What is Division 293 superannuation tax?
It sounds complicated, but it’s important for high-income earners to understand. If you want to know more about it, what it means and whether you need to pay it, we can explain.
At First Financial, we specialise in superannuation advice and tax-effective strategies, helping high-income clients manage their tax obligations.
From its definition to its purpose, here’s what you need to know about the Division 293 superannuation tax.
The definition and purpose of Division 293 Superannuation tax
Division 293 superannuation tax is a tax applied to high-income earners to reduce the tax advantages of concessional superannuation contributions. It affects individuals whose income (including concessional super contributions) exceeds $250,000 in a financial year. Those who meet this threshold are required to pay an additional 15% tax on their concessional contributions, bringing the total tax rate on these contributions to 30%.
The ATO will send you an additional tax on concessional contributions (Division 293) notice (Division 293 notice) following the submission of your income tax return and contribution from your super fund if you are liable to pay this tax.
You can nominate for this to be sent to your tax agent also. You can settle your Division 293 tax liabilities either by using your personal funds or by accessing your superannuation, and paying by the due date will ensure you avoid any interest charges.
How it’s calculated
Your tax return and contribution information (as reported by your superannuation fund) will determine your liability for Division 293 tax.
The ATO will not issue assessments until all relevant information is received. If you have more than one fund and an additional fund reports to the ATO after your tax return has been lodged, you may receive an amended Division 293 tax assessment.
You’ll have taxable super contributions if you have concessional contributions, which include employer, SG, salary sacrifice and deductible personal contributions.
These are calculated after any excess concessional contributions are deducted.
Division 293 tax applies when your combined income and super contributions exceed $250,000. The tax rate is 15% on the excess amount over the threshold or on the taxable super contributions, whichever is lower.
A Division 293 tax calculation example
David’s Division 293 income is $270,000, and his Division 293 super contributions are $18,000, bringing his total to $288,000.
To calculate his Division 293 taxable contributions, we take the lesser of his super contributions ($18,000) or the amount exceeding the $250,000 threshold ($38,000).
Since the excess amount over the threshold is $38,000, David’s taxable super contributions are $18,000 (the lesser amount).
David’s Division 293 tax payable is 15% of $18,000, which equals $2,700. Therefore, David will need to pay $2,700 in Division 293 tax.
When you believe there may have been an error
Errors in Division 293 tax assessments can occur due to mistakes on your tax return or inaccuracies in the contribution amounts reported by super funds.
If you suspect an error, carefully review the income and contributions on your notice.
If the issue is with your tax return, correct it first, or address any discrepancies with your super fund.
If your concern remains unresolved and you believe your Division 293 tax has been incorrectly calculated or applied in error, you can lodge an objection with the ATO.
Navigating tax myths and strategies
While Division 293 Tax may add some complexity, superannuation remains a valuable strategy for high-income earners to build long-term wealth.
With proactive strategies like salary sacrifice adjustments and investment diversification, its benefits can still be maximised despite the tax impact.
Many people assume that Division 293 tax diminishes the benefits of super contributions or only affects top executives.
In reality, superannuation remains one of the most effective retirement savings tools, even with the additional tax. High-income earners can still benefit from compounding returns and tax efficiencies.
With strategies like salary sacrifice and investment diversification, the impact of Division 293 tax can be effectively managed. Working with a financial adviser can make all the difference. At First Financial, we tailor strategies to help you optimise your super contributions, minimise tax liabilities, and achieve your wealth-building goals with confidence.
Talk to the superannuation advice experts
Division 293 tax exists to make the superannuation system fairer by reducing the generous tax concessions available to high-income earners. Without this tax, individuals with higher incomes could benefit disproportionately from the lower tax rate on concessional contributions compared to those on lower incomes. It ensures the benefits of super are distributed more equitably across all income levels.
When fully utilised and properly structured, superannuation is the cornerstone of your investment strategy, asset protection and tax planning goals. At First Financial, our experienced advisers can help you maximise these benefits. Call and speak to a friendly member of our team today.
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