In Australia, the high income threshold (HIT) significantly influences how employment laws are applied for higher-paid employees. It is a critical benchmark under the Fair Work Act 2009 (Cth).

The FW Act and Fair Work Regulations set out the rules for determining who is protected by unfair dismissal laws, and how agreement covered employees may have different eligibility. For employers, navigating this threshold is crucial for effectively managing legal risks and obligations related to dismissals, contract terms, award coverage, and post-employment restrictions. From 1 July 2025, the high income threshold is $183,100 per annum.

Whether you’re reviewing executive contracts, restructuring your workforce, or anticipating legislative changes, a comprehensive understanding of the HIT is paramount. An employee’s eligibility for certain protections depends on whether they are agreement covered or meet the definition of a person protected under the FW Act.

What is the high income threshold?

The high income threshold is an annually indexed earnings limit used by the Fair Work Commission (FWC) to determine specific statutory protections and entitlements.

As of 1 July 2025, the high income threshold is $183,100 per annum. Employers should always check the Fair Work Commission’s official website for the most up-to-date figure as it’s adjusted annually.

This figure includes:

• Base salary: The fixed, regular remuneration, i.e., the employee’s annual salary as stated in the employment contract provided. This is the starting point for the calculation of the employee’s earnings.
• Monetary benefits
• Agreed value of non-monetary benefits: This refers to the agreed money value of benefits that are not paid as cash but form part of the employee’s remuneration package. Examples commonly include:
  • A fully maintained company car (where there’s an agreed private use value).
  • Housing or accommodation provided.
  • Private use of company-provided devices (e.g., phone, laptop) where there’s an agreed or estimable value for personal use.
  • Life insurance premiums paid by the employer on the employee’s behalf.

It’s critical that the reasonable money value of these benefits is agreed upon in writing between the employer and employee. The FWC has, in some circumstances, estimated a real or notional value where an agreed value was absent, but relying on this is risky.

• Voluntary superannuation contributions above the Superannuation Guarantee (SG) rate: This includes any additional contributions to a superannuation fund made by the employer at the employee’s direction or on the employee’s behalf (e.g., through a salary sacrifice arrangement) beyond the compulsory SG rate (which is 12% from 1 July 2025).

The employee’s total remuneration is calculated by adding together the employee’s wages, agreed money, and any amounts applied as the employee directs or on the employee’s behalf.

It does not include:

• Bonuses, commissions, or incentive based payments (unless guaranteed): Commissions incentive based payments are only included if they are guaranteed and can be determined in advance. Discretionary payments that cannot be determined in advance are generally excluded. However, if a bonus or commission payment is guaranteed and its amount can be determined in advance (e.g., a fixed quarterly sales bonus for meeting a set target), it may be included.
• Reimbursements: Payments made to cover employee expenses (e.g., travel expenses, per diems).
• Compulsory superannuation (Superannuation Guarantee): The minimum superannuation contributions an employer is legally required to make.
• Overtime (unless guaranteed and specified): Similar to bonuses, ad-hoc overtime payments are generally excluded. However, if an employee’s contract guarantees a certain number of overtime hours and those payments can be determined in advance, they can be included (e.g., a contractual obligation to work a 58-hour week with 18 hours designated as guaranteed overtime).

Note: The relevant pay period for applying new rates or thresholds is the first full pay period on or after the effective date.

Why the high income threshold matters for employers

The high income threshold impacts on the following employment entitlements. The high income threshold acts as an income cap for certain entitlements and is adjusted each income year in line with legislative changes.

1. Unfair dismissal eligibility

2. Award coverage

3. Fixed term contract

4. Restrain of trade (proposed)

The threshold applies to both full time employees and part time employees, with calculations adjusted accordingly.

1. Unfair dismissal eligibility

The HIT is a primary filter for unfair dismissal claims.

Employees who:

• Are not covered by a Modern Award or Enterprise Agreement, AND
• Earn above the high income threshold

are generally excluded from bringing an unfair dismissal claim under the FW Act (assuming they’ve completed the minimum employment period – six months for larger employers, 12 months for small businesses). In such cases, an employer may raise a jurisdictional objection before the Fair Work Commission, arguing that the Commission lacks authority to hear the unfair dismissal claim because the employee’s earnings exceed the threshold.

For example, a senior marketing manager earning $190,000 on an individual common law contract, who is not award-covered, would typically be unable to bring an unfair dismissal claim, provided all other legal obligations regarding dismissal were met. If this employee is unfairly dismissed but not eligible to bring an unfair dismissal claim, compensation cannot be awarded under this provision due to the lack of jurisdiction.

Caution: This exclusion does not prevent an employee from pursuing other avenues for legal recourse, such as:

• General Protections Claims: These relate to adverse action taken against an employee for exercising a workplace right (e.g., making a complaint or inquiry, or being discriminated against). There is no earnings cap for these claims.
• Discrimination Claims: Under federal or state anti-discrimination laws.
• Common Law Contract Claims: For breaches of their employment contract.
• Breach of National Employment Standards (NES) Claims: The NES apply to all employees, regardless of their income or award coverage.

2. Award coverage and the ‘guarantee of annual earnings’

Even if an employee earns above the HIT, the relevant Modern Award still applies to their employment unless the employer provides a written Guarantee of Annual Earnings and the employee accepts it in writing.

Once this guarantee is properly in place:

• The Award no longer applies to the employee while their annual rate of earnings under the guarantee exceeds the HIT.
• The employee cannot later claim entitlements like penalty rates, loadings, or allowances under that Award.

A “guarantee of annual earnings” is a powerful strategic tool. It allows employers to:

• Simplify pay arrangements: Avoid the complexity of tracking specific Award entitlements (e.g., penalty rates, allowances) for high-earning, non-Award-covered roles.
• Reduce administrative complexity: Streamline payroll and compliance.
• Provide certainty: Both for the employer in terms of wage costs and for the employee regarding their remuneration package.

Key requirements for a valid Guarantee of Annual Earnings:

• Must be in writing.
• Must state the annual rate of earnings.
• Must contain an undertaking from the employer to pay at least the guaranteed amount for a specified period (which must be 12 months or more, unless employment is for a shorter period).
• The employee must accept the undertaking in writing.
• The employer must notify the employee in writing that the Award will not apply to them while the guarantee is in effect.
• The guarantee must be given and accepted before or within 14 days of the start of employment or the variation of employment terms that makes the guarantee applicable.

3. The high income threshold and fixed-term contracts

From December 2023, the Fair Work Act introduced limitations on the use of fixed-term contracts, generally restricting them to a maximum duration of two years (including extensions) or more than one extension, unless an exception applies. The HIT plays a crucial role here.

Exemption for high-income employees:

• Fixed-term contract restrictions do not apply if the employee’s guaranteed annual earnings at the time the contract is entered into are above the high income threshold. This is calculated pro-rata for part-time employees or those employed for less than a year.

Employer insight: This exemption allows employers to offer longer or renewable fixed-term contracts to high-income staff without breaching the new limitations under the Act. This is particularly beneficial for roles such as:

• Chief Financial Officers (CFOs) or Chief Information Officers (CIOs) brought in for specific corporate transformations or system implementations.
• Project-based executives (e.g., leading a major construction project or a new product launch).
• Specialist consultants engaged for a finite, high-value assignment.

4. Restraint of trade clauses and proposed reforms

Many employers include post-employment restraints, such as non-compete or non-solicitation clauses, in high-income employee contracts. However, these clauses are under increased scrutiny from policymakers and regulators due to concerns about worker mobility and competition.

What has been proposed:

In 2023–2024, the Australian Government initiated a consultation process (via an Issues Paper released by Treasury in April 2024) flagging a strong interest in limiting or banning restraint of trade clauses, particularly:

• Non-compete clauses that prevent an employee from working for a competitor or starting a competing business.
• Overly broad geographic or time-based restrictions.

While no formal legislation has passed yet or entered into consultation, the government proposed to:

• Prohibit non-compete clauses entirely for employees earning below the high income threshold. This would be a significant change, creating a clear “bright-line” rule.
• Require employers to provide additional compensation (often referred to as “garden leave” or a “restraint payment”) during the restraint period if the clause is enforced. This aims to balance the restriction on an employee’s livelihood.
• Introduce disclosure requirements when offering contracts with restraints.
• Consider further reforms for high-income earners and other types of restraints like non-solicitation clauses.

What it means for employers:

• Restraint clauses in high-income contracts are likely to face increased legislative regulation and judicial scrutiny.
• Courts already disfavour overly broad clauses. For a restraint to be enforceable, it must be reasonable in scope (time, geography, and activity) and necessary to protect a legitimate business interest (e.g., confidential information, client connections, goodwill). A high income alone does not guarantee enforceability; the reasonableness is key.
• There’s a growing judicial trend towards a stricter interpretation, as seen in recent cases where even broadly drafted restraints in a sale of business context (which historically had more latitude) have been struck down.

It is likely that there will be some reform in this area. On that basis is it recommend that employers:

• Tailor restraint clauses specifically to the role and legitimate business needs. Avoid “boilerplate” wording that is generic and unlikely to stand up in court.
• Ensure the scope (time and geographic area) is the minimum required to protect the legitimate interest.
• Consider “cascading” or “tiered” clauses: These offer multiple levels of restraint (e.g., 6 months in one state, 3 months in a smaller region) so that if one level is deemed unenforceable, a lesser one might still apply.
• Review existing contracts in light of upcoming reforms and current judicial approaches.
• Focus on other protective measures: Strengthen confidentiality agreements, implement robust data security protocols, and use “garden leave” provisions (where an employee is paid but not required to work during their notice period) to manage competitive risks.

By staying informed about these evolving legal landscapes and proactively reviewing employment practices, employers can better navigate the complexities of the high income threshold and its significant impact on their workforce management.

How Business Chamber Queensland can help

Business Chamber Queensland supports employers with up-to-date guidance on employment law changes, including the application of the high income threshold, fixed-term contract strategies, and restraint clause compliance. Our team can assist you with reviewing employment contracts, implementing best-practice HR processes, and staying ahead of proposed legislative reforms. Whether you’re looking to manage risk, simplify remuneration structures, or ensure compliance, Business Chamber Queensland is here to help you protect your business and your people.