Tax Planning Strategies for High Income Earners in Australia

Once your taxable income passes $190,000, every extra dollar is taxed at 45 cents plus the 2% Medicare levy. That arithmetic is why tax planning strategies for high income earners have always been worth the effort. What changed in 2026 is that several of the strategies people leaned on hardest now come with a deadline attached.

The 2026-27 Federal Budget delivered the largest shift in personal investment tax in decades, and the legislation has since passed Parliament. This guide covers what actually changed, which approaches still work, and the decisions worth making well before 1 July 2027.

What Counts as a High Income Earner?

The top marginal tax rate applies to taxable income above $190,000. It sits at 45%, or 47% once the Medicare levy is included. A second threshold matters just as much: where your combined income and concessional super contributions exceed $250,000, Division 293 tax adds a further 15% to those contributions.

Most of what follows is not limited to the top bracket. Anyone well into the 37% bracket benefits from the same thinking, and the Medicare levy surcharge already applies to singles and families above set income thresholds who do not hold an appropriate level of private hospital cover. The savings are simply larger the higher your income climbs.

The 2026 Changes That Reset the Playbook

Negative gearing and the capital gains tax discount

On 12 May 2026 the Government announced reforms to negative gearing and capital gains tax, and those measures are now law. From 1 July 2027, net rental losses on established residential dwellings acquired after 7.30pm AEST on 12 May 2026 can generally only be offset against rental income or gains from rental property, rather than against salary and wages. Unused losses can be carried forward. Properties held before that moment are grandfathered, and eligible new builds are excluded. The ATO's guidance on the reform sets out how the transition works.

Over the same timeline, the 50% CGT discount is replaced by cost base indexation plus a minimum 30% tax on gains accruing after 1 July 2027. Capital gains tax (CGT) applies when you dispose of an asset such as shares or an investment property. The main residence exemption is unchanged, and superannuation funds are not affected.

Division 296 on large super balances

From 1 July 2026, an additional 15% tax applies to earnings on the portion of a superannuation balance above $3 million. For high net worth individuals who have treated super as the primary shelter for two decades, this is the point at which the structure deserves a fresh look rather than simply more contributions.

Higher contribution caps

The concessional contributions cap rose to $32,500 for 2026-27, with the non-concessional cap at $130,000. Payday super also took effect on 1 July 2026, meaning employer contributions now land within seven business days of each payday. That changes how you track your remaining cap headroom across the year, particularly if you salary sacrifice on top of employer contributions.

Tax Planning Strategies That Still Work

Concessional and carry-forward contributions

Concessional contributions are taxed at 15% inside the fund, or 30% where Division 293 applies. Both compare well against a 47% marginal rate. If your total super balance sat under $500,000 at 30 June, you may also be able to use carry-forward concessional contributions from up to five prior years. That flexibility is most valuable in a year with a large bonus, a business sale, or an unusually high capital gain.

Get the structure right before the income arrives

Holding investments personally means every dollar of rent, dividend, or gain is taxed at your marginal rate. Tax effective investment structures such as discretionary trusts and companies give you options about who receives income and when, subject to the ATO's section 100A rules on trust distributions. Note also that a minimum 30% tax on discretionary trusts has been announced from 1 July 2028, so discretionary trust income splitting warrants a fresh assessment rather than an assumption. Structure decisions are far cheaper to make before an asset is acquired than to unwind afterwards. Our taxation services cover structure reviews, trust distributions, and planning for individuals with complex affairs.

Time your income and deductions deliberately

Bonuses, dividends, and asset disposals are timing decisions as much as commercial ones. Prepaying up to twelve months of deductible interest or expenses can shift a deduction into a higher-income year, which is worth more at 47% than at 30%. Where a capital gain is likely, review it before contracts are signed rather than after settlement, because by then the options have closed.

Deductions high earners routinely miss

Income protection insurance premiums paid outside super are generally deductible. So are self-education costs directly related to your current role, professional memberships, technical journals, and donations to registered deductible gift recipients. At the top rate, each of these effectively costs you a little over half the sticker price. Keep the substantiation, because the ATO expects records to match every claim.

Where High Income Earners Get It Wrong

Three patterns come up repeatedly. First, spending money purely to reduce taxable income; a deduction returns at most 47 cents in the dollar, never the whole dollar. Second, confusing tax minimisation strategies with avoidance, when arrangements lacking genuine commercial purpose attract anti-avoidance provisions and penalties. Third, leaving everything until June, by which point the income is earned, the asset is sold, and the useful levers have already passed.

Build a Plan Around Your Own Numbers

Legal ways to reduce tax in Australia depend heavily on your entity mix, your asset base, and where your income is likely to land over the next few years. With the 1 July 2027 transition approaching, decisions made this financial year may affect outcomes for a long time afterwards. The information above is general in nature and is not personal tax, financial, or credit advice; your own circumstances will determine what applies.

To book a tax planning session and review your position ahead of the 2027 changes, contact The Calculators.