The LISTO (Low Income Super Tax Offset) to be boosted
The Government has announced that they plan to increase LISTO to an amount of up to $810 a year and raise the eligibility threshold from $37,000 to $45,000 from 1 July 2027 (if legislation is passed).
What is LISTO?
The LISTO is an Australian Government measure to help ensure that low income earners aren’t taxed at a higher rate on their super contributions than they are on their take-home pay.
LISTO is a payment made directly into your super by the Government if you meet the income criteria and your super fund has your tax file number on record. It is an amount of 15% of the before-tax (concessional) contributions that you or your employer pays into your super fund, currently up to a maximum of $500. However, this maximum is set to increase, if legislation passes, from up to $500 to up to $810 from 1 July 2027.
Super concessions for balances over $3 million and over $10 million
The Government also announced that from 1 July 2026 (if legislation passes), the concessional tax rates that will apply to earnings on total super balances above $3 million and above $10 million will be amended.
- For balances under $3 million, earnings will be taxed at the current 15%.
- For balances between $3 million and $10 million earnings on the first $3 million will be taxed at 15%, earnings on any additional balance will be taxed at 30%.
- For balances above $10 million, earnings on the first $3 million will be taxed at 15%, earnings on the next $7 million (up to $10 million) will be taxed at 30% and earnings on any additional balance will be taxed at 40%.
Our current understanding is that you will only be taxed at the higher rate on the earnings you make on the balance of your super account above $3 million or above $10 million.
These taxation rates don’t apply to money held in the pension/retirement phase as earnings on any money in the retirement phase are tax-free.
A (simplified) example:
If your super balance is $4 million and you earn 6% returns for the year, you will be taxed at 15% on the investment earnings you have made on the first $3 million of your balance and then 30% on the investment earnings you made on the amount of your balance above $3 million.
So, in this example, you would be taxed 15% on the $180,000 you earnt (that is 6% earnings on $3 million), which is $27,000, and taxed at 30% on the $60,000 you earnt on the $1 million that you have in your super above the $3 million level, which is $18,000.
In this example, the tax deducted before your investment returns are credited to your account would be $45,000 under this new legislation. This compares to the $36,000 in tax you would have paid if the taxation on earnings had remained at 15% for all earnings.
Note that this example is only very basic to demonstrate how the earnings on a large super balance could be taxed at different rates, however earnings are accrued more frequently than one average amount per year. This would impact how taxation would work in a ‘real world’ scenario. This example should not be relied upon for accuracy.
More details
The $3 million and $10 million thresholds will be indexed in future years to help them remain relevant.
There are additional details that have been proposed as part of these changes. Namely that the concessional tax rates on large balances will only apply to future realised earnings. The Government also plans to consult on implementation of these new tax rates as they relate to defined benefits to ensure that there is equivalency.