An "out-of-date" tax rule older than Gangnam Style will cost lower-income workers $500 million in retirement savings this year.
That's according to the Super Members Council, adding to growing calls to lift the Low Income Super Tax Offset (LISTO) - designed to boost superannuation for some of the lowest-paid Australian workers.
Anyone earning up to $37,000 receives a refund of up to $500, which goes into building their retirement nest egg.
When it was introduced it applied to all workers in the lowest two tax brackets, but has remained frozen at the same rate for 13 years despite inflation and tax bracket changes.
It means people earning between $37,000 to $45,000 aren't able to get the rebate, despite those workers now falling into the second-lowest tax bracket.
Some 1.2 million workers will miss out out on half a billion dollars in retirement savings this financial year and that's set to become more "acute" when stage three tax cuts come into effect in 2027, a report from the council shows.
"The LISTO is no longer working as intended and over a million low-income workers, 60 per cent of them women, are being short-changed," it said on Thursday.
It identified those in part-time or in lower-paid sectors such as retail, care, hospitality and health as most affected.
Superannuation is taxed at 15 per cent and the report highlighted that discount is felt far more by higher-earning Australians who are used to paying a greater rate of tax than those on lower incomes.
Those in the highest tax bracket pay 45 per cent on income above $190,000, so the reduced rate on super is equivalent to 30 per cent for them.
However, lower income workers pay 16 per cent on every dollar after $18,200, so the discount equates to one per cent.
The council described LISTO as "out-of-date", pushing for it to be increased to $45,000 and for refunds of up to $810 to go back into workers' superannuation accounts.
Women in Super and the Grattan Institute have also proposed similar changes.
Some 68 per cent of Australians support the change, according to a Pyxis Polling survey commissioned by the council.
Acting chief executive Georgia Brumby said it was time to fix the tax benefit to keep it fair.
"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," she said.
"We must keep that promise by ensuring the system is fair and continues to deliver for all Australians - especially those on the lowest incomes."
