The federal government has just announced changes to the low-income super tax offset (LISTO) scheme so that more people on low incomes are able to grow their superannuation balances.
This is especially important for women who are more likely to work part-time or casually and who, on average, retire with around 20 per cent less in superannuation savings than men.
What is LISTO?
The low-income super tax offset refunds the tax paid on super contributions for low-income workers. The refunds go back into superannuation accounts to encourage and boost retirement savings.
A woman – let’s call her Alex – working in disability care and earning an annual salary of $35,000 pays around $630 tax on her superannuation contributions. The low-income super tax offset means that money goes back into her superannuation account, instead of the government’s coffers. Over 20 years, the LISTO scheme means that Alex’s super balance could be more than $20,000 better off, reducing her reliance on the age pension.
What are the changes?
LISTO has not been updated since it was first introduced in 2012. The income threshold has been set at $37,000 and the maximum contribution at $500 for 13 years, and these figures have not been updated to reflect changes to tax brackets or the increase in the superannuation guarantee from nine per cent to 12 per cent.
According to the Super Members Council, the failure to adjust the LISTO means that the lowest paid Australians have missed out on a combined $2.5 billion in super tax benefits since 2020.
After much advocacy from superannuation organisations and the women’s sector, the Albanese government has announced they will be lifting the income threshold for the scheme from $37,000 to $45,000 to cover the bottom two tax brackets and lifting the maximum contribution cap from $500 to $810.
These changes help bring LISTO in line with the Government’s newly legislated tax cuts which will see the tax rates on incomes between $18,200 and $45,000 fall from 16 per cent to 15 per cent in July next year and then to 14 per cent in July 2027. Without changes to LISTO, these cuts would have seen people on the lowest incomes paying more tax on their superannuation than on their incomes.
Why does it matter for women?
Women are much more likely to work part-time or casually and generally have lower incomes and therefore lower superannuation balances than men.
According to the ATO, women’s median taxable income is $48,533, which means that 50 per cent of women earn less than $48,533.
At retirement age, women’s retirement balances are, on average, $56,000 less than men’s; a gap that means women are more likely to face poverty and housing insecurity as they age, and more likely to rely on the Age Pension. This is especially true for women who take time out of the workforce to be carers and sacrifice invaluable superannuation contributions to do so.
The Super Members Council estimates that 760,000 women will benefit from this change, as women comprise 60 per cent of the workers hurt by the LISTO freeze.
These changes to LISTO, coupled with the Government’s proposed changes to high superannuation balance tax concessions, are the first steps toward a fairer superannuation system for women.