Understanding High Income and Extra Taxes in Australia ,The Short Answer
If you earn a high income in Australia, you may face extra taxes beyond the standard income tax rates. The key thresholds are:
- Medicare Levy Surcharge (MLS) applies if you earn above $93,000 (single) or $186,000 (families) and don’t have private health insurance.
- Division 293 Tax adds an extra 15% tax on superannuation contributions if your income exceeds $250,000.
- Higher Marginal Tax Rates apply once you pass certain income thresholds, up to the top marginal rate of 45% for incomes above $180,000.
This article will break down each of these thresholds and extra taxes in plain English, so you can confidently navigate your tax obligations.
Why High Income Earners Pay Additional Taxes
The Australian tax system is designed to be progressive ,the more you earn, the higher your tax rate. In addition to ordinary income tax rates, several additional taxes and levies specifically target high-income earners to ensure they contribute more towards government services like healthcare, superannuation, and public infrastructure.
Understanding these extra taxes can help you make better financial decisions, whether it’s planning for super contributions, deciding on private health insurance, or considering salary packaging.
Marginal Tax Rates for High Income Earners
Australia’s marginal tax rates mean you don’t pay the higher rate on your entire income ,only on the portion that exceeds each threshold.
| Taxable Income | Marginal Tax Rate |
| $0 – $18,200 | 0% |
| $18,201 – $45,000 | 19% |
| $45,001 – $120,000 | 32.5% |
| $120,001 – $180,000 | 37% |
| Over $180,000 | 45% |
All rates exclude the Medicare Levy of 2%.
As your income climbs, the portion taxed at higher rates increases. For example, if you earn $200,000, only $20,000 is taxed at 45%.
Medicare Levy and Medicare Levy Surcharge (MLS)
Medicare Levy
Most taxpayers pay a Medicare Levy of 2% of their taxable income. This funds Australia’s public health system. It generally applies once your income exceeds $31,365 (or $39,402 for families).
Medicare Levy Surcharge (MLS)
The MLS is an extra 1% to 1.5% added if:
- You earn above $93,000 as a single or $186,000 as a family.
- You don’t have private hospital cover.
The MLS aims to reduce pressure on the public health system by encouraging higher-income earners to take out private health insurance.
| Income | MLS Rate |
| $93,001 – $108,000 | 1% |
| $108,001 – $144,000 | 1.25% |
| $144,001+ | 1.5% |
Division 293 Tax: Extra Tax on Superannuation Contributions
If your income (including certain super contributions) exceeds $250,000, you may be liable for Division 293 tax. This imposes an extra 15% tax on concessional (pre-tax) super contributions.
How It Works
- Normally, concessional contributions (like employer super guarantee and salary sacrifice) are taxed at 15% when entering your super fund.
- If you exceed the $250,000 threshold, another 15% tax applies, bringing the total to 30% on some or all of your concessional contributions.
This measure is designed to ensure that the superannuation tax concessions do not overly benefit very high-income earners.
How These Taxes Work Together
It’s common for high-income Australians to be subject to all three of these additional taxes:
- Marginal Tax Rate: Up to 45% on income above $180,000.
- Medicare Levy: An additional 2% on your taxable income.
- Medicare Levy Surcharge: Up to 1.5% if you don’t have private hospital cover.
- Division 293 Tax: An extra 15% on super contributions if you earn more than $250,000.
Example Scenario
If you earn $280,000 without private health insurance:
- The portion above $180,000 is taxed at 45%.
- The entire income is subject to the 2% Medicare Levy.
- You’ll pay up to 1.5% MLS.
- Your concessional super contributions could face the extra 15% Division 293 tax.
Can You Reduce These Additional Taxes?
Private Health Insurance
Taking out eligible private hospital cover removes the MLS entirely.
Salary Packaging & Super Strategies
While you can’t avoid higher marginal tax rates, careful salary packaging or adjusting concessional contributions might help you manage Division 293 liabilities or optimize your after-tax position.
Tax Planning
High-income earners often benefit from professional tax planning. Structuring income, superannuation, and investments effectively can reduce the impact of additional taxes while still complying with the law.
Final Thoughts on High Income Thresholds and Additional Taxes
High-income earners in Australia face additional taxes through higher marginal tax rates, Medicare levies, and the Division 293 tax on super contributions. While these taxes are designed to ensure fairness in the system, knowing how they work gives you the power to plan effectively.
Whether you’re considering private health insurance, reviewing your super contributions, or seeking professional advice, understanding these rules is the first step to making smarter financial decisions.
Tip: If you are approaching or already above these thresholds, consider speaking with a qualified tax adviser to help you minimise unnecessary tax and optimise your financial outcomes.
About The Author: Artur Osadchiy
Artur is a Certified Practising Accountant with over 30 years’ experience working as a trusted advisor to 600+ clients across Australia. Based in Melbourne, he started Tax Window with his wife Marina in 2009 and leads the firm’s tax and accounting team. In his free time, Artur enjoys watching the AFL (go Kangas!) and spending time with family.
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