Written

For

The

Australian

-

High-income

earners

face

extra

taxes,

levies

as

budget

looms

Earn $250,000 or more? The federal government has you in its sights, and the squeeze is about to get much tighter than most high-income earners realise.

From July 1, the Division 293 tax threshold drops from $300,000 to $250,000. That means anyone earning above this level pays 30 per cent tax on concessional super contributions instead of the usual 15 per cent. But here's the sting most people miss — the $250,000 threshold isn't based on salary alone. It uses the "income for Medicare Levy Surcharge" calculation, which lumps in employer super contributions, salary sacrifice, and even net investment losses from negatively geared property.

Let me give you an example that should make property investors nervous. Say you earn $200,000, receive $19,000 in employer super, and have a negatively geared property portfolio losing $35,000 a year. Under the MLS calculation, your "income" is $254,000 — and you're hit with extra super tax. Most negatively geared investors have no idea this trap even exists.

And it doesn't end there. There's real pressure to extend the "temporary" budget repair levy — the 2 per cent surcharge on income above $180,000 — beyond its scheduled expiry. Separately, ACOSS is lobbying to apply the Medicare levy surcharge to high-income earners regardless of whether they hold private health insurance. If that happens, expect thousands to dump their cover.

Stack all three changes together and a single person on $250,000 could be looking at an additional $9,159 in taxes and levies each year.

What can you do? If you run a business, retaining profits inside a company structure rather than paying dividends is one option. Streaming dividends and trust distributions to lower-income family members can help too — though not for the Medicare levy surcharge, which is assessed on family income.

As that old Morgan Stanley line goes: you must pay taxes, but there's no law saying you gotta leave a tip.