How to shift your thinking beyond $200k
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Once you’re earning $200k+ as a developer, salary bumps don’t move the needle as much as you think. I’ll explain what actually matters more at this level, and how tax and equity play into it.
When I started Lookahead in 2012, senior developer salaries topped out at $150k. Now it’s common for a senior to be on $200k and beyond. If that’s you - congratulations and a hearty thanks for paying the highest marginal tax rate. Anyone in that position should count themselves lucky.
Once nearly half of every extra dollar (47% above $190,001) goes to tax, it changes how you should think about adding more to the pile.
- Focusing on the non-salary items that matter more anyway.
- Understanding how equity can widen the gap, thanks to the CGT discount.
1) FOCUSING ON NON-SALARY ITEMS
When candidates have multiple offers, the salary gap is usually $20k or less.
That’s meaningful, but it hits very differently depending on your tax bracket:
$100k to $120k (taxed at 32c): an extra $20k is $13,600p/a or $1,133p/m in take home pay.
$200k to $220k (taxed at 47c): an extra $20k is $10,600p/a or $883p/m in take home pay.
$883 extra per month is nice, but it probably won’t change your life as much as:
- Who your manager is
- Who your colleagues are and how much you can learn from them
- Whether your values align with your employer’s
- What your growth opportunities are
When you have an awesome manager and feel an alignment with the work you are doing, you’re naturally going to work harder, build skills faster and see through the impacts of your technical decisions. All of these will increase your value as a developer.
Hopefully by showing you the gap in salaries is close to half what it seems to be, you won’t lose sight of what genuinely makes the biggest impact to your life.
These things compound your value as a developer. It’s a marshmallow test for adults:
- Choose the extra $883p/m now in a role that ticks a lot of boxes but you only chose because it paid the most. You do a decent job but ultimately find another job in a year. This is how you end up with one year of experience five times over.
- Choose the awesome manager, strong team, and alignment with your work. You naturally push harder, learn faster, and stay longer - therefore learning from the impacts of your technical decisions. Leave that company a far more valuable developer.
That’s an over simplified hypothetical, but hopefully by seeing how salary bumps shrink in real terms, you won’t lose sight of what makes the biggest impact on your career and life.
2) LOOKING AT EQUITY
Equity is not cash. It comes with risk, and those risks vary wildly depending on whose equity you’re holding. Liquidity is often uncertain, and the risk-to-reward ratio swings dramatically.
Still, it can be more powerful than cash in the long run because of how tax works on capital gains. Thanks to the 50% CGT discount, shares held for more than a year are taxed at half the normal rate.
Here’s a simple comparison:
$220k inc super after tax=$137,969 take home pay
$200k inc super after tax = $127,59020k minus 23% tax = 15400
= 142,990 take home pay
Startup clients of ours often provide an offer with three cash: equity mixes. Most people default to the middle option. In situations like these, it’s worth remembering how the CGT discount can tilt things in your favour.
WRAPPING UP
This post could have been a sentence: above $200k, stop chasing salary, start chasing everything else.
Once you cross $200k, stop obsessing over the size of the raise. The marginal gain is smaller than you think, and the things that actually make you happier and more valuable — your manager, team, growth, and equity — aren’t captured in base salary.
Notes:
- I am quoting salaries including super to simplify take home pay calculations, but would recommend folks use base salaries when quoting permanent roles.
- I’m including the Medicare levy.
- I’m a recruiter, not a financial advisor. Seek adult supervision when making financial decisions.
- Paycalculator.com.au is a handy tool that was used here.
- Tax optimisation shouldn’t be your north star. The few times I’ve done that it’s ended badly - usually by selling shares at the end of a financial year to claim the write off - when I could have and should have simply held on. But I am hoping it’ll nudge some folks away from prioritising salary to instead focusing on the other more important factors.
