In short

Fringe benefits from salary packaging, like a novated lease car, are reported at a grossed-up value that adds to adjusted taxable income (ATI). Because the Commonwealth Seniors Health Card test uses ATI plus deemed pension income, a trailing reportable fringe benefits amount can push a newly retired person over the limit — though a current-year income estimate can often fix this.

For Australians who keep working past Age Pension age while using salary packaging — a novated-lease car, employer-paid health insurance, packaged super, school fees — the reportable fringe benefits those arrangements generate have a downstream effect that is easy to miss. They inflate your adjusted taxable income (ATI), and ATI is the income measure that decides eligibility for the Commonwealth Seniors Health Card (CSHC) — the most valuable government concession for self-funded retirees who sit just above the Age Pension cut-off. Someone who finishes their working life with $40,000–$60,000 of grossed-up Reportable Fringe Benefits Amount (RFBA) can find that the income figure used for the card is far higher than their actual cash income, tipping them over the CSHC limit in the very year they want the card. The interaction between fringe benefits tax (FBT) reporting timelines, what ATI captures, and when you lodge your CSHC claim is a planning area many pre-retirees and their advisers don't notice until the card is refused.

The reportable fringe benefits framework requires an employer to report, on your income statement, the grossed-up value of fringe benefits where the total taxable value of those benefits exceeds $2,000 in the FBT year (which runs 1 April to 31 March). The reported figure is grossed up using the lower Type 2 gross-up rate of 1.8868 — the rate that has applied since the FBT year ending 31 March 2019, and which is used for reporting regardless of whether the benefits themselves are Type 1 or Type 2. So $30,000 of taxable benefit value appears on the income statement as an RFBA of about $56,600 ($30,000 × 1.8868). The gross-up reflects the pre-tax salary you would have needed to fund the benefits yourself, which is why it is used as an income-comparable figure. You aren't taxed on the RFBA, but it flows into a string of income tests.

The adjusted taxable income concept is broader than the taxable income figure at the bottom of your return. ATI adds back the reportable fringe benefits total, reportable employer super contributions (broadly, salary sacrifice and other employer contributions above the compulsory 12% Super Guarantee for FY25-26), personal deductible super contributions, total net investment losses (such as negative gearing), tax-free pensions and benefits, and target foreign income, and subtracts deductible child maintenance. ATI drives Family Tax Benefit, the private health insurance rebate, Division 293 tax, the Seniors and Pensioners Tax Offset (SAPTO), and — most consequentially for retirees — the CSHC. The crucial CSHC-specific twist is that the income test is not ATI alone: it is ATI plus deemed income from account-based income streams. For most self-funded retirees the deemed pension income is the larger half of the equation, so the fringe-benefits issue stacks on top of it.

The CSHC itself is available once you reach Age Pension age (currently 67), are an Australian resident, and are not receiving an Age Pension, provided your income is under the test limits. From 20 September 2025 the limits are $101,105 a year for a single person and $161,768 a year for a couple (combined), with $202,210 for couples separated by illness, and an extra $639.60 added for each dependent child; the limits are indexed to the Consumer Price Index each 20 September. There is no assets test. The card delivers Pharmaceutical Benefits Scheme (PBS) prescriptions at the concessional co-payment of $7.70 (frozen until 1 January 2030) instead of the $25.00 general co-payment (from 1 January 2026), cheaper access to the Medicare safety net, often bulk-billed GP visits, and a range of state and territory concessions on utilities, vehicle registration, public transport and council rates. Over a 25–30 year retirement the cumulative value runs well into the tens of thousands of dollars. The income side of the card is assessed using deeming on your account-based pension balances if you (or your partner) are 60 or older — at 1.25% on the first $64,200 of financial assets for a single (or $106,200 combined for a couple) and 3.25% above that, the rates that apply from 20 March 2026. Account-based pensions started before 1 January 2015 can be grandfathered and exempt from deeming where the holder has kept a CSHC continuously since then.

The timing trap comes from the gap between the FBT year and the income tax year. The FBT year ends 31 March; the income tax year ends 30 June. The RFBA for the FBT year ending 31 March 2026 lands on the income statement for the income tax year ending 30 June 2026 — so someone who retires in, say, May 2026 carries a full year of late-career salary plus that trailing RFBA into their 2025-26 return, even though the benefits stopped two months before year-end. Because the CSHC "reference tax year" is normally the year just before the current one, a claim made soon after retirement can be assessed against that inflated return, putting the claimant over the limit. Here, though, is the relief the original framing of this problem often misses: where your income for the reference year is above the limit and you can show a change in circumstances — retirement and the loss of employment income is exactly such a change — Services Australia lets you provide a current-year estimate of your income instead. A genuinely retired applicant whose income has dropped can usually get the card straight away on that estimate, rather than waiting a full year for the clean post-retirement return. So the trap is real, but it is navigable.

The planning levers are therefore twofold: reduce the trailing RFBA, and use the right income figure when claiming. On the RFBA side, winding up salary-packaging arrangements 12–18 months before retirement — triggering a novated-lease residual buyout, or switching health insurance and other benefits to direct payment — clears them from the final income statement; and where the retirement date is flexible, finishing in early April (just after the 31 March FBT year-end) keeps the new FBT year's RFBA close to nil. On the claim side, a recently retired applicant should lodge with a current-year income estimate where the prior-year return is RFBA-inflated. It is also worth watching the other ATI add-backs: a late-career push to maximise super through large personal deductible or salary-sacrifice contributions, or holding a negatively geared property, all lift ATI in the same window — so the immediate tax saving on contributions has to be weighed against CSHC access just after retirement.

What do worked planning examples show?

These two cases show how RFBA and ATI affect the retirement transition. Illustrative only — not personal advice — using FY25-26 figures.

Case 1 — Anne, 67, marketing director still working full-time on a $175,000 salary, with a novated-lease car ($32,000 of annual running costs) and employer-packaged health insurance ($4,000). Her total taxable benefit value is about $36,000, which grosses up to an RFBA of roughly $67,900 ($36,000 × 1.8868). She plans to retire in June 2026. Anne has reached Age Pension age, so she is eligible to hold a CSHC — but her 2025-26 return will show $175,000 of salary plus the $67,900 RFBA, an ATI of about $242,900, far above the $101,105 single limit. If she simply claims against that return she will be refused. On these facts the rational approach is twofold: end the novated lease and health packaging before 31 March 2026 to strip the trailing RFBA out of the final year, and then, once retired with her income reduced to (say) pension and account-based pension drawings, claim the CSHC using a current-year income estimate rather than the inflated 2025-26 return. Provided her ATI plus the deemed income on her account-based pension balance comes in under $101,105, the card can be granted from the point her circumstances change rather than a year later.

Case 2 — Bill and Helen, both 67, planning to retire together in October 2026. Bill is a senior engineer ($180,000 salary plus about $50,000 of RFBA from a novated lease and packaged accommodation); Helen is a part-time consultant ($60,000, no packaging). Between them they hold about $1.5M in account-based pensions. Their 2026-27 return would combine Bill's part-year salary, a full FBT year of RFBA, and Helen's part-year income — a reference-year figure comfortably above the $161,768 couple limit. But note the deeming side too: deemed income on $1.5M of account-based pensions is already roughly $46,000 a year (1.25% on the first $106,200, 3.25% on the rest), so even in retirement their CSHC income is substantial before any salary is counted. On these facts the sensible steps are to end Bill's packaging before the 31 March 2026 FBT year-end to minimise the trailing RFBA, and after they retire to claim using a current-year estimate. If their post-retirement ATI (now just Helen's tapering consulting income and any taxable pension components) plus around $46,000 of deemed pension income lands under $161,768, the couple qualifies — but it shows how close to the line a large pension balance can put a couple even without employment income.

For people working past Age Pension age with salary packaging, the RFBA–ATI–CSHC interaction deserves attention well before the final pay packet. The advice work is to inventory the packaging arrangements early, project both the ATI and the deemed account-based pension income for the retirement year and the year after, wind packaging down to clear the trailing RFBA, and claim the card with a current-year estimate where the reference-year return is inflated. Done well, CSHC access begins right at retirement and runs across the long arc of retirement, with real concession value accumulating each year. Done without planning, the first year of retirement can be a year without the card — an avoidable setback.

Sources

Key takeaways

  • Reportable fringe benefits are grossed up at 1.8868 for reporting, so $30,000 of taxable benefit value shows as roughly $56,600 on your income statement.
  • The Commonwealth Seniors Health Card income test uses adjusted taxable income (ATI) plus deemed income from account-based pensions, not just taxable income.
  • Because the FBT year ends 31 March but the tax year ends 30 June, a trailing reportable fringe benefits amount can inflate the income tax return covering your first months of retirement.
  • If your reference-year income is over the CSHC limit but your circumstances have genuinely changed — like retiring — you can usually claim using a current-year income estimate instead.
  • Winding down salary packaging arrangements before the 31 March FBT year-end, or timing retirement just after it, reduces the trailing reportable fringe benefits amount.

Frequently asked questions

Why was I refused the Commonwealth Seniors Health Card right after I retired?

Your claim is usually assessed against your income for the reference tax year, which for someone who retires partway through the year can still include a full FBT year's worth of reportable fringe benefits from salary packaging arrangements that ended before you retired. This can push your adjusted taxable income above the CSHC limit even though your actual current income has dropped.

Can I still get the CSHC if last year's income was too high but I've since retired?

Often yes. If your income for the reference year is over the limit but your circumstances have genuinely changed — retirement and the loss of employment income qualifies — Services Australia lets you provide a current-year income estimate instead, which can get you the card straight away rather than waiting for a clean post-retirement tax return.

How can I reduce the reportable fringe benefits showing up in my final year of work?

Winding up salary-packaging arrangements — like a novated lease or employer-paid health insurance — 12-18 months before retirement, or ending them just before the 31 March FBT year-end, clears them from your final income statement. If your retirement date is flexible, finishing just after 31 March keeps the new FBT year's reportable amount close to nil.

Does the Commonwealth Seniors Health Card income test include my super pension?

Yes, but not the actual payments you receive — Services Australia deems income on your account-based pension balance (1.25% on the first $64,200 for a single, or $106,200 combined for a couple, and 3.25% above that, from 20 March 2026) and adds it to your adjusted taxable income for the test.

A note on advice. This article is general information only and doesn't account for your personal circumstances. Everyone's situation is different — before acting, it's worth talking it through with a licensed adviser who knows your full picture.