Millions to Benefit as Australia Boosts Low-Income Super Tax Offset – “Listo”
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A meaningful, yet largely overshadowed, change to Australia’s superannuation system is set to benefit millions of low-income workers, offering a crucial boost to their retirement savings. While debate continues around proposed tax increases for high-balance superannuation holders, the government is moving forward with an expansion of the low-income super tax offset, known as “Listo.”
The Listo program is designed to refund the tax paid on superannuation contributions by low-income earners. Currently, even individuals earning as little as $15,000 annually can be hit with a 15% tax on their super contributions, even if they pay no income tax on their wages. Listo refunds this tax, ensuring a fairer system.
Expanding Eligibility and Increasing Payments
Under the updated legislation,the income threshold for Listo eligibility will increase from $37,000 to $45,000,aligning with the second income tax bracket. The maximum refund available will also rise from $500 to $810. Thes changes are strategically timed to coincide with planned reductions in the lowest income tax rate, scheduled for mid-2027.
Treasury estimates indicate that these adjustments will extend Listo’s reach to an additional 770,000 Australians by 2027-28, with 490,000 individuals receiving a larger payment. 1.3 million Australians are projected to benefit, bringing the total number eligible for the offset to 3.1 million – a substantial increase compared to the 90,000 individuals impacted by the proposed tax changes on superannuation earnings exceeding $3 million.
Addressing Years of Neglect
The impetus for these changes stems from a lack of adjustment to the Listo program over the past eight years. According to the Super Members Council (SMC), this stagnation has resulted in millions of eligible workers missing out on deserved tax benefits. The current $500 payment cap is based on a 9% super guarantee rate, which has as increased to 12%. Similarly, the $37,000 eligibility threshold hasn’t been updated as the second income tax bracket was raised to $45,000 in 2020-21.
“A cleaner earning $42,000 a year only gets a 1% concession on their super contributions, while a boss on $220,000 gets a 30% concession,” a representative from the super industry pointed out, highlighting the existing inequities. The situation was poised to worsen with upcoming income tax cuts, potentially leading to one in four workers paying a higher tax rate on their super than on their wages.The SMC warned that this would “financially penalise workers for saving for their future – the opposite of what was intended.”
A Modest Step Towards a Fairer System
While the boosted Listo program is expected to provide an average of $410 to affected individuals, potentially adding $15,000 to their retirement savings over the long term (after accounting for inflation), some experts believe it’s just a starting point. The changes are estimated to cost the budget $430 million in the first full year,significantly less than the $2 billion expected to be raised from the proposed tax increase on high-balance earners.
xavier O’Halloran, chief executive of Super Consumers Australia, acknowledged the positive step but emphasized the need for broader systemic reform. “These changes nudge the system in a fairer direction. But they don’t address the root problem,” O’Halloran stated. “The system still gives too big a leg-up in the form of tax concessions to peopel who don’t need it to live a pleasant retirement.”
Ben Phillips, an associate professor at the Australian National University, agreed, noting that while the Listo changes are “not to be sneezed at,” further adjustments to superannuation taxation are warranted. “If we want better age pensions in the future, better services and a better NDIS, then it’s disappointing we haven’t done better to increase tax on super,” Phillips added.
The Listo changes represent a targeted effort to address inequities within the Australian superannuation system, but ongoing debate suggests a broader conversation about the fairness and sustainability of the system is far from over.
