Tax Minimisation Strategies
For High-Income Earners
Understanding Legal Tax Minimisation
If you're earning $140,000 or more, you're likely paying around 37% in marginal income tax rates, plus 2% Medicare Levy. For every dollar you earn above $190,000, you're keeping just 53 cents after tax.
Legal tax minimisation isn't about avoiding obligations—it's about structuring your affairs to pay no more tax than legally required. The difference between effective tax planning and unnecessary tax can mean tens of thousands of dollars annually, compounding to hundreds of thousands over a career.
Superannuation: The Foundation Strategy
Concessional superannuation contributions are taxed at just 15% inside super, compared to your marginal rate of 30%-45% (based on your marginal tax rate). This creates immediate tax arbitrage opportunities.
For someone earning $180,000, maximising the $30,000 annual general concessional cap through salary sacrifice may save approximately $9,000 in tax annually (top marginal rate of 45% plus 2% Medicare Levy, compared to 15% contributions tax).
If your total superannuation balance was under $500,000 at the end of the prior financial year, you can access unused concessional caps from the previous five years, allowing you to "catch up" on contributions and enjoy the associated tax deductions.
Negative Gearing: Offsetting Income
Negative gearing allows you to offset investment property losses against your taxable income. When rental income falls short of expenses (interest, rates, maintenance, depreciation), the loss reduces your overall income tax liability.
An investment property generating $25,000 in rent with $35,000 in deductible expenses creates a $10,000 loss.
For someone in the 47% tax bracket, this may reduce tax by approximately $4,700.
The strategy relies on capital growth over time offsetting short-term cashflow negative positions. When you eventually sell the property, the 50% capital gains tax discount for assets held over 12 months provides additional tax efficiency.
Investment Structures: Trusts and Companies
Family Trusts provide distribution flexibility, allowing investment income to be directed to family members in lower tax brackets. A trust can distribute $50,000 to a spouse with minimal other income, potentially saving over $20,000 in tax compared to the high-income earner receiving it directly.
Companies offer a flat 25% income tax rate for base rate entities if they are considered a small company i.e. turnover under $50 million. This can be attractive compared to top personal marginal rates, though companies don't have access to the 12 month 50% CGT discount rule available to as opposed to individuals, trusts and superannuation funds.
Debt Recycling: Making Debt Tax-Deductible
Debt recycling converts non-deductible home loan interest debt into tax-deductible investment debt for interest cost. As you pay down your home loan, you redraw the paid-off portion and invest it in income-producing assets. The interest on this investment loan becomes tax-deductible.
Over time, you're replacing expensive non-deductible debt with cheaper (after-tax) deductible debt whilst simultaneously building an investment portfolio. This strategy requires discipline and works best for those with stable, high incomes.
Capital Gains Tax Planning
The 50% CGT discount for assets held over 12 months creates significant planning opportunities. Timing asset sales, managing loss harvesting, and structuring ownership correctly can dramatically affect your after-tax returns.
For business owners, small business CGT concessions can reduce or eliminate capital gains on business asset sales, including the 15-year exemption and retirement exemption.
Who This Suits
Tax minimisation strategies typically benefit professionals and business owners earning $140,000+ who want to:
Reduce current year tax liability strategically
Build long-term wealth efficiently
Structure investments and income appropriately maintain full ATO compliance whilst minimising tax The right mix of strategies depends on
your income level, existing structures, investment timeline, and personal goals.
How We Help
Summit Financial Planning can help you model your numbers and map the best-fit tax minimisation strategy for your circumstances. We work with high-income earners to implement compliant, strategic tax planning that maximises wealth retention over time. Book a consultation to explore which strategies may suit your situation.
Company Structures
Companies offer flat 25% tax rates for eligible small companies but lose access to the 50% capital gains tax discount. Companies generally suit more complex investment strategies or where asset protection is paramount.
Next Steps
For professional, personal advice tailored to your circumstances, please reach out below.
At Summit Financial Planning, we excel in precise financial management tailored to your needs. Contact us today for expert assistance.
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