Division 293 tax applies to higher-income individual taxpayers - it is an additional tax of 15% on your concessional super contributions. It applies if your income exceeds the current income threshold of $250,000 and you've made taxable contributions.
The ATO assesses Division 293 when an individual lodges their tax return. They will issue a Division 293 notice of assessment.
What is the tax for?
Concessional contributions, known as pre-tax contributions (i.e. salary sacrifice and employer contributions) are taxed at 15% in your super fund. If you are a high income earner, your marginal tax rate is higher than the average income earner. When you make concessional contributions you are receiving a larger tax concession.
Division 293 imposes an additional tax of 15% to bring the concession back to an amount in line with the average income earner. Division 293 will apply even if your income exceeds $250,000 due to a once-off event.
How is it calculated?
Division 293 tax is calculated using Division 293 income. This includes:
taxable income
reportable fringe benefits amount
total net investment loss
the amount on which family trust distribution tax has been paid.
The calculation also includes Division 293 super contributions. This generally includes:
employer contributions
other family and friend contributions
assessable foreign fund amounts
assessable amounts transferred from reserves
personal contributions for which you have been allowed a deduction
defined benefit contributions
excess concessional contributions are excluded
The ATO will add an individual's Division 293 income to their Division 293 super contributions and compare the total to the Division 293 threshold ($250,000).
Division 293 tax of 15% is payable on the excess over the threshold, or on the super contributions, whichever is less.
For example:
Hyunh's Division 293 income is $240,000 in the 2021 financial year. Her Division 293 super contributions are $20,000 in the 2021 financial year.
$240,000 plus $20,000 = Total $260,000
The Division 293 super contributions are $20,000
The income amount above the $250,000 threshold is $10,000
Division 293 tax is payable on the lesser of the two, being $10,000
Division 293 tax is 15% of $10,000 = $1,500
Payment options
Your ATO notice ill detail the payment options and due date. There are two options for payment:
pay using your own money
release the funds from your super fund
To release the funds from your super fund, you are required to make an election to release money from super. An election form is required to be completed and sent to the ATO. The ATO will ask your nominated super fund(s) to send them the amount specified by you.
The election form can be completed online or via paper (for more information, click here). We can also complete the election forms on your behalf.
If you require assistance please contact us or you can read more information via the ATO website.