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Money remains tight for many of us as the Australian economy slowly recovers from the COVID-19 pandemic, particularly for low income earners, so it can be hard to find spare cash to boost your retirement savings. And if you withdrew money from your super account during the pandemic, your balance may have gone backwards.
But if you do have some money to spare now, you could let the government lend a hand as you rebuild your super account.
With the Low Income Superannuation Tax Offset – or LISTO for short – you could be eligible to receive up to $500 from the government to help restore a portion of your retirement savings.
What is LISTO?
LISTO was introduced to encourage Aussies to save for their retirement, so the tax rate on money that goes into super is lower than the rate would be for the same income saved outside super. This prevents low income earners paying 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 pay no personal income tax on the first $18,200 you earn and then 19% tax on any income over $18,201 to $45,000 (in 2021–22). So, by paying 15% on all your SG contributions, you’re paying extra tax.
According to the Retirement Income Review, in 2018?19, almost 3 million people benefited from the LISTO, 60% of whom were women.
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. LISTO payments were capped at $500 per year.
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 into your super account include your employer’s compulsory SG contributions and any salary-sacrifice contributions, plus any personal contributions for which you claim a tax deduction.
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 $3,500 ($35,000 x 10% in 2021–22). Your 15% contributions tax on this amount is $525 (which is paid by your super fund to the ATO).
If you are eligible for LISTO, the ATO automatically refunds $500 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 (including SG 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, OR you did not lodge a tax return and 10% or more of your total income comes from your employment.
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 $3,200 ($32,000 x 10.0% in 2021–22). Your super fund will pay tax of $480 ($3,200 x 15%) to the ATO when the contributions are paid into your account.
The ATO will then refund this $480 into your super account as a LISTO payment if you meet all the eligibility criteria.
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 Superannuation Tax Offset (LISTO) 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.
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.