The tax cuts brought forward in last week’s Federal Budget announcement need to be matched by changes to the Low-Income Superannuation Tax Offset (LISTO) to stop Australians, and particularly women, taking a further hit to their retirement savings.
Industry bodies Industry Super Australia (ISA) and Women in Super said that changing the LISTO rate as part of the tax cuts announcement would add tens of thousands of dollars to the retirement savings of more than 1.2 million Australians, 700,000 of those being women.
According to ISA, the LISTO was aligned with the tax-free threshold and 19 per cent tax bracket and matched super guarantee contributions, but now those tax cuts have moved the tax brackets around with the LISTO stalled at $37,000 taxable income and the maximum tax refunded at $500 per year.
Women and Super and the ISA are both calling for the LISTO to cover workers earning up to $45,000, which would allow for each worker to get an extra $400 on average.
The changes to the tax brackets announced in the Budget moved the 19 per cent tax bracket to $45,000 and lowered the tax concession to 3.5 cents in the dollar, which the ISA claimed significantly reduced the incentives for hundreds of thousands of Australians to contribute extra to their super.
The two industry bodies suggest increasing the LISTO cap to $640 to maintain the integrity of the measure.
Making this change would provide $488 million in super tax breaks to those earning less than $45,000 and would provide a much-needed boost for those that raided their super as part of the early release scheme.
The government confirmed last week that it would not allow for a third wave of the early release super scheme.
Women in Super chair Catherine Wood said the change was especially important given that women had withdrawn around $14 billion in the early release scheme.
“The least the government can do is keep the LISTO relevant,” Ms Wood said.
“The LISTO is important to ensure lower income earners receive some tax relief for saving for 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.”
ISA chief executive Bernie Dean said the move was an important step in stopping the gender pay gap from widening.
“On average women are still retiring with almost half the amount of super than men,” Mr Dean 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.”
The two industry bodies are also calling for the LISTO to increase in line with any legislated lifts in the super guarantee.
One of the announcements missing from last week’s Budget announcement related to whether the government would go ahead with increasing the super guarantee by 0.5 per cent from 1 July next year.
Do you think the government needs to make it more attractive for low income earners to contribute to super? Do you support the government increasing the rate of the superannuation guarantee next year? What do you think the government will do?
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Related articles:
https://www.yourlifechoices.com.au/government/federal-government/labor-to-block-super-changes
https://www.yourlifechoices.com.au/finance/superannuation/no-more-digging-into-super
https://www.yourlifechoices.com.au/finance/superannuation/super-windfall-coming-your-way
