Australians earning more than $180,000 a year make up barely four per cent of individual taxpayers, yet they contribute more than thirty per cent of total personal income tax. The 2024 Stage 3 tax cuts have narrowed some brackets, but the headline marginal rate of forty-five per cent still applies from $190,001 onwards. Add the two per cent Medicare levy and, for some, the 1–1.5 per cent Medicare levy surcharge, and the top effective rate can approach forty-eight per cent. Those figures explain why a well-structured tax plan matters more to a surgeon on $450,000 than ever before.
How the Progressive Tax System Works at the Top End
To appreciate any strategy, you first need to see how each extra dollar is taxed. The table below summarises the key thresholds for 2025-26, including the Medicare levy but excluding any surcharge.
| Taxable income | Marginal rate | Medicare levy | Effective marginal rate |
|---|---|---|---|
| $0 – $18,200 | Nil | Nil | 0% |
| $18,201 – $45,000 | 19% | 2% | 21% |
| $45,001 – $135,000 | 30% | 2% | 32% |
| $135,001 – $190,000 | 37% | 2% | 39% |
| $190,001 and above | 45% | 2% | 47% |
A high-income earner saves tax in only two ways: reduce the dollars subject to those rates, or move the dollars into an environment where the rate is lower. Everything that follows fits into one of those buckets.
Why “Tax Minimisation” Is Not “Tax Evasion”
The Australian Taxation Office encourages taxpayers to claim every deduction they are legally entitled to. It also enforces Part IVA of the Income Tax Assessment Act 1936, which attacks arrangements that exist mainly to obtain a tax benefit. The line between smart planning and avoidance is intent. Genuine investments, commercial loans, market-value salaries and arm’s-length transactions lie on the right side of that line. Round-robin loans, sham invoices and contrived schemes do not. Keep that distinction in mind as you read on; every tactic below passes the ATO’s purpose test.
Superannuation: The First Line of Defence
Salary sacrificing into super remains the simplest way to move income from a forty-five per cent environment into a fifteen per cent concessional tax environment. From 1 July 2025 the concessional cap rises to $30,000 a year. If you did not use the full cap in any of the past five years and your total super balance sits below $500,000, the carry-forward rule allows you to contribute the unused amount this year.
Take Denise, an executive on $300,000. She sacrifices $25,000 of her salary. Personally, she would have paid $11,750 in tax and Medicare levy on that slice. Inside super it is taxed at $3,750. Her net saving: $8,000. Division 293 does impose an extra fifteen per cent on concessional contributions once adjusted income exceeds $250,000, but even then the combined thirty per cent rate still beats forty-seven.
High-income couples can also split up to eighty-five per cent of concessional contributions with a lower-earning spouse, evening up balances and potentially avoiding future transfer balance cap issues. Those with an SMSF gain further flexibility: the fund can borrow to buy property under a limited recourse borrowing arrangement, enabling negative gearing at a fifteen per cent rate instead of forty-seven.
Trusts and Income Splitting
Discretionary (family) trusts continue to be the Swiss Army knife of Australian tax planning. Under section 97 of the ITAA 1936, trust income is assessed to beneficiaries “presently entitled” on 30 June. A trustee can stream franked dividends to one adult child in a low tax bracket, while directing capital gains to another. The trustee can also distribute to a corporate beneficiary taxed at the twenty-five per cent base rate, retaining funds for reinvestment.
The ATO’s updated guidance in TR 2023/1 focuses on schemes designed mainly to reduce tax, particularly “circular” money flows back to parents. Play by the rules, pay distributions, keep resolutions before 30 June, and let lower-tax beneficiaries genuinely benefit, and the structure remains powerful.
Consider the Nguyen family trust. In 2025-26 it will earn $200,000 in investment income, including $30,000 in fully-franked dividends. By distributing $90,000 to their university-age daughter and $60,000 to their son with part-time income, neither will exceed the $45,000 bracket. The balance goes to a company beneficiary taxed at twenty-five per cent. The family’s average tax rate on that $200,000 drops below twenty-two per cent, saving more than $40,000 compared with dad taking it all personally.
Leveraging Investment Structures for Capital Gains and Franking Credits
Assets held for over twelve months qualify for the fifty-per-cent capital gains tax discount under Division 115. Timing the sale of a property or share parcel can therefore halve the taxable component. Pair that with years in which deductions are high, perhaps after large charitable gifts or business losses, and the effective rate slides further.
Australian shares add another perk. Franking credits attached to fully-franked dividends represent company tax already paid at thirty per cent. A high-income earner who receives a $7,000 franked dividend gets a $3,000 credit. That credit first offsets personal tax on the dividend and any excess offsets other income. Shares in mature, fully-franked payers such as the major banks therefore reduce top-rate tax payable dollar for dollar up to the value of credits.
SMSFs in pension phase pay zero tax, which turns franking credits into refundable cash. A high-income couple approaching retirement can transfer share portfolios into their SMSF, then draw a tax-free pension while receiving the credit refund to the fund. The ATO pays billions in such refunds each year; they remain lawful after the government dropped earlier plans to scrap them.
Negative Gearing: Property and Beyond
Negative gearing lets you deduct interest and holding costs when they exceed rental or investment income. Most Australians think of property, yet the same rule applies to margin-loan-funded share portfolios. The higher your marginal rate, the bigger the benefit.
Suppose Jackson on $400,000 buys a townhouse for $1.2 million, borrowing $1 million at six per cent. Interest is $60,000, outgoings another $15,000, and rent $45,000. The $30,000 net loss reduces his taxable income, saving $14,100 at the forty-seven per cent rate. If the property grows three per cent ($36,000) that year, the after-tax position improves further. Of course, the leverage cuts both ways, capital loss risk is real, but from a tax view the deduction is immediate while any gain is deferred until sale and then discounted.
Business and Professional Practice Structures
Many doctors, dentists and architects operate through service entities or incorporated practices. When structured correctly, the business pays a fair market salary to the professional and the remaining profit stays in the company at twenty-five per cent (base-rate entities) or thirty per cent. Profits can fund growth or be paid later as franked dividends when the practitioner’s personal income is lower, smoothing tax over time.
Fringe benefits also come into play. A vehicle packaged through a novated lease or a laptop purchased by the company can provide value at a lower overall tax cost than paying for the item personally out of post-tax dollars. The key is to follow the living-away-from-home, car parking and minor benefits rules under the Fringe Benefits Tax Assessment Act to avoid unexpected FBT bills.
Smart Deduction Strategies High Earners Overlook
Work-related education, professional membership fees and even the interest on loans used to buy income-producing shares often languish unclaimed. Meticulous records unlock those deductions. Keep receipts for conferences, pay-as-you-go journals, financial planning fees tied to investment advice, and the cost of managing tax affairs itself.
Home-based professionals can claim a percentage of running costs under the ATO’s revised fixed-rate method of eighty-nine cents per hour from 1 July 2025, covering power, internet and phone. If you maintain a dedicated office and satisfy the “place of business” test, you can also claim the proportion of mortgage interest or rent relative to floor area, though this may affect the main residence CGT exemption on eventual sale, so take advice first.
Charitable giving offers both societal good and personal benefit. A $10,000 donation to a deductible-gift-recipient charity saves a top-rate taxpayer $4,700 in tax while funding valuable causes. Some high-net-worth individuals set up private ancillary funds, allowing them to claim a deduction now but spread donations to operating charities over future years.
Timing the Market and Your Income: Capital Gains, Bonuses and Pre-payments
Not all income needs to land in the same financial year. A listed company director can receive board fees in July rather than June, pushing them into the following year’s return. Investors can crystallise losses on underperforming shares before 30 June to offset earlier gains. Businesses may pre-pay twelve months of interest on investment loans or income-protection premiums, bringing the deduction forward.
Timing can also relate to asset sales. Selling a property on 2 July delays the CGT event to the new financial year, potentially aligning with lower income if, say, you plan to take unpaid leave or wind back hours. Conversely, bringing a sale forward to 28 June makes sense if carry-forward capital losses are about to expire.
ATO Compliance and Record-Keeping Essentials
Every strategy lives or dies on evidence. The ATO’s data-matching program pulls information from banks, share registries, property titles offices and even cryptocurrency exchanges. Keep digital copies of invoices, loan statements, trust distribution minutes and salary-sacrifice agreements for at least five years. Use myGov to link to the ATO and check pre-fill reports, ensuring omitted income does not trigger an audit. If you run a trust or company, lodge BAS and ASIC statements on time. Penalties climb quickly, from up to 75 per cent of the shortfall for reckless claims to daily late-lodgement fines.
Putting It All Together: A Sample Savings Scenario
Imagine Chloe, an engineering consultant on a salary of $250,000 plus $30,000 in fully-franked dividends from a share portfolio. She and her partner Sam, who earns $60,000, want to cut their tax bill.
Step one: Chloe salary-sacrifices $25,000 into super. Tax saved: $7,000 net after allowing for contributions tax.
Step two: They establish the Bellamy Family Trust. In 2025-26 it earns $40,000 in portfolio income and a $20,000 capital gain (eligible for the discount). Chloe, Sam and their adult son each receive one-third. The income taxed at lower brackets instead of forty-seven per cent saves $7,600.
Step three: The trust allocates $15,000 of franking credits across beneficiaries, wiping out remaining personal tax on that income.
Step four: The couple buy an investment unit, generating a $25,000 negative-gearing loss. Chloe’s taxable income falls accordingly, saving another $11,750.
Cumulative annual saving: $26,350. Over a decade, assuming similar income and investment performance, the family retains well over a quarter-million dollars that would otherwise have gone to Canberra, all within the four corners of the law.
Plan Early, Review Often
The rules that govern super caps, marginal rates and even negative gearing can change with a single budget night. A strategy that works brilliantly this year might need tweaking next year. High-income earners who treat tax planning as a once-a-year chore leave money on the table. Those who engage a qualified tax agent, monitor legislative updates and keep impeccable records not only cut their tax but also sleep better, confident the ATO will find a compliant story when it comes knocking.
Start mapping the year ahead now. Document every deduction, review your structures, and use the power of timing to your advantage. Put simply, the less you pay in avoidable tax, the more capital you have working for your family’s future, and that is the ultimate return on investment.
At EEA Advisory, we specialise in building tax strategies tailored to high-income professionals, business owners and investors. Many people assume comprehensive financial advice is only for the ultra-wealthy, but the reality is that effective planning is often far more affordable than you think, and the tax savings alone can more than cover the cost. No matter where you are in Australia, our team can help you optimise superannuation, structure investments, and protect family wealth, all while staying fully compliant with the ATO. A conversation today could be the first step toward reducing tomorrow’s tax bill and securing your financial future.
