Financial Planning for High Income Earners in Australia

Above $135,000 in 2024-25, Australia's 37% marginal rate applies (45% above $190,000). At this level, every legitimate tax reduction strategy provides an outsized return - and every missed opportunity is proportionally more expensive.

• The marginal rate reality: At $200,000 income, your average (effective) tax rate is approximately 32%. But every additional dollar of income above $190,000 is taxed at 47% (45% + 2% Medicare). Every deductible dollar saves 47 cents. The tax value of each strategy is directly proportional to your marginal rate - making tax planning exceptionally high-value at this income level.
• Division 293 tax for super contributions: Concessional super contributions for individuals with income plus contributions exceeding $250,000 attract an additional 15% Division 293 tax - making the effective tax on super contributions 30% rather than 15%. Still significantly below the 47% marginal rate, so super contributions remain highly tax-effective, but the benefit is lower than for middle-income earners.
• The Medicare Levy Surcharge: High income earners without private hospital cover pay an MLS of 1–1.5% on top of the 2% Medicare Levy. At $150,000 income without private cover, the MLS is 1% ($1,500). Private hospital cover for singles costs $1,200–$2,500/year - so the financial case for having cover is strong even if the healthcare value is secondary.
• Lifestyle inflation is the primary wealth-destroyer: Research consistently shows that high-income Australians with poor wealth outcomes typically have one cause: lifestyle spending rises proportionally with income. A household earning $300,000 with a $280,000 cost structure saves less than a household earning $120,000 with a $70,000 cost structure. The number on the payslip matters less than the gap between income and expenditure.
• Complexity requires professional advice: At high income levels, the interactions between tax, super, family trust distributions, investment structure, estate planning, and business interests create genuine complexity. A financial planner and tax accountant working together - rather than either alone - typically produce materially better outcomes.

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Superannuation remains the highest-priority tax reduction tool for high income earners, even with Division 293. The tax saving on contributions and the tax-free compounding environment are unmatched.

• Maximise concessional contributions to $30,000: Salary sacrifice up to the concessional cap ($30,000 minus employer SG). If employer SG is $22,000 on a $200,000 salary, you can salary sacrifice a further $8,000. The saving: $8,000 taxed at 30% (including Division 293) rather than 47% = $1,360 annual tax saving. Small but real.
• Carry-forward concessional contributions: If your super balance is below $500,000 and you've had years below the concessional cap (earlier career, overseas period, parental leave), carry-forward cap space from the previous 5 years can be contributed in a single year. For a high earner who recently returned from overseas or had a career change, this can allow $100,000+ in a single deductible contribution.
• Non-concessional contributions for high earners: Above-cap contributions from after-tax income (up to $120,000/year, or $360,000 under bring-forward) move wealth from your personal tax environment (earnings taxed at 47%) to super (earnings taxed at 15% in accumulation, 0% in pension phase). For long-term wealth building, the internal compounding advantage is substantial.
• Spouse super contributions for lower-earning partners: If your partner earns below $40,000, contributing $3,000 to their super generates a $540 tax offset. More importantly, building your partner's super balance protects against gender super gap outcomes and maximises the couple's total super efficiency - two balanced accounts in retirement are more Centrelink-efficient than one large and one small.
• Super as succession vehicle: For high income earners building substantial wealth, super provides a tax-effective inheritance mechanism - death benefits paid to dependants (spouse, minor children) from super are tax-free. Death benefits paid to non-dependants (adult children) attract up to 32% tax on the taxable component - estate planning around this is essential for estates with large super balances.

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How you hold investments has a direct bearing on the tax rate applied to returns. At high marginal rates, the difference between structures can be worth tens of thousands of dollars per year.

• Personal ownership - high income, high tax: Investment income (interest, dividends, rent) earned personally is added to your income and taxed at your marginal rate (37–47%). Capital gains on assets held over 12 months receive the 50% discount - effective rate 18.5–23.5%. For high income earners, personal investment generates the worst tax outcome.
• Discretionary (family) trust - income splitting: A family trust distributes investment income to family members at their marginal rates. Distributing $50,000 to a spouse earning $30,000 (effective rate 19%) rather than adding it to your $250,000 income (marginal rate 47%) saves approximately $14,000 per year on that distribution. Adult children can receive up to $18,200 tax-free (the tax-free threshold). This is the primary driver of family trust establishment for high earners.
• Corporate beneficiary - retained profits: A trust can distribute income to a company (corporate beneficiary) that the family owns, taxed at 25–30% company rate rather than 47% personal rate. The company retains the after-tax profit for reinvestment - creating a tax-deferred compounding pool. When profits are eventually paid as dividends (with franking credits), the personal tax is offset by the credits. Useful for high earners who don't need to consume all investment returns.
• Company structure for business income: If you operate a business or have substantial consulting income, operating through a company (Pty Ltd) caps tax at 25–30% on retained profits rather than 47%. The business can reinvest at a lower tax rate, pay franked dividends when needed, and access the small business CGT concessions on eventual sale.
• The structure decision is hard to reverse: Changing investment structure after assets are acquired triggers CGT and stamp duty. Establish the right structure before investing - not after the first investment is made. Take advice before acting.

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At high income levels, the tax benefit of deductible investment debt is greatest. Debt recycling - converting non-deductible home loan debt to deductible investment debt - delivers its highest returns for top-bracket earners.

• The debt recycling tax saving at 47%: Converting $200,000 of non-deductible home loan debt (at 6.5%) to investment debt (same rate, now deductible) generates $200,000 × 6.5% × 47% = $6,110 in annual tax savings. This is in addition to the investment returns on the portfolio funded by the recycled debt. The strategy is most powerful at the highest marginal rates.
• Margin lending for accelerated portfolio building: Margin loans allow you to borrow against an existing share portfolio to purchase additional shares. Interest is tax-deductible (against investment income or as a net investment loss). For high income earners with concentrated equity portfolios, margin lending provides liquidity without selling. Risk: margin calls in volatile markets require top-up capital.
• Investment property negative gearing: Negative gearing (where deductible property expenses exceed rental income) generates a net loss that offsets other income. At 47% marginal rate, $20,000 of net property loss produces a $9,400 tax saving - making negative gearing significantly more valuable at high income than at middle income. The caveat: the investment must make sense on capital growth grounds regardless of the tax benefit.
• Franking credits at high income: Fully franked dividends from Australian shares attach 30% franking credits. At a 47% marginal rate, the after-tax dividend = cash dividend + 70% of the franking credit (with the remaining 30% covering the difference between the company rate and your marginal rate). Franked shares are less tax-advantaged for high earners than for pension-phase investors - but still contribute to after-tax returns.

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Several employment and lifestyle structures are available to high income earners that provide tax-effective benefits or additional remuneration.

• Novated lease: A novated lease allows you to pay for a car (including petrol, insurance, registration, and servicing) from pre-tax salary via salary sacrifice. The lease payments and running costs come from before-tax income, reducing your taxable income. For electric vehicles, the fringe benefits tax (FBT) exemption eliminates FBT entirely - making EVs one of the most tax-effective salary packaging benefits currently available.
• Salary sacrifice for additional super: Beyond the default SG, salary sacrificing additional amounts (up to the $30,000 concessional cap) directly reduces your taxable salary, saving tax at the marginal rate on the sacrificed amount. At 47%, every $10,000 sacrificed saves $4,700 in income tax (while paying 30% including Division 293 on the super contribution - net saving $1,700 per $10,000).
• Private health insurance rebate: As income rises, the PHI rebate decreases (income-tested). Above $186,000 for singles (2024-25), the rebate is zero. Despite receiving no rebate, hospital cover is still required to avoid the MLS. Choose a fund based on value rather than rebate maximisation at high income levels.
• Charitable giving and tax: Donations to Deductible Gift Recipients (DGRs) are fully tax-deductible. At 47% marginal rate, a $10,000 charitable donation costs the donor $5,300 after tax - and delivers $10,000 of impact to the charity. Donor-advised funds (Perpetual IMPACT Philanthropy, AET, Sydney Community Foundation) allow a large deductible gift in one year with grants to charities over multiple years.
• The 'wealth accumulation rate' test: The single most important financial metric for a high income earner is what percentage of income is converted to net assets each year. At $250,000 income, a 20% wealth accumulation rate adds $50,000/year to net worth. A 5% rate adds $12,500. Track this annually - not investment returns, not tax paid, but the actual accretion to net worth.

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