The Australian Institute of Superannuation Trustees (AIST) is calling for the 2019/20 Federal Budget to include a $1,000 government contribution for everyone receiving the LISTO.
The Low Income Superannuation Tax Offset (LISTO), like the Low Income Superannuation Contribution (LISC) it replaced, is meant to offset the contributions tax paid by people on low incomes – so they don’t pay a higher rate of tax on their compulsory super contributions than they do on their wages.
However, when the LISC was introduced, which was effectively just renamed by the Coalition to the LISTO, no allowance was made for increases in the Super Guarantee rate.
The $500 limit of the LISTO works out almost exactly to the contributions tax someone on $37,000 would pay with a Super Guarantee rate of 9.0% – which was the rate when the LISC was introduced.
But since 2014/15 the Super Guarantee rate has been 9.5%, and is scheduled to go higher. Meaning that people on low incomes continue to pay, some, contributions tax. Due to, in the words of AIST, “out-of-date mathematics”.
“Furthermore, it is limited to $500, which means that low income earners whose employers contribute more on their behalf do not obtain any additional return of tax,” says AIST, in its 2019/20 pre-Budget submission.
AIST is not calling for the LISTO to be indexed to the Super Guarantee rate, but for all people receiving the LISTO to also receive an additional government contribution for $1,000.
This would help, the organisation says, partially offset factors which lead to “smaller superannuation balances, a reduced quality of life in retirement and an increased reliance on the Age Pension” for people on lower incomes.
According to ATO figures around 3 million Australians were eligible for the, then, LISC in 2016/17.
AIST is also calling for the Government to commit to the currently legislated schedule of increases to the SG rate (10% from 1 July 2021, 12% from 1 July 2025). There are concerns the Government may further delay increases to the SG rate. Labor has said it won’t accept further delays, but hasn’t committed to a timetable.