Over One Million Australians Set for Significant Superannuation Increase: What This Means for Your Future

The government is planning to enhance the low-income superannuation tax offset, commonly known as LISTO, as part of its new initiative.

Currently, LISTO provides a tax offset on superannuation contributions for individuals earning less than $37,000 annually. This ensures that superannuation remains a tax-efficient option for Australians with lower incomes.

The proposed legislation aims to increase the income threshold for this offset to align with the top of the second income tax bracket, currently set at $45,000. This adjustment would extend benefits to an additional 1.3 million workers.

The Association of Superannuation Funds of Australia (ASFA) estimates that this change could boost the superannuation balance of someone earning $44,000 by nearly $50,000 by the time they retire.

“Our reforms to the low-income superannuation tax offset will provide a more secure retirement for over a million Australians, particularly benefiting young people and women,” said Chalmers.

“These changes will help make the super system fairer from top to bottom.”

Alongside the higher LISTO offset, the bill also increases the tax rate on superannuation earnings for accounts with more than $3 million.

This will impact the top 0.3 per cent of super account holders – a total of about 90,000 people.

Instead of the current flat concessional tax rate of 15 per cent, the bill proposes raising the tax rate on earnings for super accounts with a balance of between $3 million and $10 million to 30 per cent, and to 40 per cent for accounts worth more than $10 million.

The increased tax rates won’t apply to an account’s entire earnings – only to the proportion of the balance over each of the new thresholds.

Combined, the changes will generate about $1.6 billion in extra tax revenue for the federal budget per year.

Both of those elements of the laws have since been scrapped – the current bill only includes a higher tax for realised earnings, and the $3 million and $10 million thresholds will be indexed.

Despite the changes, the passage of the current bill is uncertain. The Coalition opposes the changes, meaning the government will require support from the Greens to get the laws through the Senate.

However, ASFA has encouraged the Greens and opposition to back the legislation.

“Together, these changes make super tax settings fairer and more sustainable,” chief executive Mary Delahunty said. 

“I encourage the parliament to pass the legislation without delay. 

“Aussie workers on low incomes cannot wait another day for the fairness that this package delivers to them.”

If passed, the higher tax rates on wealthy accounts will come into effect on July 1, while the LISTO boost will follow a year later.

NEVER MISS A STORY: Get your breaking news and exclusive stories first by following us across all platforms.