For individuals whose income exceeds certain thresholds, an additional tax known as Division 293 tax applies to their superannuation contributions.
While super contributions are generally taxed at a concessional rate of 15%, the Division 293 tax is designed to reduce this concession for high-income earners.
So what exactly is Division 293 tax is and how might it affect your super?
What is Division 293 Tax?
Division 293 tax is an additional 15% tax on superannuation contributions, aimed at individuals whose combined income and concessional super contributions exceed $250,000 in a financial year. This effectively reduces the tax benefits that high-income earners receive on their super contributions, bringing the total tax on these contributions to 30% (the standard 15% concessional rate, plus an additional 15% from Division 293).
Who Needs to Pay Division 293 Tax?
If your income, combined with your concessional super contributions, exceeds $250,000, you may be liable for Division 293 tax. The calculation includes a range of concessional contributions such as employer contributions, salary sacrifice, and personal deductible contributions, as well as certain roll-over benefits.
The Australian Tax Office (ATO) uses two main pieces of information to assess whether you need to pay Division 293 tax:
- Your tax return: This provides your Division 293 income.
- Superannuation fund reports: These show your super contributions for the year.
If your income and super contributions go over the $250,000 threshold, Division 293 tax will apply. The amount of tax charged is 15% of either the excess over the threshold or the taxable super contributions, whichever is lower.
How Will You Know If You Owe Division 293 Tax?
Once the ATO receives your income tax return and the relevant super contribution details from your fund, they will assess whether you are liable for Division 293 tax. If you owe Division 293 tax, the ATO will issue a notice—called the “Additional Tax on Concessional Contributions (Division 293)” notice—directly to your myGov inbox or to your tax agent, depending on your communication preferences.
It’s important to note that if you have multiple super funds or if your contributions are reported after you have lodged your tax return, you may receive an amended assessment later.
When To Expect A Division 293 Notice
Your Division 293 notice will be sent after the ATO has received both your tax return and the contribution information from your super fund. If your income indicates that you may be subject to Division 293 tax, the ATO will remind you of this when you prepare your tax return online. However, you’ll only receive the final assessment once all information is complete.
What to Do if You Think Your Assessment is Incorrect
Errors in Division 293 tax assessments can occur, usually due to inaccuracies in your tax return or the super contributions reported by your fund. If you believe the ATO has miscalculated your Division 293 tax, it’s essential to check the income and contribution figures carefully. You may need to correct your tax return or contact your super fund to verify the amounts reported.
In the event that you still disagree with the assessment, you have the right to lodge an objection with the ATO.
Division 293 tax is something high-income earners should be aware of, especially as it impacts the tax concessions they receive on their superannuation.
By understanding how this tax works and reviewing any notices or assessments carefully, individuals can ensure they are meeting their obligations and maximising their super savings.
If you have any questions or concerns about Division 293 tax, your accountant can guide you through the process and help clarify your tax position.
