Smart Financial Advice for High-Income Earners in Australia

According to the latest report, Australians with an annual income of $175,000 for 2024 and 2025 are classified as high-income earners putting them in the top 12% of the country’s income brackets. Normally, they are junior doctors, managers, and consultants. 

However, many high-income earners still feel that they need to work more and earn more to keep their current financial status and lifestyle.

This article is a brief guide for creating a personal financial plan that high-income earners in Australia can use to manage their hard-earned money to achieve their financial goals starting with Wealth Preservation.

Income Protection and Wealth Preservation Strategies

For high-income earners who have managed to bring in substantial amounts of income and saved enough to accrue assets and investments, protecting and preserving their wealth is a top priority. Below are some strategies that high-income earners can explore.

Protecting Your Greatest Asset (YOU)

High-income earners such as surgeons, lawyers, and CEOs may probably have a highly robust and comprehensive investment strategy, however, many fail to recognize the greatest asset they have that needs protection – themselves and their income.  

People, especially high-income earners, leverage their skills and knowledge to build their wealth. So, when unforeseen events occur like medical emergencies, or disability which prevents them from working, their financial capability is greatly impacted. 

Income Protection is an effective solution in protecting a portion of your income should you be unable to work due to illness or injury. While providing you with a long-term income source in the event of you being unable to work, the premiums you pay are largely tax-deductible to you personally. Learn more about our insurance offerings here. 

Our team of advisers has decades of experience providing tailored fit financial solutions to Australians. We provide our expertise in helping high-income earners obtain their life insurance, total and permanent disability (TPD) insurance, and income protection insurance so that they can sleep soundly and enjoy life knowing that they have protected their greatest asset for their loved ones. 

As for medical coverage, high-income earners with inadequate private patient hospital coverage must pay a medical levy surcharge depending on their income. Read the full guide here.

Reducing your Taxable Income

Another way to improve your cash flow that not many Australians take advantage of is by reducing your taxable income. Here are some ways that you could achieve this: 

1. Tax Deductions – if you’re employed, there are a lot of tax deductions that you can take advantage of such as transportation to work, tools you used for work, work-from-home expenses, clothes for work, training, and etc. If you are self-employed, there may be even more tools at your disposal, and seeking advice relating to making your affairs more tax-effective could illuminate how you can make your expenses work harder for you. Full list of deductions and how to claim can be found here.
2. Salary Sacrificing – also known as salary packaging, is an arrangement between you and your employer where they will effectively reduce your pre-tax income by paying for certain expenses of yours with your pre-tax income. This allows you to pay for certain expenses with pre-tax money, which is more cost-effective while reducing your taxable income. Read more about salary sacrificing here.
3. Negative Gearing – a tax strategy that allows an investor to deduct the net loss incurred through an investment against the investor’s taxable income. Net loss is simply the difference between the property’s expenses and the rental income it generates. While this is most commonly seen with investment properties, where the interest repayments exceed the rent received, it also applies to investment loans for shares and other assets. Here’s a more detailed guide on negative gearing.
4. Franking Credits – this tax strategy is available for individuals who are shareholders of a company that has distributed franked dividends. Upon declaring dividends, the company already pays the taxes for you but will later be credited to the shareholders as franking credits. Shareholders can use these credits to offset their taxable income.
5. Donations and philanthropy – Australians are allowed to claim deductions from their donations to organisations that are eligible under Deductible Gift Recipients (DGR). You can read more about DGR here.

Investments for High Earners

When it comes to growing your money, a common question people ask themselves is ‘which investment will give me the best return?’ 

Investing effectively requires a long view that stretches beyond simply chasing short-term returns. The success of your investment will be determined by the impact your investments have on propelling you toward your goals and objectives. There are many different considerations that may impact how and when you decide to invest and they include the following:

Investment Goal

Your investment goal should be clear, achievable, and measurable. It should guide you as to what you want to achieve financially. Whether it is purchasing a new home, investment property, car, future travels, or your retirement, having a clear picture of your goal will help you determine where it is best for you to invest.

Time Horizon 

Depending on your goal, your time horizon can be classified as short-term, medium-term, or long-term. The rule is, that the longer your time horizon, the vast options of investments you can choose from – depending on your risk tolerance.

Risk Assessment 

When it comes to investing, your risk tolerance or appetite as an investor will play an important role in the return on your investment. Understanding your profile is fundamental to allocating your investments in line with your objectives. 

• High-risk, High Reward investments – these are the investments which can give high ROIs however, the risks associated with these investments are also high. 

• Low-risk, Low Reward investments – these types of investments are for investors who prefer less-risky investments and are amenable to lower ROIs.

Available Investment Options 

Below are some of the available investment vehicles that are available to Australians. The key is to tie up your investment goal, time horizon, and risk tolerance and match them with the suitable investment for you. 

High Risk, High Rewards Investments 

• Equities/Stock market 

• Forex Trading 

• Cryptocurrency 

• Business 

Low Risk, Low Rewards Investments 

• Cash deposits 

• Government bonds 

• Index Funds 

• Exchange-Traded Funds (ETFs)

Plan your Retirement and Estate 

For every individual, there are financial stages that everyone journeys through as they progress through their career with the ultimate stage typically being a comfortable retirement and the ability to effectively transfer the wealth that they have accumulated to their next generation and initiatives that they are passionate about. 

Retirement Planning for High Earners in Australia

Superannuation 

In Australia, the current average retirement age is 56 years old and constantly increasing. To comfortably retire, the Australian government has put in place instruments such your Superannuation contributions. Read more about concession and non-concession super contributions here.

SMSF (self-managed super fund) 

Many Australians also set up SMSF’s to support their retirement as they have more control over the investments they make while potentially providing access to investment opportunities that may not be available with a traditional super fund. However, due to the significant costs and administration obligations that come with being a trustee of your own super fund, this is not a desirable option for many people. A financial advisor can help you better understand whether an SMSF is right for you.

Estate Planning for High Earners in Australia

As a person is nearing towards a later stage in the financial journey, probably the biggest thing to consider is wealth transfer or estate planning, especially for high-income earners who have built a substantial amount of wealth. 

Part of estate planning strategies that most high-income earners use is having insurance policies to cover estate taxes and legal fees so that their heirs will not have to worry about taking it out of their own pockets. If you’re interested in adding insurance to your estate plan, send our team a message and one of our expert advisors will get in touch with you.

Disclaimer 

This is just an overview of financial planning, there are tons of technicalities in each part of the plan that need to be studied carefully to have a customized strategy. It is best to consult with a professional to guide you through the process of financial planning. You can reach our team of experts here.

Call Us

Why do you need a trusted Financial Advisor? 

Having a trusted financial advisor by your side to guide you on your financial planning journey can make the process seamless and faster. At Curo Financial, our team of specialists are equipped with the best knowledge and tools to help you customize a financial plan to achieve your goals. If you’re interested to know more about how we can help you, you can reach our team of experts here.

Frequently Asked Questions

Where to invest for high earners? 

High earners can invest in a wide array of investment options in Australia depending on their financial goals, time horizon, and risk tolerance. Talking with a financial advisor can help you understand what are your options based on your profile. 

How do high-income earners reduce taxes in Australia? 

In Australia, there are a lot of ways in which high-income earners can reduce their taxable income. Deductions from work and salary sacrificing are the most common. 

What is considered a high-income earner in Australia? 

If you’re making $175,000 per year in Australia, then you belong to the high-income earner classification based on the latest report from the government. 

 

General Advice Disclaimer: The advice provided is general advice only and in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.