Retirement
1.2m Australians lose in tax offset lag
The Treasury’s latest tax cuts will see more than 1.2 million low-income earners paying a higher rate of tax on their superannuation contributions, with funds arguing changing the tax rate could add thousands to members’ retirement income.
1.2m Australians lose in tax offset lag
The Treasury’s latest tax cuts will see more than 1.2 million low-income earners paying a higher rate of tax on their superannuation contributions, with funds arguing changing the tax rate could add thousands to members’ retirement income.
Superannuation contributions are taxed at a flat rate of 15 per cent, meaning it favours those with a higher income.
To offset this, the government introduced the low-income superannuation tax offset (LISTO) to help members with smaller wages by giving them $500.
The LISTO rate was aligned to the tax-free threshold and 19 per cent tax brackets and matches superannuation guarantee contribution.
But the LISTO rate has stalled at $37,000 taxable income, and the maximum tax refunded is $500 a year, seeing more than 1.2 million Australians missing out on new savings.
Industry Super Australia CEO Bernie Dean said increasing the rate of LISTO to cover workers earning up to $45,000 would greatly benefit women who have fallen behind.
“On average, women are still retiring with almost half the amount of super than men,” he said.
“This proposal will put more money into women’s super balances early in life – going some way to bridge the gender pay gap that unfortunately persists in retirement.”
Industry Super Australia and Women in Super say the LISTO cap needs to be immediately increased to $640 to maintain the integrity of the measure. The LISTO should also increase in line with the legislated lifts to the super guarantee.
The changes would benefit 705,000 women who would take home 60 per cent of the extra payments – making women the biggest winner from the measure. Each worker would get about $400 an extra on average.
Women in Super chair Catherine Wood said it was important to ensure these lower-income earners receive some tax refund for saving in retirement.
“It can never match the $10,000 plus annual tax break received by high-income earners, and the government should at least maintain the integrity of the provision which impacts over half the female workforce,” she said.
“Young women on lower incomes have had to access their superannuation to get them through the pandemic. The least the government can do is to keep the LISTO relevant.”
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