3.38 Total Net Investment Loss - Net Rental Property Loss

Providing evidence of total net investment loss

The amount of a person's total net investment loss will start appearing on their TNA from the 2009-10 tax year. In the interim, a person must provide an estimate of their 2008-09 total net investment loss.

Proof of estimates of current year total net investment loss are not required unless the officer considers that a reasonable estimate has not been given. However the deductions used for the estimate must be consistent with deductions allowable by the ATO.

Act reference: SSAct section 1071 Seniors Health Card Taxable Income Test Calculator

Reportable superannuation contributions

A person's reportable superannuation contributions are the sum of:

  • any reportable employer superannuation contributions (certain salary sacrificed employer contributions to superannuation) for the income year that are to be reported to individuals on their payment summary from 1 July 2009, and
  • total amount of deductible personal superannuation contributions made by a self-employed person for the income year.

Act reference: SSAct section 1071 Seniors Health Card Taxable Income Test Calculator

Policy reference: SS Guide 3.9.3.39 Reportable Superannuation Contributions

Account based income stream

From 1 January 2015, account-based income streams (long term) come under the income test for CSHC. Account-based income streams (long term) include account-based pensions and account-based annuities.

Income from account-based income streams is assessed under the deeming provisions using the person's latest superannuation statement (see 4.4.1.20).

Act reference: SSAct section 1071-13 Seniors Health Card Taxable Income Test Calculator, section 9(1) Financial assets and income streams definitions

Policy reference: SS Guide 3.9.3.31 Account-based Income Streams

Last reviewed: 2 January 2015