Tax on Dividends: How Directors and C-Suite Executives Cut Their Tax Rate from 47% to 15%

You’re sitting on $1-2 million in company stock. It’s generating $50,000-100,000 in annual dividends. And you’re paying 47% tax on dividends because those shares are held in your personal name.

That’s $23,500 to $ 47,000 going to the ATO every single year.

Meanwhile, the executive down the hall, same company, same shares, is paying just 15%. Their company stock sits inside a self-managed super fund. They’re on track to $2 million each in super. They’ve got a family trust holding the overflow.

The difference? Structure. And it’s costing you $30,000+ annually.

The executive dividend trap

You’ve worked hard to reach director or C-suite level. The remuneration package reflects that: a $500,000 base salary, and another $500,000 in company stock annually. Strong performance, golden handcuffs, you know the deal.

But here’s where it gets expensive.

Every dividend you receive from company stock held in your personal name is taxed at your marginal rate: 47%. If you’re sitting on $2 million worth of company shares with a 5% dividend yield, you’re receiving $100,000 in dividends annually, and handing $47,000 straight to the ATO.

That’s not tax minimisation. That’s wealth leakage.

Why the 47% tax rate hits executives hardest

The dividend tax burden on high-income earners isn’t just about the percentage. It’s about volume and frequency.

Consider this: a mid-level employee with $100,000 in Australian shares might receive $5,000 in annual dividends. At the top marginal rate, that’s $2,350 in tax. Painful, but manageable.

But executives receiving equity compensation? You’re not holding $100,000 in shares. You’re holding $500,000, $1 million, sometimes $2 million or more. Your annual dividends might be $50,000 to $100,000. The tax on dividends at 47% means you’re writing a five-figure cheque to the ATO every single year. Just on the income, before we even talk about capital gains.

This is where smart structuring becomes non-negotiable.

The wealth structure that changes everything

The most financially savvy executives understand this: your ideal wealth structure includes a paid-off family home, maximised super, and a family trust holding other investments.

This isn’t creative accounting. It’s using the structures the tax system was designed to encourage.

A self-managed super fund is taxed at just 0-15%. A family trust distributes income to beneficiaries, allowing you to optimise across the entire family’s tax position. Compare that to the 47% you’re paying in your personal name, and the opportunity becomes crystal clear.

The strategy that’s saving executives $30,000+ annually? It’s called an in-specie transfer.

How directors actually cut from 47% to 15%

Here’s the process we walk C-suite executives through:

Step one: Establish your self-managed super fund (SMSF). The setup cost runs around $3,000, and the establishment takes one to two weeks.

Step two: Transfer your company shares directly into your SMSF, what is called an in-specie transfer. You’re not selling the shares and rebuying them. You’re simply changing who owns them, moving ownership from your personal name into your super fund. This uses your non-concessional contribution cap: $120,000 per year, or you can bring forward three years at once for $360,000. Your partner can do the same. Between both of you, that’s close to $1 million moved into the SMSF over two financial years.

Step three: Transfer remaining stock into your family trust using the same in-specie method for flexible income distribution.

The family trust is particularly powerful if you have a non-working spouse or adult children at university. Distributing income to family members in lower tax brackets can reduce the effective tax rate on that portion to 0-19%, compared to your 47% personal rate. Even if your spouse works, distributing to them at a 30% effective rate still saves you 17%.

Let’s revisit those numbers. You have $2 million in company stock generating $100,000 in annual dividends. Previously, you paid $47,000 in dividend tax. 

Now, with the right structure:  

$1 million in your SMSF generating $50,000 in dividends = $7,500 tax (15%)  

$1 million in your family trust generating $50,000 in dividends = $0 tax* 

*Assumes income distributed to a non-working spouse or adult children at university. If your spouse is working, you might pay approximately $15,000 on this portion at a 30% effective rate. Still substantially better than 47%. Your total annual tax drops from $47,000 to as low as $7,500-22,500, depending on your family’s situation. 

That’s a $24,500-39,500 annual savings. Every single year.

Compounding over a decade? Now here’s where it gets interesting. 

That $30,000 you’re saving each year? If you invest those savings at 7% (net return) annually, you’re looking at approximately $475,000 in additional wealth after 10 years. That’s not just tax saved. That’s wealth compounded.

And when you reach retirement age, and sell those shares held in super? Zero capital gains tax. Zero tax on dividends in the retirement phase.

The $2 million target every executive should know

Here’s the benchmark: you should be working towards $2 million each in your super fund – $4 million total for couples.

This isn’t arbitrary. It’s the sweet spot where you’ve maximised the tax-effective environment of superannuation. Once you hit $2 million per person, you lose the ability to make further non-concessional contributions. At that point, future company stock flows into your family trust instead.

But most executives we meet haven’t started. They’re accumulating company stock year after year, paying top marginal rates on every dividend, missing the opportunity entirely.

Timing is everything

The costliest mistake? Waiting too long.

Imagine you received $500,000 in company stock three years ago. It’s now worth $1 million. To transfer it into your SMSF or family trust today, you’ll trigger capital gains tax on that $500,000 gain, which significantly erodes the benefit.

The right time to structure this is immediately after your stock vests. Every vesting period should be a trigger point: stock just vested? Transfer it into the right structure before capital gains accumulate.

This is especially critical for executives at high-growth companies. If you’re holding shares in major tech firms or ASX leaders that have doubled or tripled in value, every year you delay costs you both in ongoing dividend tax and future capital gains exposure.

What this actually costs to implement

Let’s talk numbers. SMSF setup costs roughly $3,000. Ongoing administration runs another $4,000 annually. Family trust setup is similar.

So you’re looking at $6,000-8,000 in year-one costs, then $7,000-8,000 annually ongoing.

Against tax savings of $27,000-32,000 per year? You’re in front within three months. The break-even is immediate, and the compounding benefit over 10-20 years is substantial.

Plus, the long-term advantage – zero tax in the retirement phase – adds another layer of wealth preservation that’s difficult to quantify but impossible to ignore.

The blind spot at the executive level

Here’s what we see far too often: incredibly capable leaders earning $500,000 to $1 million annually, running divisions or entire companies, completely unaware that this strategy exists.

Why? It requires specialist knowledge at the intersection of executive remuneration, tax structuring, and wealth accumulation. Your company’s HR department won’t tell you. Your standard accountant might not know. And by the time you discover it on your own, you’ve already left six figures on the table.

The tax on dividends alone, before considering capital gains, represents one of the single biggest wealth leaks for Australian executives receiving equity compensation.

If you’re a director, VP, or C-suite executive receiving company stock, ask yourself:

1. Do I have an SMSF set up to hold company shares at 15% tax instead of 47%?
2. Am I on track to $2 million each in super?
3. Do I have a family trust for investments outside super?

If you answered no to any of these, you’re almost certainly paying more tax than necessary.

A word on diversification: While this strategy optimises your tax position on company stock, holding significant wealth in a single company does carry concentration risk. As part of your overall wealth plan, we’ll also look at diversification strategies and ensure your retirement plan balances tax efficiency with prudent risk management.

Where to from here

The path is clear: we get you sorted, then comfortable, then thriving.

We specialise in working with executives exactly like you—directors and C-suite leaders at ASX-listed companies and Australian arms of global firms—navigating complex remuneration structures and building lasting wealth.

Every vesting period you miss is another opportunity lost. Every quarterly dividend taxed at 47% when it could be 15% is wealth that should be compounding in your favour.

We love a good chat. 

Get in touch and let’s find out what’s possible.

We’ll map out exactly where you are, where you should be, and how to close the gap – whether that’s getting to the $2 million super target, structuring your next vesting event, or simply ensuring your wealth structure matches your income level.

Because we make more possible with your money.