The Low Income Tax Offset & Low Income Super Tax Offset

If you earn $37,000 or less a year, you may be eligible for both the low income tax offset (LITO) and the low income super tax offset (LISTO). Here’s a snapshot of both, based on facts and figures from the Australian Taxation Office (ATO).

The good news is that you don’t have to do anything to claim either tax offset, according to the ATO, as it calculates both LITO and LISTO automatically when you lodge your tax return.

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Each offset does slightly different things. As outlined by the ATO, the LITO reduces your tax payable, whereas the LISTO is a payment into your super fund made by the Government once per financial year. Based on ATO figures, if you’re eligible for one offset, there’s a good chance that they’ll decide you’re eligible for the other, which means you could end up paying less tax and get a top-up for your superannuation.

The LITO

Originally introduced in 1993, the LITO has been through a number of changes and, according to the ATO, currently applies to any Australian resident for income tax purposes with a taxable income of less than $66,667. The current maximum tax offset you can receive if you’re eligible for the LITO is $445, which the ATO indicates applies to a taxable income of $37,000 or less.

ATO figures explain the maximum offset of $445 is reduced by 1.5 cents for every dollar earned in excess of $37,000, meaning that, for example, someone with a taxable income of $45,000 would likely receive a tax benefit of $325. This is calculated as $445 – ($8,000 x $0.015).

As mentioned, the LITO is calculated on your behalf by the ATO – just submit your tax return for the financial year and the ATO should take care of the rest.

Am I eligible for the LITO?

As mentioned, the eligibility requirements for the LITO are simple. According to the ATO website, you just need to have a taxable income of less than $66,667 for the financial year and be an Australian resident for income tax purposes.

The LISTO

Effective 1 July 2017, the LISTO replaced the previous low-income superannuation contribution policy. As outlined on the ATO’s website, the LISTO’s aim is to “provide continued support for low-income earners and ensure that, generally, they do not pay more tax on their super contributions than on their take-home pay.”

The LISTO takes the form of a payment made into the super funds of eligible individuals. The ATO states that the payment will generally be 15% of the total concessional (pre-tax) super contributions made by the individual within the financial year, capped at $500.

The maximum LISTO payment is $500 per financial year, and the minimum LISTO payment an eligible person can receive is $10. Any amounts lower than that will be rounded up to $10 according to the ATO.

The LISTO is calculated using information provided by your super fund, as long as your super fund has your TFN. If your super fund doesn’t have your TFN, it cannot accept a LISTO payment on your behalf. Your eligibility for the LISTO is calculated by the ATO when you lodge your tax return, or using contributions information provided by your super fund if you do not lodge a tax return.

Am I eligible for the LISTO?

The ATO advises you will likely be eligible for a LISTO payment if you meet the following criteria:

  • You or your employer made concessional (before tax) contributions to your super fund – this includes super guarantee payments;
  • You had an adjusted taxable income of $37,000 or less for the financial year;
  • You did not hold a temporary resident visa at any point in the financial year (an exemption applies if you’re a New Zealand citizen in Australia);
  • You either:
    • Lodged a tax return and received at least 10% of your total income from business and/or employment; or
    • Are not required to lodge a tax return and received at least 10% of your total income from your employment.

If you’re unsure about whether you are eligible, we recommend taking a look at the questionnaire on the ATO website, contacting the ATO directly or obtaining professional tax advice.

Whether or not you’re eligible for the LISTO, it’s important you’re with a super fund that can make the most of your super balance in order to help you prepare for retirement. You can compare super funds and see if you can find the right one for you with Canstar.

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