A super tax adjustment is needed to stop women taking further hits to their retirement savings

INDUSTRY bodies Industry Super Australia and Women in Super say the stage two tax cuts should be matched by a change to the Low-Income Superannuation Tax Offset (LISTO) in a move that would add tens of thousands of dollars to the retirement savings of more than 700,000 women.

The LISTO was aligned with the tax-free threshold and 19 percent tax bracket and matches superannuation guarantee contributions – but the tax cuts have moved those brackets up the scale. But the LISTO rate has stalled at $37,000 taxable income and the maximum tax refunded is $500 a year, seeing hundreds of thousands of women left behind.

More than 1.2 million Australians would see a boost in their super savings by increasing the LISTO to cover workers earning up to $45,000.

The changes would benefit 705,000 women who would take home 60 percent of the extra payments – making women the biggest winner from the measure. Each worker would get about $400 an extra on average.

“On average women are still retiring with almost half the amount of super than men," Industry Super Australia chief executive Bernie Dean said. “This proposal will put more money into women’s super-balances early in life – going someway to bridge the gender pay gap that unfortunately persists in retirement."

The Budget tax reform moved the 19 percent tax bracket to $45,000 and has lowered the tax concession to 3.5 cents in the dollar, dramatically reducing the incentives to contribute to super for hundreds of thousands of Australians, most of whom are women.

Industry Super Australia and Women in Super say the LISTO cap needs to be immediately increased to $640 to maintain the integrity of the measure. The LISTO should also increase in line with the legislated lifts to the Super Guarantee.

The LISTO is important to ensure lower income earners receive some tax relief for saving for retirement," Women In Super chair Catherine Wood said. “It can never match the $10,000 plus annual tax break received by high income earners, and the government should at least maintain the integrity of the provision which impacts over half the female workforce.”

“Young women on lower incomes have had to access their superannuation to get them through the pandemic. The least the government can do is to keep the LISTO relevant.”

More than 200,000 women under 30 would get the super boost, providing vital early career contributions that make the biggest difference to the final nest egg. The changes could lead to a 30-year-old woman earning $40,000 being up to $56,170 better off at retirement.  

Women would get $291 million of the super tax refunds and the proposal would provide $488 million in super tax breaks to those earning less than $45,000. It would be a much-needed super boost after women withdraw about $14 billion from super under the government’s early release scheme and ISA analysis shows a quarter of female applicants effectively drained their balance.     

Data suggests that many women become eligible for the tax break about the time they leave the workforce or reduce hours to raise children. About a third of all new recipients of the proposed LISTO increase would be women in their 20s and 30s.

This is also the stage in life when the gender super gap widens - the average super balance gap of women doubles from 15 percent less than men at 30 to 30 percent less once a woman reaches her 40s.

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