Most Australians pay more tax than they need to — not because the system is unfair, but because they don’t know the rules well enough to use them. The ATO isn’t going to remind you about deductions you missed. That’s your job, or your accountant’s.
This guide covers the most effective, legal tax minimisation strategies available to Australian individuals and business owners right now — with all figures updated to the 2025–26 financial year (1 July 2025 to 30 June 2026).
1. Salary Sacrifice: Redirect Pre-Tax Income Before the ATO Sees It
Salary sacrifice is one of the most underused strategies available to employees. You agree with your employer to redirect a portion of your pre-tax salary into benefits — and that redirected amount never appears as assessable income.
The most common use is salary sacrificing into superannuation. Contributions made this way are taxed at 15% inside super instead of your marginal rate. With the current 2025–26 brackets sitting at 30% on income between $45,001 and $135,000, and 37% from $135,001 to $190,000, the tax saving on every sacrificed dollar is substantial.
Salary sacrifice doesn’t stop at super. You can also salary sacrifice a car through a novated lease arrangement, or in some employer arrangements direct it toward mortgage repayments. Not-for-profit employees often have access to extended salary packaging that goes well beyond what’s available in the private sector.
For a full breakdown of how it works, who qualifies, and the FBT implications to watch for, start with our complete guide to salary sacrifice.
2. Maximise Super Contributions Before 30 June 2026
Superannuation remains the most tax-effective savings environment available to Australians. Earnings inside super are taxed at 15%. In pension phase, they can be tax-free entirely.
The key numbers for 2025–26:
- Concessional (pre-tax) contributions cap: $30,000 — this includes your employer’s compulsory Super Guarantee contributions, which increased to 12% from 1 July 2025 (up from 11.5% in 2024–25). That is the final scheduled increase under current legislation.
- Non-concessional (after-tax) cap: $120,000
- Division 293 threshold: $250,000 — if your income plus concessional contributions exceed this, an additional 15% tax applies to those contributions
If your total super balance was below $500,000 at 30 June 2025, you may be able to carry forward unused concessional cap space from up to five previous years and make a larger deductible contribution before 30 June 2026. This is a powerful catch-up strategy for anyone with gaps in past contributions.
For business owners, making a personal deductible contribution and lodging a Notice of Intent to Claim with your fund before year-end can significantly reduce your assessable income for 2025–26.
3. Use an SMSF for Greater Tax Control
A Self-Managed Super Fund (SMSF) is more than investment flexibility — structured correctly, it is a sophisticated tax planning tool.
Inside an SMSF, you can hold a diverse range of assets — including direct property, shares, and business real property. Earnings are taxed at 15%, and once you move into pension phase, that drops to zero.
One strategy popular with business owners is purchasing commercial property through an SMSF and leasing it back to their own business at market rent. The business claims a tax deduction on the rent; the SMSF receives that income at 15%. It must be structured correctly to comply with ATO rules — the sole purpose test and arm’s length requirements are non-negotiable.
The SMSF contribution rules and current caps apply equally inside an SMSF as they do for retail and industry funds.
If you are new to the structure, our guide on what an SMSF is and how it works is the right starting point before making any decisions.
4. Choose the Right Business Structure — It Changes Everything
The entity you operate through determines how every dollar of income is taxed. Getting this wrong does not just cost you at tax time — it shapes how income flows through your financials for years.
- Sole trader: all business income taxed at your personal marginal rate — up to 47% including the 2% Medicare levy at 2025–26 rates
- Company: flat 25% corporate tax rate for base rate entities with turnover under $50M; 30% for larger companies
- Trust: income distributed to beneficiaries and taxed at their individual rates — powerful where family members are in lower tax brackets
For anyone comparing options at business registration or a restructure point, our guide on sole trader vs company covers the trade-offs in plain language. If you are further along and weighing up whether a trust structure offers better tax and asset protection outcomes, the trusts vs companies comparison breaks down both sides.
The right structure saves money every single year. Do not leave it at whatever you set up when you first registered.
5. Claim Every Work-Related Deduction You Are Actually Entitled To
Missed deductions are the most common tax leak we see with new clients. The ATO allows deductions for expenses incurred to earn your income — as long as they are not private in nature, and you have the records to support them.
Working from home: The fixed rate method remains at 70 cents per hour for 2025–26, confirmed by the ATO under PCG 2023/1. It covers electricity, gas, internet, phone, and stationery for the hours you work at home. You must keep a contemporaneous record of the actual hours worked at home for the entire income year. Estimates are not accepted. A timesheet, roster, or diary kept in real time meets the requirement.
Our detailed guide on working from home tax deductions covers both the fixed rate and actual cost methods, including what can be claimed separately (such as equipment depreciation) and what is bundled into the hourly rate.
Three other areas people consistently miss:
- Parking: Claiming work-related parking costs is often legitimate — but the conditions matter. Not all parking is deductible, and the rules are more nuanced than most people assume.
- Medical expenses: The general medical expenses tax offset was abolished years ago, but there are still specific medical costs that may be claimable depending on your circumstances.
- Legal fees: Not all legal expenses are deductible, but many are. The rules around legal expense deductibility turn on whether the expense relates to income production or capital matters.
6. Prepay Deductible Expenses Before 30 June 2026
Prepaying certain expenses before year-end pulls deductions forward into 2025–26, reducing your taxable income now rather than next year.
Common prepayments include:
- Income protection insurance premiums (paid annually upfront rather than monthly)
- Investment loan interest (prepayable up to 12 months in advance under s 82KZM ITAA 1997)
- Professional subscriptions, memberships, and association fees
- Business insurances and software subscriptions
The general rule: expenses prepaid for a period not exceeding 12 months, where the service period ends before the next income year, can usually be deducted in the year of payment. Speak to your accountant before prepaying large amounts — the rules differ between individuals, small business entities using the simplified prepayment rules, and larger businesses.
7. Time Capital Gains to Maximise the 50% CGT Discount
The CGT 50% discount gives individuals and trusts a 50% reduction on capital gains from assets held longer than 12 months. If you are approaching the 12-month mark on an investment, waiting until after the anniversary before selling can halve the tax on your gain.
Triggering a large capital gain in the same year as other high income can push you into a higher bracket. Deferring a sale to the next financial year, or realising the gain in a lower-income year, is worth planning around.
This is especially relevant with the second marginal bracket dropping from 16% to 15% on income between $18,201 and $45,000 from 1 July 2026 — a small but real consideration for lower-income investors.
Franked dividends from Australian companies carry imputation credits. If your marginal rate is below the corporate tax rate, you may receive a refund on those credits — an entitlement many Australians do not fully use.
8. Split Income Across Family Members Through a Trust or Spouse Contributions
Where income can legally be distributed to family members in lower tax brackets, the overall family tax bill can drop meaningfully.
A discretionary family trust gives the trustee annual flexibility to decide how much income each beneficiary receives. If your spouse, adult children, or parents are taxed at lower marginal rates, directing distributions their way means that income is taxed at their rate rather than yours.
Outside trusts, you can contribute to your spouse’s superannuation if their income is below $40,000. The tax offset is calculated as 18% of the lesser of $3,000 (reduced $1 for every dollar your spouse earns above $37,000) or the amount you contribute. The maximum offset is $540 for 2025–26 — modest, but part of a broader compounding strategy.
The ATO monitors income splitting closely. Any arrangement must be genuine, commercially documented, and properly set up. Distributions to minors are subject to penalty tax rates above $416 under Division 6AA.
9. Watch Division 7A If You Operate Through a Company
Division 7A catches business owners who use company funds for personal purposes without treating the amount as a dividend. The ATO deems this a taxable dividend in your hands — at your marginal rate, with no franking credits to offset it.
The risk is common. Taking money from your company for personal use outside of salary, formally declared dividends, or compliant loans (with minimum annual repayments at the ATO benchmark interest rate) triggers Division 7A.
The benchmark interest rate is set by the ATO for each income year — confirm the current rate with your accountant before drawing any money. Getting this wrong is expensive: it triggers back-taxes and can involve penalties. The fix is always the same — structure it correctly before you draw.
10. Work With an Accountant Who Plans Ahead, Not Just Behind
Most people see their accountant once a year to lodge a return. By then, the financial year is closed and there is almost nothing left to do strategically.
The real savings happen in April, May, and June — while there is still time to act. Topping up super before the cap resets, prepaying deductions, timing asset sales, reviewing whether your business structure still fits — all of these require decisions before 30 June 2026.
Worth knowing for forward planning: the second marginal bracket is legislated to drop from 16% to 15% on income between $18,201 and $45,000 from 1 July 2026. For clients with bonuses, asset sales, or deferred income decisions, this creates a timing consideration worth discussing with your accountant now.
If your current accountant is only reactive, you are leaving money on the table every year.
Frequently Asked Questions
What is the most effective tax minimisation strategy in Australia for 2025–26?
For most employees, maximising concessional super contributions up to the $30,000 cap is the single most effective lever — contributions are taxed at 15% instead of your marginal rate.
For business owners, the combination of business structure, super contributions, income splitting, and capital gains timing tends to produce the largest results. The right approach depends on your income level and personal circumstances.
Is tax minimisation legal in Australia?
Yes. Arranging your financial affairs to reduce your legally owed tax is entirely lawful. Tax evasion — hiding income or falsifying records — is not. The ATO’s Part IVA General Anti-Avoidance provisions target arrangements with no commercial substance beyond gaining a tax benefit, so legitimate strategies must have genuine economic purpose beyond the tax outcome.
What is the concessional contributions cap for 2025–26?
The cap is $30,000 for the 2025–26 financial year. This includes all before-tax contributions: your employer’s 12% Super Guarantee, any salary sacrifice amounts, and personal contributions you claim as a tax deduction.
If your total super balance was below $500,000 at 30 June 2025 and you have unused cap space from the past five years, you may be able to contribute more than $30,000 without triggering excess contributions tax.
How does the working from home deduction work in 2025–26?
Under the ATO’s fixed rate method (PCG 2023/1), you can claim 70 cents per hour for every hour worked at home in 2025–26. The rate covers electricity, gas, internet, phone, and stationery. Y
]ou must keep a contemporaneous record of your actual hours — estimates are not accepted. Equipment depreciation is claimable separately. The actual cost method is available if your real costs are higher, but requires more detailed records and a dedicated home office space.
Do I need an SMSF to use superannuation as a tax strategy?
No. Maximising contributions to a retail or industry super fund works for most people. An SMSF becomes worth considering when you have a significant balance (generally $200,000 or more), want to hold specific assets like direct property, or have a business premises strategy that suits the structure. Our SMSF guide walks through the decision.
What tax rate does a company pay in Australia in 2025–26?
Base rate entities — companies with aggregated turnover under $50 million that derive less than 80% of income from passive sources — pay 25% corporate tax. All other companies pay 30%. Profits distributed as franked dividends carry imputation credits that shareholders can offset against their personal tax.
Ready to Stop Overpaying?
The strategies above are a starting point. What applies to you depends on your income, structure, family situation, and goals — and some of the most valuable decisions need to be made before 30 June 2026.
At KSH Tax, we work with individuals and business owners across Australia on proactive, year-round tax planning. If you want to know what you are leaving on the table, get in touch for a free consultation.
