How to Pay Less Tax as an Individual: The FY2025-26 Guide

Most people overpay tax for one simple reason: they only think about it after 30 June, when the year is closed and nothing can be changed. Every strategy below works before the year ends. Almost none work after.

Know your marginal rate first

Your marginal rate is the tax rate on your next dollar of income. It tells you what every strategy is worth. The 2025-26 resident brackets:

Taxable income	Rate
$0 to $18,200	0%
$18,201 to $45,000	16%
$45,001 to $135,000	30%
$135,001 to $190,000	37%
Over $190,000	45%

Add the 2% Medicare levy on top. So if you earn $100,000, your marginal rate is 32%, and every $1,000 of deductions returns $320 to you.

1. Add to super before tax

Concessional contributions are payments into super from before-tax money. They are taxed at 15% inside the fund instead of your marginal rate. If your marginal rate is 32%, every $1,000 contributed saves you $170 in tax while still building your retirement savings.

The cap is $30,000 a year, and it includes what your employer already pays. On a $120,000 salary your employer contributes about $14,400, leaving roughly $15,600 you can add yourself via salary sacrifice or a personal contribution you claim as a deduction.

Catch-up contributions: if your total super balance was under $500,000 on 30 June 2025, you can also use unused cap from the past five years. This is the go-to move in a spike year, such as a bonus, a redundancy payout, or an asset sale.

The high-income catch: if your income plus super contributions exceeds $250,000, an extra 15% tax (called Division 293) applies to contributions. Super is still usually worthwhile at 30% versus a 47% marginal rate, but the saving is smaller than it first looks.

2. Claim every deduction you are entitled to

A deduction is an expense connected to earning your income. It reduces your taxable income, so each dollar is worth your marginal rate. The commonly missed ones:

• Work expenses: tools, equipment, registrations, union and professional fees, self-education linked to your current job.

• Car: the cents-per-kilometre method needs no logbook but caps out at 5,000 km. If you drive more for work, a 12-week logbook usually produces a bigger claim. Run both numbers before choosing.

• Working from home: a fixed rate per hour covers power, internet, phone and consumables. You must keep a record of actual hours.

• Investment costs: interest on loans used to invest, subscriptions, and the fee for preparing your tax return.

• Income protection insurance: premiums are deductible if you pay them outside super.

  
  

One rule covers all of it: no record, no deduction. Substantiation is what makes a claim survive an ATO review.

3. Donate before 30 June

Gifts of $2 or more to registered charities (look for DGR status, meaning deductible gift recipient) are fully deductible. If you plan to give anyway, giving before 30 June in a high-income year makes the same donation cheaper after tax.

4. Time income and deductions deliberately

Unlike most businesses, individuals are generally taxed on a receipts basis: salary, bonuses, interest and dividends count in the year you receive them, not the year you earn them. Deductions are claimable when the expense is incurred. Those two rules create real, legitimate timing levers:

• Prepay expenses. A special rule lets individuals deduct a prepaid expense in full this year if it covers 12 months or less. The classic example is prepaying a year of interest on an investment loan before 30 June.

• Do the repairs, do not just plan them. Repairs on an investment property are deductible when incurred, so the work needs to happen before 30 June, not merely be quoted.

• Defer income you genuinely control. A bonus arranged to be paid in July is next year's income, but the deferral must be agreed before you become entitled to it. Sole traders on a cash basis can achieve the same by timing when they bill and collect. Employees cannot simply hold back a payslip.

The principle: a deduction is worth more in a high-income year, and income costs less in a low-income year.

5. Use negative gearing where it genuinely stacks up

If the costs of an income-producing investment (loan interest, property expenses) exceed the income it earns, the loss reduces your other taxable income. This is negative gearing. It is a cash-flow loss first and a tax benefit second, so it only makes sense where the asset itself is sound. Proposed rules from the 2026 Budget would limit this for residential property, so structure decisions made now should account for where the rules are heading.

6. Plan capital gains, do not just report them

A capital gain is the profit when you sell an asset like shares or property. It is added to your income and taxed at your marginal rate. Three levers change what you pay, and all three only work before you sell:

• Hold for 12 months. Assets held longer than a year qualify for the CGT discount: only half the gain is taxed. Selling at month 11 instead of month 13 can double your tax on the gain (note that proposed rules from the 2026 budget will change this to indexation).

• Sell in a low-income year. The same $50,000 gain costs far less in a year of parental leave, retirement or a career break than in your peak earning year, because it stacks on top of less income.

• Use your losses. Capital losses only offset capital gains, never salary. If you hold an investment that is down and you intended to exit anyway, selling it in the same year as a gain cancels part of that gain out. Unused losses carry forward.

  
  

These levers also stack with super: a large catch-up contribution in the year of a gain pushes your taxable income down and can pull the gain into a lower bracket.

7. Check your Medicare Levy Surcharge position

The Medicare Levy Surcharge is an extra 1% to 1.5% tax on higher earners who do not hold private hospital cover. It starts at $101,000 for singles and $202,000 for families. For many people above those thresholds, a basic hospital policy costs less than the surcharge it removes. Run the comparison; do not assume.

8. Use your spouse and household

• Spouse super contribution: contribute to a low-income spouse's super and receive a tax offset of up to $540.

• Hold investments in the lower earner's name. Investment income is taxed at the rate of whoever owns the asset. Get this right at purchase, because moving assets later triggers capital gains tax and duty.

• Government co-contribution: lower earners who add after-tax money to super can receive up to $500 from the government.

9. Smaller levers worth knowing

• Salary packaging: some employers let you pay certain costs from pre-tax salary. Electric vehicles under a novated lease are currently exempt from fringe benefits tax, which can make an EV significantly cheaper than paying from after-tax income (this excludes PHEV's and the proposed budget changes will also phase out benefits for fully electric vehicles).

• First Home Super Saver: save a deposit inside super at the 15% tax rate, then withdraw eligible contributions to buy a first home (don't keep your money in a normal savings account - rather make a concessional super contribution).

• PAYG withholding variation: if you reliably get a large refund each year (common with negatively geared property), you can apply to have less tax withheld during the year instead of lending it to the ATO interest free.

• Offsets you already own: franking credits on Australian dividends, foreign income tax offsets, and the Low Income Tax Offset (up to $700 for incomes under $66,667) are entitlements, not strategies, but they are missed often enough to check.

The strategies interact, and that is the whole point

A super contribution can trigger Division 293. A capital gain can tip you over the surcharge threshold. An asset in the wrong name can cost more in duty than it saves in tax. Each strategy is simple alone; the value is in sequencing the right combination for your numbers before 30 June.

That is the work we do at Margraf Advisory Partners. We model your actual position, show you what each lever is worth in dollars, and make sure the moves work together. If you want to look at your position before the year closes, get in touch.

This article is general information only and does not consider your personal circumstances. It is not financial or tax advice, and some strategies touch areas requiring a licensed financial adviser. Speak with us before acting.

Contact Us

MAP | Felix Margraf, Principal | 0431 409 045 | felix@margraf.com.au | margraf.com.au