Reduce MLC through Super
October 9, 2024
I'm currently earning $100,000 in the 23/24 year. I have to pay Medicare Levy Surcharge. Can I make a personal super contribution to negate the MLC?
To reduce or avoid the Medicare Levy Surcharge (MLS), one option is to lower your taxable income by making personal super contributions. Here's how it works:
How Personal Super Contributions Help
- Tax Deduction: By making a personal super contribution and claiming it as a tax deduction, you can reduce your taxable income.
- Reduced Income: If your taxable income falls below the MLS threshold, you won't have to pay the surcharge.
Steps to Reduce MLS with Super Contributions
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Determine Contribution Amount: To avoid the MLS, you need to reduce your taxable income below the MLS threshold for singles, which is $93,000 for the 2023/24 year.
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Calculate Required Contribution:
- Current Income: $100,000
- MLS Threshold: $93,000
- Difference: $100,000 - $93,000 = $7,000
You would need to make a personal super contribution of at least $7,000 and claim it as a tax deduction to lower your taxable income to $93,000 or less.
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Concessional Cap: Ensure your total concessional contributions (including employer contributions) don't exceed the annual cap of $27,500. Check how much your employer has already contributed to your super this year.
Important Considerations
- Notice of Intent: You must submit a "Notice of Intent to Claim a Deduction" to your super fund before you lodge your tax return.
- 15% Tax: The contribution will be taxed at 15% when it enters your super fund.
- Future Access: Remember, you can't access this money until you meet certain conditions, like reaching retirement age.
Conclusion
By making a personal super contribution of $7,000 and claiming it as a tax deduction, you can reduce your taxable income and potentially avoid the MLS. However, make sure this fits within your financial plans, as it impacts your immediate cash flow. If you have more questions or need further help, feel free to ask Gotax.
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