Division 293 tax is a crucial aspect of Australia’s tax system, specifically targeting high-income earners whose combined income and concessional super contributions exceed $250,000. This additional tax, amounting to 15%, aims to ensure that high earners do not benefit disproportionately from tax concessions, aligning their contributions more closely with those of average income earners.

Determining Your Liability

If you find yourself in the bracket where your combined income and concessional super contributions exceed $250,000, you will be subject to Division 293 tax. This tax liability becomes apparent when the Australian Taxation Office (ATO) sends you an “Additional tax on concessional contributions” notice. This notice is issued after the ATO has received both your income tax return and contribution data from your super fund.

How Division 293 Tax Is Calculated

To calculate your Division 293 tax, the ATO uses the following formula:

  1. Determine Your Division 293 Income (a): This includes your taxable income, reportable fringe benefit amounts, and financial investment losses. The sum of these factors provides your Division 293 income.
  2. Calculate Your Division 293 Super Contributions (b): This figure is determined based on the contribution information reported to the ATO by your super fund.
  3. Find Your Combined Income and Super Contributions (c): Combine your Division 293 income (a) and Division 293 super contributions (b) to determine the total.
  4. Identify the Division 293 Threshold (d): The threshold is set at $250,000.
  5. Calculate the Amount Above the Threshold (e): Subtract the threshold (d) from the combined total (c) to find the amount exceeding the threshold.
  6. Determine Taxable Super Contributions (f): Select the lesser of Division 293 super contributions (b) or the amount above the threshold (e).
  7. Calculate Division 293 Tax: Multiply your taxable super contributions (f) by 15%.

Example:

  • Taxable Income: $240,000
  • Reportable Fringe Benefit Amount: $30,000
  • Financial Investment Loss: $2,000
  • Division 293 Income (a) = $272,000
  • Taxable Super Contributions (f): $23,000
  • Division 293 Tax: $23,000 x 15% = $3,450

Paying Division 293 Tax

You have two options to settle your Division 293 tax: using your personal funds or releasing money from your super fund. If you choose to use funds from your super fund, you must complete an election form within 60 days from the date of your Division 293 assessment. The election form can be conveniently completed online through ATO online services.

In summary, Division 293 tax is a mechanism to ensure that high-income earners contribute equitably to the Australian tax system, aligning their tax benefits more closely with those of average earners. Understanding the calculation process and payment options can help you manage your tax obligations effectively.

Current as of March 2025.