The Super Members’ Council on Wednesday held a special webinar to launch its new report, ‘Breaking the deal – Why LISTO needs to be fixed for low-income workers’, to outline the reasons behind its campaign urging the government to rethink the way in which superannuation is taxed.
Earlier this month, AustralianSuper chief executive Paul Schroder also called on the government to consider the superannuation tax concessions for lower-income earners over their higher-earning counterparts.
Schroder said super tax concessions are a cornerstone of the system.
“We must also recognise that tax concessions are central to the success and fairness of superannuation – they’re not giveaways or foregone consolidated revenue – they are part of the long-term social contract that encourages Australians to save for retirement,” he said.
“The deal here is simple: I lock my money away for 40 years and, in return, the government gives me concessional tax arrangements … Tax concessions are incentives designed to reward long-term saving and shift the burden of retirement funding from future taxpayers.
“As the system matures, these concessions have become more targeted and equitable”.
During Wednesday’s webinar, Georgia Brumby, director of advocacy and deputy chief executive of the SMC, said that LISTO has been frozen for 13 years and as a result, more than a million low-paid workers are missing out.
“There are two reasons why this is happening. Firstly, the income threshold has been stuck for 13 years. It means that while wages and tax brackets and everything else has gone up, the LISTO has not, so this means that people who should be getting that tax refund are not getting it,” she said.
“Secondly, the amount of the refund has been frozen which means, even if you are eligible, the refund has effectively shrunk over time relative to the rate of the super guarantee increase.”
Due to the stagnation of LISTO, this year, low-paid workers are missing out on around $500 million in super contributions.
“Obviously this is very unfair and has long-lasting consequences on their retirement balances,” Brumby said.
“Unfortunately, it is about to get worse. When the stage three tax cuts come into effect in 2027, while this is excellent news for lower-income workers in terms of their tax brackets, this brings an unfairness from a super perspective. Unless we fix the LISTO by 2027 we are going to see one in three Australians paying more tax on their super than on their take home pay, breaking the very deal that super is built on.”
Jo Kowalczyk, chief executive of Women in Super, said reforming LISTO is just one of the system levers that can be pulled to address the separate gender gap.
“Tax concessions are such a fundamental part of the system, and more than a million low-income workers, with the failure to realign LISTO, are no longer getting the benefit, and it will just keep getting worse,” Kowalczyk said.
Independent MP for Bradfield, Nicolette Boele, said LISTO is no longer “fit for purpose”.
“When you have legislation that pegs tax offsets to dollar amounts, rather than using a formula, eventually you are going to get those unintended outcomes that don’t work in favour of the most vulnerable,” she said.
“It’s why tax brackets need to be reviewed and adjusted, just as we did in the last term of Parliament with the stage three tax cuts. I think this is where the unfairness comes in. Tax breaks on super contributions are huge to high-income earners because they contribute more in dollars to super, but it’s actually the case that those high-income earners are receiving the largest tax break per dollar than they contributed to super.”
However, Boele said she doesn’t believe the government will make many changes to superannuation during this term in office and will “stick to its knitting”.
“It’s going to do what it promised in the election campaign. I don’t get a sense it’s going to do much more than that, and it’s going to do it precisely the way it wants to do it.”
“It’s a real shame, because I think with a landslide victory, it’s in a position to perfectly take on some of that much needed reform. I really don’t think the government is going to do anything too risky and unless it’s their idea or it’s good for electoral purposes this term, I don’t think that they’re going to stretch beyond what they’ve committed to do.”
