Government announces LISTO reforms

The proposed changes to the Low-Income Superannuation Tax Offset (LISTO) has been applauded by the superannuation sector.

Announced today (13 October), the federal government’s proposed reforms will raise the LISTO eligibility cap from $37,000 to $45,000, increasing the maximum payment from $500 to $810 as of 1 July 2027, reflecting the current 12 per cent Super Guarantee rate.

In doing so, this will guarantee that people earning under $45,000 a year are not penalised with higher tax insider super than outside of super.

These changes could potentially inject an extra $15,000 to the super balances of 1.3 million low-income Australians when they reach retirement age.

This move will particularly prove beneficial for women, who make up 60 per cent of low-earning Australians. These changes could result in up to $60,000 more in women’s super balances at retirement.

The super sector has widely welcomed this new proposal, with Jo Kowalczyk, Women in Super CEO describing this as “a monumental victory for fairness in our super system”.

"For too long, the LISTO has been frozen while the rest of the super system evolved around it. Low-income workers, the majority of them women, have been short-changed by $3 billion since 2020,” Kowalczyk added.

“Today's announcement corrects this injustice and ensures that Australia's lowest-paid workers receive the same fair tax treatment on their retirement savings as everyone else."

Reacting to the proposal, CEO of the Association of Superannuation Funds of Australia (ASFA), Mary Delahunty said: “Super offers working Australians a deal: if you put money away to support yourself in retirement, and reduce your reliance on the age pension, you get a tax concession.”

“Currently, for many of the lowest-earning Australians, the deal isn’t working because their tax rate is higher on super than on take-home pay.  

“Giving people on low incomes a higher tax offset will mean they are less disadvantaged by taxation on super,” Delahunty added.

AustralianSuper chief strategy officer, Paula Benson, congratulated the government on initiatives that will “make our already world-class super system even more equitable”.

“The Treasurer’s landmark reforms will make super fairer and help Australians build their retirement savings with confidence.

“We are long-time supporters of lifting the LISTO to help people who need it most, especially women with low incomes. The indexing of the Division 296 proposal and taxing of realised gains will ensure the system remains fit for purpose for future generations of Australian workers,” she said.

Research from the Super Members Council (SMC) found that women had been disproportionately affected by the LISTO freeze in 2012, missing out on $295 million this year alone.

According to SMC, unfreezing LISTO will provide a major boost to younger workers and mothers working part-time frontline jobs such as carers, retail assistants, hospitality workers and health workers.

Misha Schubert said this boost will make the superannuation system “even stronger and fairer for those who need it most”.

“We all know, when something’s out of date, you fix it. By fixing the LISTO, the Government will make a big difference to the retirements of more than a million of Australia’s lowest-paid workers.”

“The LISTO boost is a win for low-paid workers, a win for women, a win for key workers, and a win for the principle that every single Australian deserves economic security and dignity in retirement.”