You’re liable to pay Division 293 tax if you exceed the income threshold ($250,000) and you have taxable contributions for an income year.
If your Division 293 income plus your Division 293 super contributions are greater than the Division 293 threshold, the taxable contributions will be the lesser of the Division 293 super contributions and the amount above the threshold.
Income
Division 293 tax is calculated based on your Division 293 income, which is similar to the calculation for income for Medicare levy surcharge purposes. This information is collected from your tax return.
To calculate your Division 293 income, we disregard any reportable superannuation contributions reported on your tax return – these contributions are included in another part of the calculation.
Contributions
Division 293 tax uses the contribution information reported to us by your super fund, to determine taxable contributions.
The contributions counted for Division 293 tax purposes are your super contributions made before tax, also known as concessional contributions. To calculate which contributions are the Division 293 super contributions, we disregard any contributions that attract certain additional tax.
One-off events
Even though you may not normally have an income in excess of the Division 293 threshold, certain events can increase your income to this level for a particular year.
For this reason Division 293 might apply to you for only one year where:
- you receive an eligible termination payment
- you make a capital gain
- for another reason your income significantly increases
- you decide to salary sacrifice some of your income to super.
In these cases your marginal tax rate for the year increases and therefore the concession you have received on your concessional contributions also increases. To reduce this concession to an equitable level, you may be assessed for Division 293 tax. In the same way your contributions may also increase for a particular year.
Information for first time clients
You may have received an Additional tax on concessional contributions (Division 293) notice for the first time and be unsure why this has been sent to you.
Division 293 reduces the tax concession high income earners receive, even if this is due to a one-off event, and aligns it more closely with the concessions received by average income earners.
Concessional contributions are taxed within your super fund at a concessional rate of 15%.
If you are a high income earner, your marginal tax rate is higher than an average income earner. When you make concessional contributions to your fund, you receive 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.
Example: Working out the tax concession on super
In the 2020–21 financial year Mark earns $320,000 and his employer contributes $20,000 to his super fund. Mark’s fund pays tax of $3,000 on his contribution (15% × $20,000).
If Mark’s employer had not contributed to super, Mark would have earned $340,000 and the additional $20,000 would have been taxed at his marginal rate of 47%. Mark would have paid $9,400 tax on the additional $20,000.
The tax concession Mark would receive on his contributions is $6,400.
By paying Division 293 tax of $3,000 (15% × $20,000) Mark still receives a concession but it is reduced.
The total amount of tax paid on the contribution is $6,000 (30% × $20,000, made up of 15% taxed in the fund and 15% Division 293 tax). The tax concession is now $3,400.
