You work hard to put money away for later. Then a tax notice arrives, and the number is bigger than you expected. If you earn a good income, Division 293 is one of those rules that catches people off guard.
So let’s walk through it.
It’s an extra tax on some super contributions for higher earners. Your super fund already pays 15% on the contributions you make before tax. If Division 293 applies to you, you pay an extra 15% on part of those contributions. That can bring the total tax on them to 30%.
It kicks in when your combined income and concessional (before-tax) super contributions go over $250,000 in a financial year. Your income here is roughly your taxable income, with a few extras added back, like reportable fringe benefits and certain investment or rental losses. The contributions include your employer’s super guarantee, any salary sacrifice, and personal contributions you claim a deduction for.
It’s worked out for you as an individual, not as a household. So it’s your numbers that matter.
Karen’s income for Division 293 purposes is $240,000. Her concessional contributions for the year are $15,000. Together that’s $255,000, which is $5,000 over the line.
The tax is 15% of the smaller of two amounts: her contributions, or the $5,000 she’s over by. Here that’s $5,000, so the extra tax is $750. Not every dollar above $250,000 gets taxed, which is good to know.
The ATO sends a Division 293 notice once it has your tax return and your fund’s contribution details. You have to pay by the date on the notice to avoid interest. You can pay from your own money or ask for money to be released from your super. That choice must be made within 60 days of the assessment, and it can’t be reversed.
Super is still one of the most tax-effective ways to build money for later life. Division 293 doesn’t change that. What it changes is how much you should know before the notice lands.
If you’re in the $250,000 zone, it’s worth asking a few questions. How close are you to the line this year? Is a bonus, a property sale or a lump sum coming up that could push you over? Is your salary sacrifice still the right amount? Those answers can look very different once you put your income, super and tax side by side.
Talk to our team about how Division 293 fits your income, super and tax. Our team looks at all three together, because they’re connected.