30/06/2026
How Do High Income Earners Reduce Tax in Australia? 💰📊
Earning over $190,000?
You are now in the top marginal tax bracket, where each extra dollar can be taxed at 45% plus the Medicare Levy. For many high income earners, this means close to half of each additional dollar can go to tax.
The good news is that there are still legitimate, ATO-compliant strategies that may help reduce tax legally.
Smart Tax Planning Strategies for High Income Earners 📈
1. Maximise Superannuation Contributions 🏦
Super remains one of the most effective tax planning tools in Australia.
From 1 July 2026, the concessional contribution cap increases to $32,500.
These contributions are generally taxed at 15% inside super, rather than your marginal tax rate. This can be valuable for high income earners, but remember: employer super guarantee contributions are included in this cap, and SG is now 12%.
Also check whether you have unused concessional contribution caps from previous years that can be carried forward.
Important: If your income plus concessional super contributions exceeds $250,000, Division 293 tax may apply, adding an extra 15% tax on some or all of your concessional contributions.
2. Review Private Health Cover 🏥
High income earners without appropriate private hospital cover may pay the Medicare Levy Surcharge.
From 1 July 2026, the MLS thresholds have increased, but the surcharge can still be up to 1.5% depending on your income and family situation.
Extras-only cover usually does not protect you from MLS. You generally need appropriate hospital cover.
3. Invest Tax Efficiently 📊
Tax should never be the only reason to invest, but structuring matters.
Consider:
✅ Franked dividends, where suitable
✅ Holding eligible assets for more than 12 months to access the CGT discount
✅ Offsetting capital gains and losses carefully
✅ Claiming legitimate investment costs, such as loan interest or management fees
✅ Avoiding “tax deduction” investments that only make sense because they lose money
4. Use Salary Packaging Where Available 🎯
Depending on your employer, salary packaging may help reduce taxable income.
Common examples include:
✅ Additional super contributions
✅ Novated leasing
✅ Portable electronic devices
✅ Work-related benefits
✅ FBT-exempt items, where eligible
The rules depend heavily on your employer and industry, so get advice before setting anything up.
5. Claim Legitimate Deductions Properly ✅
The ATO is paying close attention to deductions, especially for higher-income earners.
Possible deductions may include:
✅ Work-related travel
✅ Professional memberships
✅ Training and professional development
✅ Home office expenses
✅ Tools and equipment
✅ Donations to registered DGR charities
✅ Investment-related expenses
For 2025-26, the fixed rate method for working from home is 70 cents per hour, but you still need proper records.
6. Structure Business Income Carefully🧾
If you operate through a company, trust, or other structure, tax planning can be powerful, but it must be done correctly.
A structure should have a genuine commercial purpose. It should not be used simply to divert personal services income or shift income in a way the ATO may challenge.
This is an area where professional advice is essential.
Critical Compliance Reminders ⚠️
The ATO has sophisticated data-matching systems and continues to focus on high income earners.
Avoid:
❌ Over-claiming deductions
❌ Exceeding super contribution caps
❌ Claiming private expenses as business expenses
❌ Using aggressive tax schemes
❌ Poor documentation
❌ Misusing trusts or companies to split income incorrectly
The Bottom Line 💡
Good tax planning is not about avoiding tax.
It is about making sure you do not pay more than legally required.
With the right structure, smart super planning, careful investment decisions, and proper documentation, high income earners can often improve their tax position while staying fully compliant.
Tax laws change regularly. Review your strategy every year with a qualified accountant or tax adviser. 📞