If you or your partner are working part-time or earning a modest income, it’s worth knowing how government incentives can support your super. One key measure is the Low Income Superannuation Tax Offset (LISTO), which ensures lower earners aren’t disadvantaged when contributing to super.
In the recent 13 October government announcement, which is primarily focused on those with high super balances as part of the Better Targeted Superannuation Concession changes, there was also an announcement of increased support for lower earners through the LISTO.
What is the LISTO?
The Low Income Superannuation Tax Offset (LISTO) was introduced from 1 July 2017 to provide assistance to low-income earners. If your adjusted taxable income is up to $37,000, you may be eligible to receive a refund into your superannuation account for the 15% contributions tax paid on your eligible concessional superannuation contributions, up to a cap of $500. This measure was designed to ensure that lower-income earners do not end up paying more tax on their super contributions than on their wages, promoting fairness within the superannuation system.
The LISTO is paid automatically into your super fund if you’re eligible and you have recorded your Tax File Number (TFN) with your super fund, helping you to grow your retirement savings without any extra effort.
Significant proposed changes to LISTO
Significant proposed changes announced on 13 October to LISTO are set to provide even greater support for low-income workers.
Proposed from 1 July 2027, the LISTO will see two pivotal adjustments:
- Increased income threshold: The eligibility threshold for LISTO will rise from $37,000 to $45,000. This expansion means more individuals will qualify for the offset.
- Higher maximum payment: The maximum LISTO payment is set to increase from $500 to $810. This substantial boost will provide a more significant contribution to eligible individuals’ super accounts, helping their savings grow more rapidly.
These changes are a direct response to the government’s commitment to support low-income workers and ensure that the tax concessions on superannuation contributions are equitable. The increase in the maximum payment also accounts for recent rises in the Superannuation Guarantee rate, which seems a sensible adjustment.
Harmonising support: LISTO and super co-contribution thresholds
One of the most noteworthy aspects of these proposed changes is the closer alignment of the LISTO income threshold with the government super co-contribution. The super co-contribution helps eligible individuals save for retirement by matching personal after-tax super contributions, up to a maximum of $500, if their income falls within certain thresholds.
While super co-contribution thresholds have been indexed over time since it was introduced in 2003, LISTO’s threshold has remained unchanged since its introduction in 2017. With the LISTO threshold increasing to $45,000, it will now be more closely aligned with the current lower income threshold for super co-contributions of $47,488.
This alignment simplifies the landscape for low-income earners somewhat, making it a bit easier to understand and access available support, reinforcing the policy’s intent to provide consistent assistance for retirement savings.
Who benefits and how?
These reforms are projected to have a far-reaching positive impact. The Treasury estimates that 1.3 million Australians will directly benefit from the boost to LISTO, with approximately 60% of these beneficiaries being women. Furthermore, the total number of Australians eligible for LISTO is expected to increase to 3.1 million. For workers earning between $28,000 and $45,000, the changes will translate into an average increase of $410 in their LISTO payment. This additional support can significantly enhance retirement security, especially when compounded over many years of contributions and investment earnings. (Source: Treasury Publication)
By boosting LISTO, alongside other reforms like better targeting superannuation concessions and paying super on paid parental leave, the government’s stated aim is to empower low-income workers to earn more, keep more of what they earn, and ultimately retire with more.
Have you ever received a government super contribution without realising it?
Because the government super co-contributions and LISTO are made directly to your super fund in co-ordination with data from the Australian Taxation Office (ATO) and your super fund, you may have had a contribution into your super without you even realising.
We encourage you to consider how these changes might affect your personal retirement planning, to make the most of them. To learn more about how Retirement Essentials can assist you with your retirement planning, consider a tailored Retirement Advice Consultations or use the free online Age Pension calculator to estimate your entitlements.
What are your thoughts on these proposed changes to LISTO?
Do you welcome these changes?
