From 1 July 2024, the long-discussed Stage 3 tax cuts finally come into effect. However, in early 2024 the Federal Government revised the original plan — shifting more of the benefit towards middle-income earners and reducing the gains for high-income Australians.

For individuals with net wealth between $1 million and $15 million, these changes not only affect your take-home income, but also prompt a fresh look at investment and tax strategies. Here’s what you need to know.

The Revised Stage 3 Tax Cuts — At a Glance

The original Stage 3 plan would have abolished the 37% tax bracket altogether, applying a flat 30% rate to incomes between $45,000 and $200,000.

The revised structure keeps the 37% bracket in place and only modestly increases the income threshold at which the top marginal tax rate applies.

Example:

An individual earning $200,000 per year under the original Stage 3 proposal would have seen their tax bill drop by around $9,075.
Under the revised plan, the cut is about half that — approximately $4,500.

For high-net-worth (HNW) individuals, it’s a clear signal: the top end of town is no longer the primary beneficiary of these reforms.

Why It Matters for HNW Investors

For those earning well above $190,000, the top marginal tax rate (now kicking in slightly later, but still at 45%) continues to erode income and reduce after-tax returns.

That makes tax efficiency even more crucial — particularly for those who already have significant assets and investment income on top of salary or business earnings.

Strategies to Consider

1. Optimise Investment Structures

With little relief at the top end, HNW individuals should revisit how their investments are held.

• Trusts and corporate beneficiaries can help manage tax on distributions.

• Investment bonds may allow tax-deferred compounding and a capped tax rate if held long enough.

Choosing the right structure for new investments could save thousands each year.

2. Maximise Superannuation Contributions

Even for HNW investors, superannuation remains one of the most tax-advantaged vehicles available.

• Maximise concessional (pre-tax) contributions, currently capped at $30,000 per year (as of 2024/25).

• Consider non-concessional (after-tax) contributions if you have room under your lifetime cap.

Super earnings in accumulation phase are taxed at just 15% — much lower than top marginal rates.

3. Negative Gearing Where Appropriate

For those with significant taxable income, negatively geared investments (like property) may still be an effective way to offset income, while building long-term capital growth assets.

Of course, this needs to be balanced against interest rate risks and portfolio diversification.

4. Review Salary Packaging

For salaried executives and professionals, salary sacrifice arrangements can help reduce taxable income while funding benefits like additional super, vehicles, or other approved items.

The Big Picture

The revised Stage 3 cuts reinforce the importance of proactive planning.
Rather than expecting personal tax cuts to materially boost cash flow, HNW Australians should be focused on:
? Structuring income and investments tax-efficiently
? Ensuring portfolios are properly diversified
? Taking advantage of the few concessions that remain for high earners

As always, the right strategy depends on your individual circumstances, goals, and risk tolerance — and should be reviewed regularly with a trusted adviser.

Final Word

The new Stage 3 tax cuts may be less generous than many HNW individuals hoped, but they also serve as a timely reminder to review and refine your financial strategy.

If you’d like to discuss how the changes impact your position — and how to adapt — speak to your adviser today.