The market’s preoccupation with the $3 million super tax appears to be overshadowing what’s happening to super fund provisions that used to boost retirement savings for the younger, low-income cohort at the other end of the wealth divide.
Based on Cbus research, the current income threshold is leaving a growing cadres of low-income earners without access to the Low-Income Super Tax Offset (LISTO) they once took for granted.
Based on Cbus’ research the number of its members receiving LISTO has declined over the past five years due to the income threshold remaining unchanged since its introduction in 2017.
What’s becoming increasingly evident, says Cbus deputy CEO Marianne Walker is that the current freeze is not only affecting many members, it's also having an equally negative impact across all industry sectors.
Under the current settings, an apprentice earning $27,778 annually would reach their maximum LISTO entitlement early - long before they receive the full benefit.
Super isn't keeping up
"Many young tradies, apprentices, and women in construction start their careers on low pay while learning their trade, yet the system isn't keeping up," Walker said.
"Raising the LISTO threshold to $45,000 makes sense. It's a direct investment in their financial security, setting them up for the long term by boosting their super savings."
Walker also recommends boosting the cap to $810 to ensure workers aren't penalised simply because super contributions are rising as intended.
Cbus argues that permanently aligning the LISTO threshold with the lowest tax bracket and increasing the cap would support hundreds of thousands of super members - across multiple funds - currently missing out, while also ensuring the system works as originally designed.
Based on the latest Cbus figures, only 45% of its members under 18 received a LISTO payment last year, with women making up 18% of recipients.
Widespread fallout from policy oversight
Rival industry fund, HESTA, also corroborated Cbus’ concerns that the fallout from this policy oversight is being felt across the board.
HESTA's latest data suggests over 70,000 of its members with incomes between $37,001-$45,000 missed out on $35 million in contribution refunds last year.
Based on HESTA’s modelling, missed LISTO payments over the past four financial years have cost an estimated 200,000 low-income worker members over $102 million in this fund alone.
Disproportionate tax concessions
Meanwhile, another industry super fund, Rest Super noted that the bottom 30% of households receive disproportionately fewer super tax concessions - with just 4% - than those at the other end of the wealth divide.
With nearly half a million [Rest] members receiving the benefit each year - 65% of whom are women - Rest believes that LISTO is a hugely important measure for its members.
"The failure to update the LISTO settings over time means our members are missing out on vital additional superannuation, and some are paying more tax on super than on their take-home pay,” said Rest.
"This particularly impacts women, and particularly during ages where women are more likely to take time out from the workforce or reduce hours to care for children."
