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Money is tight for everyone in the wake of the COVID-19 pandemic, so it’s hard to find extra dollars to boost your retirement savings.
But you may be able to get the government to do the hard work for you when it comes to putting extra super contributions into your account.
With the Low Income Superannuation Tax Offset – or LISTO for short – you could be eligible to receive up to $500 to help you save for your retirement.
What is LISTO?
The super system is designed to encourage Aussies to save for their retirement, so the tax rate for super savings is lower than for the same income outside super.
LISTO was introduced to avoid the situation where low income earners pay more tax on their super contributions than if they received the same amount in their take home pay.
Put simply, all compulsory Superannuation Guarantee (SG) contributions paid by your employer are taxed at 15% when they go into your super account. If you are on a low income (earning under $37,000), you only pay tax on any income you earn over $18,200 (in 2019/20 and 2020/21 financial years). So, by paying 15% on all your SG contributions, you’re paying extra tax.
Background to LISTO and LISC
The Low Income Superannuation Tax Offset (LISTO) came into effect on 1 July 2017 as a renamed version of the Low Income Superannuation Contribution (LISC), which was introduced in July 2012.
The LISC policy initiative was a response to the Henry Review into Australia’s tax system. The Henry Review findings argued low income taxpayers should not be paying more tax on their concessional (before-tax) super contributions – like the SG – than on their wage and salary income.
How does LISTO work?
To even things up for low income earners, LISTO acts as an offset or refund for the tax your super fund pays on your concessional (before-tax) contributions if you earn under $37,000 a year.
Your concessional contributions include your employer’s compulsory SG contributions and any salary sacrifice or personal tax-deductible contributions you choose to make into your super account.
An example of how LISTO works is if your salary is $35,000, your employer is required to make SG contributions into your super account of $3,325 ($35,000 x 9.5% in 2019/20 and 2020/21). Your 15% contributions tax on this amount is $500 (which is paid by your super fund to the ATO).
If you are eligible for LISTO, the ATO automatically refunds this amount into your super account.
Who is eligible for LISTO payments?
The ATO determines your eligibility for LISTO and it’s only payable if your annual salary is less than $37,000. (Technically, your salary is based on your actual or estimated adjusted taxable income.)
To be eligible for LISTO, you need to meet all the following criteria:
- You have an adjustable taxable income of $37,000 or less
- You or your employer have paid concessional contributions for the year into a complying super fund
- You have not held a temporary resident visa at any time during the year
- You have lodged a tax return and at least 10% of your total income came from employment, business income or a combination of both.
Need to know
As LISTO is paid directly into your super account, you need to ensure your super fund has your Tax File Number (TFN) so it can accept a LISTO payment from the ATO.
If you do not lodge a tax return, the ATO will still check if you are eligible for LISTO by using contribution information from your super fund and other income information it collects.
To receive the maximum $500 payment of LISTO, your salary or wage needs to be between $35,000 and $37,000.
If you are earning under $35,000, you will receive a lower amount of LISTO.
For example, if your salary is $32,000, the SG contributions made by your employer into your super account will be $3,040 ($32,000 x 9.5% in 2019/20 and 2020/21). Your super fund will pay tax of $465 ($3,040 x 15%) when the contributions is paid into your account.
The ATO will then refund this $465 into your super account as a LISTO payment.
How to calculate your LISTO
A LISTO payment is determined by calculating 15% of the concessional contributions you or your employer pay into your super account during the financial year. The maximum amount is capped at $500 for each financial year, with the minimum amount being $10. If you are eligible for less than $10, the ATO rounds the payment up to $10.
To work out how much LISTO you may be eligible to receive, try the low income super amount calculator tool on the ATO’s website. It estimates your eligibility and entitlement to the tax offset based on information about your income and super contributions.
Case study
During 2020/21, Preeti works part time as a teachers’ aide at a private school. Her income from the position is $36,000 and the school makes concessional (before-tax) contributions into her super account of $3,420.
Preeti also salary sacrifices $300 into her super account during the year. This makes her total concessional contributions $3,720 ($3,420 + $300) for 2020/21.
Although Preeti’s LISTO amount is $558 ($3,720 x 15% = $558), she is only eligible to receive $500 as this is the maximum LISTO amount.
How do you receive LISTO?
The amount of LISTO you are eligible to receive is automatically calculated by the ATO and paid into your super account, so you don’t need to do any paperwork or apply to receive the payment.
The ATO checks the relevant information provided in your income tax return when you lodge your return after 30 June each year. It also receives information from your super fund about your super contributions.
Normally, the ATO makes the first round of LISTO payments several months after you lodge your tax return.
Need to know
If you have reached your preservation age and are retired from the workforce, you can apply to have LISTO paid directly to you.
You can request direct payment either through the myGov online portal or by completing an Application for payment of ATO-held superannuation money form and submitting it to the ATO.
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