Low Income Superannuation Tax Offset – being updated from 1 July 2027

The one problem with compulsory super

Compulsory Superannuation has one negative feature. For individuals with low taxable incomes there is no tax benefit from the “concessional” tax treatment of super contributions. If the same amount had been paid as salary the individual would pay less tax. In fact, individuals with low tax rates are effectively paying a penalty to have employer super contributions in lieu of salary as well as not being able to access their super until retirement or age 65.

This negative feature arises where low taxable income individuals have a marginal tax rate of less than 15% (which is super tax rate applying to compulsory super contributions).

The solution to the problem in 2012

The Government “solved” this problem in 2012 by introducing the “Low Income Superannuation Tax Offset” (affectionally known as LISTO) for individuals whose adjusted taxable income was $37,000 or less. Individuals whose adjusted taxable income was more than $37,000 were not entitled to LISTO. Additionally, the amount of the LISTO payment was calculated as 9% of the compulsory contributions (and capped at $500).

When introduced, the LISTO payment was equal to the amount of tax which compulsory super contributions suffered when paid into a super fund, thereby “reversing the affect of the tax. LISTO was calculated by the ATO and paid as a contribution (non-deductible) to the relevant member’s superannuation fund. For individuals whose taxable income was $37,000 or less, the LISTO contribution worked a treat as the then compulsory contribution rate was 9%.

Unfortunately, the LISTO parameters were not changed as and when the compulsory contribution rate increased from 9% to the current 12%. Consequently, over time, the LISTO contributions increasingly failed to fully offset the tax imposed on compulsory contributions.

Treasurer’s announcement

On 13 October 2025, the Treasurer announced a significant updating of LISTO.  For the 2027/28 and subsequent financial years:

• the threshold at which LISTO ceases to apply will be $45,000 of adjusted taxable income (rather than the current $37,000 of adjusted taxable income); and

• the LISTO amount will be calculated as 12% of compulsory contributions (rather than the current 9% of compulsory contributions; and

• maximum LITO amount will not be $810 (rather than the current $500).

Summary of impact of proposed changes

Technical Points

1. Adjusted taxable income of an individual for a financial year – is their taxable income for the financial year (disregarding any assessable First Home Super Saver released amounts) adjusted by adding (amongst other things):

• their adjusted fringe benefits total for the financial year;

• total net investment loss for the financial year;

• the value of any tax free pension or benefit received during the financial year; and

• reportable superannuation contributions of the individual received during the financial year.

2. The ATO will make any LISTO payment to the individuals’ current superannuation fund. If the individual has no superannuation or RSA accounts or the only accounts are pension accounts, the ATO may pay the LISTO amount directly to the member or, if the member has died, to their estate.

3. For an individual to have an entitlement to a LISTO payment in relation to a financial year, 10% or more of their total income for that year (that is assessable income, reportable fringe benefits total and reportable employer superannuation contributions) must be derived from employment or business activities.