Division 293 tax is an additional tax on concessional superannuation contributions for high-income earners in Australia.
It is applied at a rate of 15% on certain super contributions when an individual’s combined income and concessional contributions exceed $250,000 in a financial year.
This tax effectively reduces the tax concession available to higher-income individuals, ensuring a more equitable distribution of superannuation tax benefits.
How Division 293 Tax Works
Concessional (before-tax) super contributions are usually taxed at 15%. However, if an individual’s Division 293 income plus their concessional contributions exceed $250,000, an additional 15% tax is levied on the portion that exceeds this threshold. This brings the total tax on these contributions to 30%.
What Counts as Division 293 Income?
To determine whether you exceed the $250,000 threshold, the Australian Taxation Office (ATO) considers a range of income sources, including:
• Taxable income (assessable income minus allowable deductions)
• Total reportable fringe benefits amounts
• Net investment and rental property losses
• Income from trusts
• Super lump sum amounts taxed at a zero rate
• Assessable first home super saver released amounts
These amounts are totaled to calculate your Division 293 income. However, super lump sum taxed elements and assessable first home super saver released amounts are subtracted from the total.
One-off payments such as redundancy payouts and capital gains can also push an individual’s income above the $250,000 threshold in a particular year, even if they typically earn less.
These events include:
• Receiving a redundancy or termination payment
• Making a capital gain (e.g., from selling an investment property or shares)
• Earning a significantly higher income in one year due to bonuses or other payments
If your income exceeds the threshold due to one of these events, you may have to pay Division 293 tax for that year, even if your income is lower in other years.
Which Contributions Are Taxed Under Division 293?
Division 293 tax applies to concessional super contributions, which include:
• Employer contributions (including Superannuation Guarantee (SG) payments)
• Salary-sacrificed contributions
• Personal deductible contributions
• Certain roll-over superannuation benefits
However, excess concessional contributions (contributions that exceed the standard concessional cap) are disregarded for Division 293 tax purposes. If an individual carries forward unused concessional cap amounts from previous years, all contributions within the higher cap are still counted for Division 293 calculations.
How Division 293 Tax is Calculated
The Australian Taxation Office (ATO) assesses Division 293 tax using both:
- Your income tax return – to determine Division 293 income
- Super fund contribution reports – to determine Division 293 concessional contributions
The tax is then calculated as 15% of the lower of:
• The amount over the $250,000 threshold
• The taxable concessional contributions
For example, if an individual has a Division 293 income of $260,000 and concessional contributions of $20,000, the excess income above the threshold is $10,000. Since this is lower than the concessional contributions, the additional 15% tax applies to $10,000, resulting in a $1,500 Division 293 tax liability.
Receiving and Paying Division 293 Tax Notices
If you are liable for Division 293 tax, the ATO will issue a Division 293 notice of assessment after receiving your super fund’s tax return and contribution details.
Payment options include:
• Paying the tax directly from personal funds
• Releasing money from your superannuation account
Paying on time helps avoid interest charges.
Can You Avoid Division 293 Tax?
Unfortunately, Division 293 tax cannot be avoided if your income exceeds the threshold. However, tax planning strategies—such as reducing taxable income through deductions or structuring salary-sacrificed contributions—can help keep your total income under $250,000 and minimise liability.
Disputing a Division 293 Tax Assessment
If you believe you have been incorrectly assessed, check the reported income and contribution amounts on your Division 293 notice. Errors in tax returns or super fund reporting can sometimes lead to miscalculations. You can correct mistakes by:
• Amending your tax return
• Contacting your super fund to verify reported contributions
• Lodging an objection with the ATO if the assessment appears incorrect
Division 293 tax is designed to limit superannuation tax concessions for high-income earners, ensuring a fairer tax system.
While it increases the tax burden on those earning above $250,000, it is still more favourable than paying the highest marginal tax rate of 47%. Even if you have to pay Division 293 tax, the 30% tax rate on concessional contributions is still lower than the top marginal tax rate of 47%, making superannuation a tax-effective investment.
If the Division 293 tax may apply to you, consider speaking with a LT financial adviser or LT tax professional to explore strategies to optimise your super contributions and tax position.