Super tax settings short-changing 1.2 million low paid workers around $500 million this year, report finds

A new report by the Super Members Council (SMC) has found 1.2 million workers will miss out on around $500 million in retirement savings this year due to out-of-date tax settings, leaving some workers with up to $60,000 less by retirement.

The report finds that the Low Income Super Tax Offset (LISTO) – a fairness measure designed to top up the super of lower-income workers – has stayed frozen for 13 years and fallen behind changes to tax brackets and super contribution rates.

As a result, 1.2 million workers will miss out on around $500 million in super tax concessions in 2025–26, or a total of $3 billion since 2020, with women accounting for around 60% of those affected.

The issue will become more acute on 1 July 2027 when stage three tax cuts come into effect, leaving one in four workers paying more tax on super than on income.

SMC is launching a digital campaign to raise awareness of the issue and calls on the Government to unfreeze the LISTO and implement a simple, targeted fix to ensure low paid workers get a fair super tax benefit like everyone else.

It comes as a new survey for SMC by Pyxis Polling finds 68 per cent of Australians support changes the LISTO.

Currently, a cleaner earning $42,000 gets a 1% concession on their super tax compared to their marginal income tax while a senior manager earning $220,000 gets a 30% tax concession.

To unfreeze LISTO, SMC is calling on the Government to make two simple fixes:

• Lift the eligibility for the LISTO to fully cover the first two tax brackets. That means lifting LISTO eligibility to $45,000 (from $37,000).
• Increase the cap on payments to $810 (from $500) to reflect the 12 per cent super guarantee.

These changes would instantly boost the retirement balance projections of more than 1.2 million Australians – 60% of them women. It would also help close the gender super gap.

The new report by SMC shows women (approximately 737,000 in 2025–26) are disproportionately affected, missing out on $295 million this year alone.

Over a working life, a woman in the bottom 20% of wage earners could lose up to $60,000 from their super balance by retirement. The LISTO freeze particularly hits younger workers and mums working part-time in frontline, lower paid sectors: carers and aides, retail sales assistants, hospitality workers, and many health professionals.

“We all know when something’s out of date you fix it. Whether it’s wages, broken laws, or super – we update things to keep them fair for everyone,” said Georgia Brumby, Acting CEO Super Members Council.

“One part of our super system has been frozen for 13 years, and more than a million low-paid workers, the majority of which are women, are being shortchanged by up to $60,000 in retirement savings. It’s time to fix it.”

“At the heart of super is a deal: Australians put aside a portion of their money for their future – in exchange the government gives them a tax benefit. We must keep that promise by ensuring the system is fair and continues to deliver for all Australians – especially those on the lowest incomes.”