How to Pay Less Tax Legally as a High Income Earner in Australia

How to Pay Less Tax Legally as a High Income Earner in Australia

What if you're paying $40,000 to $60,000 more tax this year than you legally need to? Most high income earners in Australia are doing exactly that, not because they want to, but because the strategies that actually move the needle are misunderstood, poorly implemented, or never reviewed against current rules. This guide walks through the legal, ATO-compliant strategies high earners use to reduce their effective tax rate in 2026, with specific 2025-26 figures and the planning sequencing that produces the best long-term outcomes. WIAA's team includes registered tax agents and six financial advisers, with 2,000+ tax returns filed and 1,000+ Australians advised. Read it as a playbook, not a textbook.

TL;DR: The 7 Highest-Leverage Tax Strategies

• Max your concessional super contributions every year. Cap is $30,000 in 2025-26, rising to $32,500 from 1 July 2026.

• Use carry-forward concessional contributions while your balance is under $500K. The 2020-21 unused cap expires 30 June 2026.

• Plan around Division 293 if your income plus contributions exceeds $250,000. Super is still cheaper at 30% than the top marginal rate at 47%.

• Income split between spouses through ownership structure, spouse contributions, and family trust distributions.

• Use family trusts or investment companies for non-super investment income that would otherwise sit at the top marginal rate.

• Claim every legitimate deduction. Each $1,000 claimed saves $470 at the top marginal rate.

• Time income, gains, and deductions across financial years using pre-payment, CGT timing, and bonus deferral.

Bottom line: High income earners can typically reduce their effective tax rate by several percentage points each year through legal planning. Over a 20 to 30 year career, the cumulative saving routinely runs into six figures, before counting the compounded value of the additional contributions themselves.

Jump to a Strategy

• The Australian Tax System for High Income Earners

• Strategy 1: Maximise Concessional Super Contributions

• Strategy 2: Use Carry-Forward Concessional Contributions Before They Expire

• Strategy 3: Plan Around Division 293 Tax for High Income Earners

• Strategy 4: Income Splitting Between Spouses (For Couples)

• Strategy 5: Family Trusts and Investment Companies for High Income Earners

• Strategy 6: Claim All Legitimate Deductions

• Strategy 7: Time Income, Gains, and Deductions Strategically

• Practical Examples

• Common Mistakes High Income Earners Make

• FAQ

• Ready to Build a Real Tax Strategy?

The Australian Tax System for High Income Earners

To plan effectively, you first need to understand what you are working with. The Australian resident tax brackets for 2025-26 are:

Plus the 2% Medicare Levy for most Australians, and the Medicare Levy Surcharge for higher earners without private health cover.

For someone earning $250,000, their top marginal rate is 47% (45% plus Medicare). Their effective average tax rate is lower because the lower brackets still apply to the first portions of income, but every additional dollar above $190,000 is taxed at the top rate.

The implication is straightforward. Strategies that move income out of the 47% marginal rate, into a lower-taxed structure, are the most valuable for high income earners.

Bottom line: The 47% top marginal rate is the benchmark every high income tax strategy is measured against. The lower a strategy can drop that rate on each dollar, the more valuable it is.

Strategy 1: Maximise Concessional Super Contributions (The Biggest Lever for High Earners)

Super remains the single most effective tax minimisation tool for high income earners in Australia. The structural reason is simple. Concessional contributions are taxed at 15% inside super, compared to 47% at the top marginal rate.

The 2025-26 concessional contributions cap is $30,000, rising to $32,500 from 1 July 2026, including employer Super Guarantee (SG).

For someone on a $300,000 income:

• Employer SG of approximately $36,000 already exceeds the cap, but only the cap counts against personal salary sacrifice

• Remaining cap headroom for salary sacrifice in 2025-26 is effectively zero in their case (SG already maxes the cap)

• Lower-income earners typically have substantial headroom to top up via salary sacrifice

For someone on a $200,000 income:

• Employer SG of approximately $24,000

• Remaining cap headroom of approximately $6,000 for salary sacrifice

• Tax saving: approximately $1,920 per year (32% gap between 47% marginal and 15% super, applied to $6,000)

What if you've been salary sacrificing up to the cap for years, but never modelled whether Division 293 changes the calculation? Many high earners discover the after-tax outcome was different than they thought. Strategy 3 below walks through the modelling.

Bottom line: Maxing concessional contributions every year is the highest-leverage tax strategy for most high income earners. The annual saving compounds dramatically over a working life.

Strategy 2: Use Carry-Forward Concessional Contributions Before They Expire

If your total super balance at the previous 30 June was under $500,000, you can use unused concessional cap from up to 5 prior financial years on top of the current year's cap.

Critically, the 2020-21 unused concessional cap expires on 30 June 2026. After that date, those amounts are gone permanently.

For a high income earner with a balance of $480,000 who has only made SG contributions for several years, the available carry-forward cap could be $50,000 to $80,000+. Making the full contribution in a single year could produce a tax saving of $25,000 to $40,000 depending on income level.

This is one of the most under-used strategies among high income earners, often because they assume their balance is too high to qualify. Many balances sit just below the $500,000 threshold without the earner realising.

(Subject to current ATO rules and the contribution cap rules in effect at the time of contribution.)

Bottom line: If your super balance is anywhere near $500,000, check your carry-forward cap via myGov. The 2020-21 window closes 30 June 2026.

The 2020-21 unused concessional cap expires 30 June 2026. If your super balance is under $500K, this is a use-it-or-lose-it opportunity. Book a 15-min chat with WIAA to scope your specific carry-forward position, phone 1800 942 843 or email tax@whatifadvice.com.au.

Strategy 3: Plan Around Division 293 Tax for High Income Earners

For high income earners, Division 293 is the rule that genuinely matters. It applies an additional 15% tax on concessional super contributions when your income plus concessional contributions exceeds $250,000.

The effective tax rate on concessional contributions then becomes 30% (15% in-fund + 15% Division 293), instead of the standard 15%.

The key insight is that Division 293 does not change the recommendation to maximise contributions. Even at 30%, super is still cheaper than the 47% top marginal rate. You are saving roughly 17 cents on every dollar contributed.

What changes is the planning:

• Modelling the after-tax outcome including Division 293 to confirm the strategy still makes sense

• Considering whether to balance contributions between spouses to keep one or both below the threshold

• Reviewing whether non-concessional contributions might offer better marginal outcomes in some cases

Bottom line: Division 293 reduces but does not eliminate the value of concessional contributions for high income earners. Always model the after-tax outcome before changing strategy.

Strategy 4: Income Splitting Between Spouses (For Couples)

If your spouse earns less than you, redirecting some investment income into their name can produce significant tax savings. This is one of the most effective non-super strategies for high income earners.

The mechanics matter. Doing this informally, moving money between spouse accounts without proper ownership structure, doesn't satisfy the ATO. The methods below are the legitimate paths:

• Joint or spouse-only investment ownership. Holding shares, ETFs, or property in the lower-earning spouse's name shifts the income into a lower marginal rate.

• Spouse contribution to super. If your spouse earns less than $40,000, you may be eligible for a tax offset of up to $540 for contributing to their super.

• Spouse super contribution splitting. A portion of your concessional contributions can be transferred to your spouse's super each year.

• Family trust distributions. Income can be distributed to lower-income family members through a discretionary family trust structure.

The tax saving depends on the gap between your marginal rate and your spouse's. Every $20,000 distribution moved from 47% to 30% saves $3,400 per year. Compounded over decades and across multiple investments, the savings become substantial.

What if your investments are sitting in the wrong name? The most common pattern we see is high earners with everything held personally when even basic spouse ownership would save five figures per year.

Bottom line: Income splitting is a powerful long-term strategy for high income earners with a lower-income spouse. The structures need to be set up correctly to comply with ATO rules.

Strategy 5: Family Trusts and Investment Companies for High Income Earners

For high income earners with substantial investment income, the legal structure holding those investments matters enormously.

The main options:

Family trusts: typically $2,000 to $4,000 per year in combined setup amortisation and ongoing costs. They allow income to be distributed to lower-taxed family members each year, and for households with substantial investment income, the tax savings usually outweigh the costs comfortably.

Investment companies suit high income earners who plan to retain investment income inside the structure for long-term growth rather than distribute it immediately. The flat 25% to 30% tax rate is well below the top marginal rate.

Family trusts must have genuine commercial or family purposes. The ATO scrutinises arrangements that exist solely for tax avoidance. WIAA's registered tax agents can scope whether a trust structure suits your situation.

Bottom line: The structure holding your investments often matters more than the investments themselves. High income earners with substantial non-super assets should review their structures every 3 to 5 years.

Structure decisions are the highest-stakes element of tax planning for high earners. WIAA's combined financial adviser and registered tax agent team can model your current structure against alternatives. Single-issue structure advice typically runs $1,500 to $2,500, and routinely identifies five-figure annual savings. Book a chat or email tax@whatifadvice.com.au.

Strategy 6: Claim All Legitimate Deductions

High income earners often miss legitimate deductions, either through poor recordkeeping or unfamiliarity with what is claimable.

High earners routinely miss deductions worth thousands per year, not because they're aggressive but because they don't realise the claim exists. Diligent records and an annual review with a registered tax agent catches most of them. The categories:

• Work-related expenses, including home office costs, professional development, subscriptions, and equipment

• Self-education expenses directly relevant to your current employment

• Investment property expenses, including loan interest, repairs, depreciation, agent fees, and insurance

• Investment-related expenses, including financial advice on existing investments, accountant fees for investment returns, and certain interest costs

• Donations to deductible gift recipients (DGRs)

• Income protection insurance premiums (when held outside super)

• Some financial advice fees, particularly those relating to managing existing investments, following Taxation Determination TD 2024/7

For a high income earner, every $1,000 of legitimate deductions saves $470 in tax at the top marginal rate. Diligent recordkeeping and an annual review with your accountant typically uncover meaningful additional claims.

Every claim must be substantiated with appropriate records. Speak to a registered tax agent before claiming if you're uncertain.

Bottom line: Deductions are the lowest-effort tax strategy available. Diligent claiming over a career adds up to tens of thousands in saved tax.

Strategy 7: Time Income, Gains, and Deductions Strategically

Timing matters more in tax planning than many people realise.

Timing strategies are less glamorous than super or trust structures, but they're the cheapest and easiest to implement. Most require nothing more than a calendar reminder before 30 June. A few common strategies:

• Pre-pay deductible interest on investment loans up to 12 months in advance, bringing the deduction into the current year

• Timing capital gains to align with lower-income years, such as parental leave, sabbaticals, or post-retirement

• Bunching donations to push the deduction into a year with higher marginal income

• Bringing forward or deferring bonuses where employer flexibility allows

• Realising losses to offset gains in the same financial year

• Holding investments for over 12 months to qualify for the 50% CGT discount

• Timing the sale of a business to align with retirement and super contribution opportunities, including the small business CGT concessions

For high income earners with substantial discretion over when income or gains are realised, timing can save tens of thousands across a career.

Bottom line: Tax timing is rarely urgent in any single year, but consistent attention across a career produces substantial cumulative savings.

Practical Examples

The figures below are illustrative only and based on 2025-26 rules. Your actual outcomes depend on your specific circumstances, marginal tax rate, and current ATO rules at the time of planning.

Example 1: Marcus, 38, Senior Consultant Earning $260,000

Marcus is a senior management consultant working from a Sydney CBD firm, single, recently bought an apartment in Surry Hills with an $850K mortgage. He has $340,000 in super and no other significant investments. His effective tax rate sits at approximately 34% with no planning.

His optimised strategy:

• Maximise concessional contributions every year, accepting Division 293 implications

• Use carry-forward concessional cap from prior years given his balance is below $500,000

• Build a non-super ETF portfolio over time, structured carefully for future flexibility

• Claim all legitimate work-related deductions including home office and professional development

• Implement income protection insurance held outside super for deductibility

• Time annual bonus payments to align with super contribution capacity where possible

Modelled outcome: Marcus reduces his effective tax rate by approximately 3 percentage points annually, saving roughly $7,500 per year. Over 25 years to retirement, the cumulative saving (without compounding) exceeds $185,000, plus the compounded value of the super contributions themselves.

Example 2: David and Linda, Both 45, Combined Income $510,000

David and Linda live in Melbourne's inner south. David is an engineering executive at a national infrastructure firm earning $310,000. Linda is a senior public sector manager earning $200,000. They have two children at private school in years 9 and 11, a paid-off family home, and substantial investment property and share holdings.

Their optimised strategy:

• Both maximise concessional contributions every year, with David monitoring Division 293

• Linda uses carry-forward concessional cap given her balance is below $500,000

• Establish a family trust to hold their share portfolio, allowing distributions to lower-income family members where appropriate

• Restructure the investment property loan to optimise interest deductibility

• Time capital gains realisations across multiple years to avoid bunching into a single high-income year

• Implement spouse contribution splitting from David to Linda to balance their super positions

• Pre-pay investment loan interest before 30 June each year to bring forward the deduction

Modelled outcome: combined tax saving of approximately $22,000 to $28,000 per year through the combination of super, structure, and timing strategies. Over 20 years to retirement, this represents more than $500,000 in tax savings, before considering the compounded value of the additional super and investment contributions.

Common Mistakes High Income Earners Make

Leaving super contributions at SG only. Many high income earners default to the employer SG and miss tens of thousands in annual tax savings. Salary sacrificing up to the cap is the highest-leverage starting point.

Ignoring carry-forward concessional contributions. Many high income earners with balances under $500,000 are leaving meaningful contribution capacity unused. The 2020-21 unused cap expires on 30 June 2026.

Holding all investments in personal names. Without considering family trusts, joint ownership, or investment companies, high income earners often pay top marginal rates on income that could be taxed at lower rates.

Underestimating Division 293 implications. Many specialists, executives, and senior professionals trigger Division 293 without realising. Tax planning that fails to account for it produces misleading projections.

Poor recordkeeping for deductions. High income earners often miss legitimate deductions due to inadequate records. A simple system for capturing receipts, mileage, and home office costs can save thousands per year.

Treating tax planning as an end-of-year exercise. The best tax outcomes come from continuous planning across the year, not from frantic activity in May and June. Strategy is more valuable than reaction.

Failing to coordinate financial advice and accounting. Tax planning works best when your financial planner and accountant communicate. Siloed advice typically produces worse outcomes than integrated planning. WIAA combines registered tax agents and financial advisers under one roof, which avoids the coordination problem entirely.

Worried you're making one of these? A 30-minute review with our registered tax agents and financial advisers will tell you. Free 15-min initial chat: call 1800 942 843 or email tax@whatifadvice.com.au.

FAQ

What is the top marginal tax rate in Australia? For 2025-26, the top marginal tax rate is 45% on income above $190,000, plus the 2% Medicare Levy, making the effective top rate 47%. The Medicare Levy Surcharge of 1% to 1.5% also applies to higher-income earners without adequate private health cover.

What income counts as high income in Australia for tax purposes? There's no formal definition, but a few thresholds matter for planning. $190,000 puts you in the top marginal bracket. $250,000 triggers Division 293 on super contributions. $500,000+ household income usually phases out the Child Care Subsidy. Most tax planning leverage starts around $135,000 to $150,000 and increases sharply above $190,000.

Is salary sacrificing worth it for high income earners? For most high income earners, yes. Even with Division 293 applying (effective 30% tax on contributions), super remains significantly cheaper than the 47% top marginal rate. The exception is where cashflow constraints make accessibility a higher priority than tax efficiency.

Is a family trust just for tax purposes legal in Australia? Family trusts must have genuine commercial or family purposes. The ATO scrutinises arrangements that exist solely for tax avoidance. With genuine commercial purpose, family trusts are a long-established and legitimate structure used by many high income Australian families. WIAA's registered tax agents can scope whether one suits your situation.

What is negative gearing and is it worth it for high income earners? Negative gearing occurs when investment expenses exceed investment income, with the resulting loss deducted against other income. For high income earners at 47% marginal rate, the deduction is valuable, but the strategy only makes sense if the underlying investment produces long-term capital growth. Cashflow losses without capital growth are not a winning strategy.

Are financial advice fees tax-deductible? Some are. Fees relating to managing existing investments that produce assessable income, or for tax planning advice, are generally deductible following Taxation Determination TD 2024/7. Initial advice on a new investment is typically not. Always check with your accountant or registered tax agent (subject to current ATO rules).

Should I have an SMSF as a high income earner? Maybe, but not automatically. SMSFs make sense for higher-balance members (typically $500,000+) with specific investment needs such as direct property, business premises, or complex estate planning. For most high income earners, a quality retail or industry fund is cheaper and equally effective.

Do I need an accountant and a financial planner, or just one? Both, generally. Accountants focus on historical tax compliance and reporting. Financial planners handle forward-looking strategy across super, investments, insurance, and retirement. The two functions overlap most for high income earners, which is why WIAA includes registered tax agents and financial advisers under one roof, the coordination happens internally rather than between two firms.

How much tax can a high income earner save with proper planning? For a typical high income earner with one or both spouses on six-figure incomes, annual savings of $5,000 to $25,000+ are common through coordinated planning. Over a 20 to 30 year career, the cumulative impact runs into six figures, before counting the compounded value of additional super and investment contributions.

Ready to Build a Real Tax Strategy?

For a high income earner, the cumulative tax saved through coordinated planning over a career typically lands in six figures. The frustrating reality is that most of the savings come from a handful of structural moves made once and reviewed annually, not from heroic year-end activity in late June.

Three ways to start a conversation:

• Free 15-minute phone or video chat if you want to start small. Call 1800 942 843 or book online. We'll talk through your situation and where the biggest leverage points sit.

• Email the tax team directly at tax@whatifadvice.com.au if you'd rather start with a specific written question. Useful if you just want to scope one issue (carry-forward cap, family trust setup, deductions review) before deciding what level of advice you need.

• Single-issue tax strategy advice from $1,500 if there's one specific thing you want help with (super strategy, family trust setup, deductions review, structure review) without committing to a full Statement of Advice.

Still asking what if about your tax bill? Let's run the numbers.

WIAA combines registered tax agents and financial advisers under one roof, AFSL 528250. Offices in Brisbane (Toowong and Grange) and Melbourne, plus virtual advice Australia-wide.

General Advice Disclaimer: This information is general in nature and does not take into account your personal financial situation, needs, or objectives. All tax figures referenced are based on 2025-26 rules and are subject to current ATO and legislative settings. You should consider whether the information is appropriate for you and seek personal financial advice and registered tax agent advice before making any decisions. What If Advice is an Authorised Representative under Beryllium Advisers Pty Ltd, AFSL 528250.