Minimising FY21 taxable income using Superannuation contributions

New tax rates are looking quite interesting in the context of claiming deductions on Super contributions for single taxpayers.

For those who enjoy the detail, and getting every cent of value like myself, read on..

During FY20, the medicare levy threshold started phasing in AFTER the effective tax-free threshold of $21,885 (after factoring in low and medium income tax offsets). This essentially meant you could not pay medicare levy without paying income tax (duh).

However, this year the medicare levy starts phasing in at $22,801, which is BEFORE the new effective tax-free threshold of $23,226. This means you can pay medicare levy without paying income tax!!

During this phase in period, medicare levy increases by 10%, whilst your super contributions remain taxed inside the fund at 15%.

Therefore, you should NOT be reducing your medicare levy to nil this year using deductible super contributions. You should be reducing your taxable income to $23,226, where you still pay around $42 of medicare levy.