If you’re earning a high income in Australia, you could be facing a top marginal tax rate of 45%, plus an extra 2% for the Medicare levy. That’s a significant chunk of your income, which leads to many individuals scratching their head, wondering how can I reduce this.
Even if you’re not in the top tax bracket (which currently kicks in at $180,000 and above), the strategies we’re sharing can still help. Whether you’re on a moderate income or pushing into higher brackets, there are plenty of ways to make the tax system work better for you.
We’ll also walk through some of the latest updates to tax laws that affect what you can (and can’t) claim as deductions in 2025, especially changes that rolled out in the last couple of years.
5 Smart Tax Strategies for High-Income Earners
If you’re earning over $120,000, the right tax planning can significantly reduce your tax bill and boost your long-term wealth. Whether you’re an executive, business owner, or specialist contractor, these strategies can help you optimise your return and legally reduce your taxable income.
Let’s explore the most effective options available now.
1. Leverage Negative Gearing with Investment Properties
Negative gearing remains a powerful tool for high-income earners who invest in property. When your rental income doesn’t cover your property’s expenses (like loan interest, maintenance, and depreciation), the resulting loss can offset your taxable income, reducing the tax you pay.
Example:
Alex, a senior engineer, buys a $500,000 rental property. It earns $2,000/month in rent but costs $2,500/month to hold. That $500 loss each month can be deducted against Alex’s income, reducing his tax liability.
Depreciation plays a crucial role here. Ordering a Tax Depreciation Report from a qualified Quantity Surveyor can significantly increase your deductions, especially in the early years of owning a new property.
But beware: with rising interest rates and a volatile property market, negative gearing has its risks. Always speak to a mortgage broker and tax adviser to stress-test your cash flow.
2. Salary Sacrifice for Insurance and Super
Salary sacrificing lets you redirect part of your pre-tax income to approved benefits, lowering your taxable income in the process.
One underused option is salary sacrifice for income protection insurance. If structured correctly, your premiums could be tax-deductible. This insurance provides a safety net if you can’t work due to illness or injury.
Other insurance types —like public liability or professional indemnity — may also be deductible, especially if you’re self-employed or a contractor.
You can also sacrifice income into superannuation, where contributions are taxed at just 15% (much lower than the top marginal tax rates).
4. Strategic Super Contributions & Depreciation Claims
Contributing extra to super — either through salary sacrifice or personal deductible contributions — is a go-to tax minimisation tactic. Contributions are taxed at just 15% instead of marginal tax rates (up to 45%).
Use the carry-forward rule if you’ve had unused concessional caps in the past five years and your super balance is under $500,000. This can allow for a large one-off deductible contribution.
If you’re self-employed or run a business, depreciating your work-related assets (like tools, vehicles or equipment) can also help lower your taxable income.
5. Structure Your Business Income
Running a business or side consultancy? Choosing the right business structure can save you significant tax.
For example, income earned through a company is taxed at 30% (or even 25% for base rate entities), often lower than your personal rate. This is especially effective if your spouse is involved in the business. Hiring a business accountant can assist you as they will be able to identify the best way to structure your business based on your individual circumstances.
New Tax Changes and Opportunities (2024–25)
Stage 3 Tax Cuts Have Changed
Originally intended to flatten the tax system, the updated Stage 3 cuts (from 1 July 2024) reduce benefits for high earners.
- 19% bracket drops to 16% (on $18,201–$45,000)
- 32.5% bracket drops to 30% (on $45,001–$135,000)
- 37% bracket returns for incomes $135,001–$190,000
- 45% rate applies to income over $190,000
In short, if you earn above $135,000, you’ll pay more tax than under the original plan. For many high earners, the tax cut is just $804 flat.
Electric Vehicle FBT Changes
Electric vehicles remain FBT-exempt (if under Luxury Car Tax limits and first used after 1 July 2022), but plug-in hybrids lose their FBT exemption from 1 April 2025.
If you’re planning to salary package a vehicle, consider switching to a pure electric or hydrogen car.
Final Thoughts
Effective tax planning can have a dramatic impact on your wealth over time. At Coleman Financial Group , we help high-income individuals and business owners create tailored strategies that reduce tax, manage super contributions, and comply with changing laws, through our financial planning services, or business accounting services.
Whether it’s optimising your property deductions, revisiting your salary package, or rethinking your business structure, the right advice can help you keep more of what you earn.
