OK, this might get complicated!
All PBS listed medications have a government defined/agreed price. For a PBS script, that price is what the patient pays (the co-payment), however the price is also subject to a co-payment cap. The cap is $41.30 for "ordinary" patients, or $6.60 for pensioners. So, using metformin as an example, the agreed price is about $20, and that is what a patient pays, but a pensioner only pays $6.60 due to the pensioner co-payment cap. If the medication in question had an agreed price of $100, the normal patient would pay $41.30 whilst the pensioner would pay $6.60. All of these payments count towards the safety net.
With me so far?
In order allow some competition, pharmacies requested the ability to reduce that $6.60 pensioner co-payment (out of their own pocket/profit, as it were) and it was decided (the industry is government regulated) that they should be allowed to give a $1 discount on that co-payment. That's the reduction from $6.50 to $5.60.
The "safety net" is reached when the patients family (it is family, not individually based) spends a certain amount in a (calendar, I believe) year. The amount is roughly $1300 for a normal patient, $300odd for a pensioner (these numbers are from memory, pre-coffee and subject to early morning inaccuracy!). When the patient has spent that amount, the safety net kicks in and subsequent scripts are free for the remainder of the year. All the co-payments discussed above, $6.60, $5.60, and the "up to $41.30" count towards the safety net.
The added complexity is that the government agreed price does not always reflect the actual price of the medication. So for example, the metformin I mentioned above has an agreed price of $20ish, but is actually dirt cheap, costing only a few dollars, but under the PBS, the price is $20. So the option for the pharmacy is to supply the product as a "private script". Private scripts normally cover medications that aren't listed on the PBS, and are basically a way for doctors to supply medications that are outside the PBS system. So a pharmacist can in fact dispense a script as "private", and thus outside the PBS rules. This means that a dirt cheap drug like metformin could be supplied at a dirt cheap price, but would not count towards the safety net. Depending on how much medication a patient and their family takes, this might produce a saving. However it also risks them missing the safety net, which might means over the course of the year they spend more, not less! The difficulties arise, of course, when the pharmacy neglect to explain all this, the patients take the "instant savings" and then halfway through the year start to wonder why they're still paying for their medications....
Some extra notes! There are a couple of other components to the price that muddy the waters still further (of course there are, this is Australia!). There is a small dispensing fee wrapped up in the pricing, and also sometimes a brand premium if there is a cheaper generic product that the government would prefer you to have. Additionally, some medications are in fact cheaper to buy over the counter (Panadol etc.) though I'd guess most doctors wouldn't bother writing a script for them. Also Aboriginals and Torres Strait Islanders all get the pensioner prices, or free if they are themselves pensioners. Lastly, there has been some discussion on whether the $1 discount on the co-payment is in fact a good thing, and talk of it being dropped. The bottom line is that all PBS pricing is regulated, whilst dispensing things as private removes the (price) regulations but also the safety net.
As one final point, seeing as we are talking about community spirit and acting for the common good. The PBS is massively expensive, and it's budget is constantly increasing. Whilst it certainly benefits the pharmacy for people to get their medications, as a tax payer it is worth remembering that unused medications still cost the government money, and they get that money by charging income tax. If you (generic "you"!) don't need the medication, don't get it! The pharmacy regularly see's bucket loads of medications being brought back by relatives of old people who have died. They sometimes have hundreds or thousands of dollars worth of medications, yet they have still had their latest script for the same meds dispensed just days previously. We also see people getting scripts that they have no intention of taking, or things like antibiotic repeats (written by the doctor "in case you need them") when they have already recovered. They get them "just in case they might need them in the future" when they self diagnose something entirely different (risky in itself!). Whilst it's free for them, it still contributes to our tax bills!