Australia’s top marginal income tax rate is 45%, applying to income above $190,000. With the 2% Medicare levy, the combined rate on income in this bracket is 47%. High-income earners also face additional considerations: Division 293 super tax, the Medicare Levy Surcharge, and the erosion of offsets and concessions at higher income levels.
Key Takeaways
- The top marginal rate is 45% on income above $190,000, plus 2% Medicare levy = 47% combined
- Division 293 applies an additional 15% tax on super contributions for those earning above $250,000
- Medicare Levy Surcharge adds 1–1.5% for those above $93,000 without private hospital cover
- Salary sacrifice into super, investment structuring, and debt management are commonly used strategies
- All strategies must comply with ATO rules — none remove the tax obligation entirely
The Tax Brackets Above $135,000
| Taxable Income | Rate | Combined with Medicare Levy |
|---|---|---|
| $135,001 – $190,000 | 37% | 39% |
| $190,001+ | 45% | 47% |
On a $200,000 income:
- Income tax: $60,667
- Medicare levy: $4,000
- Total: $64,667
- Effective rate: 32.3%
On a $300,000 income:
- Income tax: $105,667
- Medicare levy: $6,000
- Total: $111,667
- Effective rate: 37.2%
Division 293 — Additional Super Tax for High Earners
Normally, super contributions are taxed at 15% in the fund — far below the 47% top marginal rate, making salary sacrifice into super highly attractive.
Division 293 tax reduces this concession for high earners. If your income (plus concessional super contributions) exceeds $250,000, an additional 15% tax applies to super contributions, bringing the effective rate to 30% (15% fund tax + 15% Division 293).
- This still represents a significant concession for those in the 47% bracket ($190,000+)
- Division 293 is assessed by the ATO after you lodge your tax return
- It is payable from your super fund balance or out of pocket
Example: $300,000 salary, salary sacrifice $30,000 into super (the concessional cap).
- Without Division 293, the super contribution is taxed at 15% in the fund = $4,500
- With Division 293: 15% + 15% = 30% effective super tax = $9,000
- Even so, the $30,000 at 30% is better than $30,000 at 47% (marginal + Medicare)
Medicare Levy Surcharge
High earners without adequate private hospital cover pay an additional 1–1.5% on top of the standard 2% Medicare levy.
| Income | Surcharge |
|---|---|
| Up to $93,000 | Nil |
| $93,001 – $108,000 | 1.0% |
| $108,001 – $144,000 | 1.25% |
| $144,001+ | 1.5% |
For someone earning $200,000 without cover: 1.5% MLS × $200,000 = $3,000 extra tax. Most high earners hold complying private hospital cover to avoid this.
See Medicare Levy Surcharge Explained.
Loss of LITO at High Incomes
The Low Income Tax Offset ($700 maximum) phases out completely at $66,667. High-income earners receive no LITO.
Concessional Contributions Cap
High earners who want to maximise salary sacrifice into super are limited to the concessional contributions cap of $30,000 per year (FY2025–26). This includes both employer SG contributions (12% of salary) and any salary sacrifice.
At a $200,000 salary, the employer pays 12% = $24,000 in SG. This leaves $6,000 of concessional cap for additional salary sacrifice.
A person on $300,000 has the employer contributing $36,000 — which already exceeds the $30,000 cap, meaning Division 293 applies to the cap amount and the employee cannot salary sacrifice further without exceeding the cap.
Investment Structure Considerations
High earners with significant investment income often explore how investments are structured (personally, via a company, via a family trust, or via super). Each structure has different tax rates, access restrictions, and compliance costs. These are complex decisions that require accounting and legal advice specific to individual circumstances.
Frequently Asked Questions
What is the highest tax rate in Australia? The top marginal rate is 45% on income above $190,000. Including the Medicare levy (2%), the top combined rate is 47%. With the Medicare Levy Surcharge (up to 1.5%), the maximum combined rate approaches 48.5%.
What is Division 293 tax? Division 293 is an additional 15% tax on concessional super contributions for people with incomes above $250,000. It brings the total tax on their super contributions to 30% (still below the 47% top marginal rate, but lower concession than for average income earners).
Can high-income earners avoid paying the top marginal rate? The only way to legally reduce income tax is through allowable deductions, salary sacrifice into super (within the cap), and lawful structuring of investments. The ATO scrutinises high-income earners closely, and arrangements without genuine commercial substance can be challenged. Professional advice is essential.
Does the 45% rate apply to my entire income? No. The 45% rate applies only to income above $190,000. On a $250,000 income, only the $60,000 above $190,000 is taxed at 45%. The income below that threshold is taxed at the lower rates in each bracket.
This article provides general tax information. For advice tailored to your situation, speak with a registered tax agent or accountant. High-income tax planning is complex and should not be undertaken without professional guidance. Find an adviser through the Tax Practitioners Board register.