Determining if you need to pay Division 293 tax
You're liable to pay Division 293 tax if you have taxable contributions for an income year.
If your income – for surcharge purposes, plus your low-tax contributions – is greater than $300,000, the taxable contributions will be the lesser of the low-tax contributions and the amount above the $300,000 threshold.
Income for surcharge purposes
Division 293 tax is calculated based on your income for surcharge purposes, which is similar to the calculation for income for Medicare levy surcharge purposes. This information is collected from your income tax return.
For Division 293 tax purposes, we disregard any reportable super contributions reported on your income tax return – these contributions are included in another part of the calculation.
Division 293 tax uses contribution information reported on member contribution statements (MCS) and the self-managed super fund (SMSF) annual return, which are lodged to us via your super fund, to determine the total taxable super contributions.
The contributions counted for Division 293 tax purposes generally include:
- employer contributed amounts
- other family and friend contributions
- assessable foreign fund amounts
- assessable amounts transferred from reserves
- personal contributions for which you have been allowed a deduction
- defined benefit contributions.
These contributions are concessionally taxed at 15% within the super fund.
The total taxable super contributions amount is not the same as low-tax contributions. To calculate which contributions are the low-tax contributions, we disregard any contributions that attract certain additional tax.
For the 2012-13 year, we disregard contributions subject to excess concessional contributions tax, which equates to an additional 31.5% on top of the 15% tax paid by the super fund.
For the 2013-14 year and onwards, excess concessional contributions are included in your individual assessable income and taxed at your marginal tax rate (and are liable for the excess concessional contributions charge) on top of the 15% tax paid by the super fund. In these circumstances, applying the additional 15% Division 293 tax to those contributions would not be fair.
As a result, low-tax contributions are generally equal to total taxable super contributions (concessionally taxed in the fund) minus excess concessional contributions.
How we calculate Division 293 tax
We calculate your Division 293 tax amount by following these steps:
- Determining your income for surcharge purposes.
- Determining your low-tax contributions.
- Adding your income for surcharge purposes and your low-tax contributions.
- If the combined figure is greater than $300,000, you have taxable contributions. Taxable contributions will be the lesser of either
- the low-tax contributions
- the amount above the $300,000 threshold.
- The tax applied will be 15% of the taxable contributions.
Modifications for defined benefits
There is a modification to the way low-tax contributions are calculated for defined benefit accounts.
- Add together all concessionally taxed contributions made to an accumulation account in a super fund, including an accumulation account in a constitutionally protected fund (CPF).
- Disregard any excess concessional contributions exceeding the concessional contributions cap for the year.
- Add the defined benefit contributions (as reported on the MCS).
Modifications for state higher level office holders
If you're classified as a state higher level office holder who makes certain super contributions to a constitutionally protected fund (CPF), you're exempt from having Division 293 tax applied to those super contributions.
State higher level office holders
Under the regulations, you're state higher level officer holder if you are:
- a minister of the government of a state
- a member of the staff of a minister of the government of a state
- the governor of a state
- a member of staff of the governor of a state
- a member of the parliament of a state
- the clerk of a house of the parliament of a state
- the head of a department of the public service of a state or a statutory office holder of equivalent seniority, including a statutory office holder who is the head of an instrumentality or agency of a state
- a judge, justice or magistrate of the court of a state.
If at any time in the income year, you fall within the category of a state higher level office holder you will be treated as being a state higher level office holder for the entire income year.
Constitutionally protected funds
Constitutionally protected funds (CPFs) are untaxed super funds that don't pay income tax on contributions or earnings they receive.
CPFs are operated by some state governments in Australia for their employees.
Under the Australian Constitution, state government assets can't be taxed by the Commonwealth, so different arrangements apply to concessional contributions to CPFs.
Exempt super contributions
For state higher level office holders, all contributions made to a CPF, other than salary packaged contributions, are excluded from the low-tax contribution amount when determining the taxable contributions, but included when determining whether the $300,000 threshold was exceeded.
Salary packaged contributions are made because you agreed with your employer for the contribution to be made and, in return, withholding payments are reduced.
Modifications for Commonwealth judges
If you're a justice of the High Court, or justice or judge of a court created by the parliament, who makes super contributions to a super fund established under the Judges’ Pensions Act 1968, you're exempt from having Division 293 tax applied to those contributions.
Contributions made to one of these judges’ funds are excluded from the low-tax contribution amount when determining the taxable contributions, but included when determining whether the $300,000 threshold has been exceeded.
Modifications for refunded excess concessional contributions
If you accept a refund of excess concessional contributions offer for the 2012-13 year, the amount released under this offer is excluded from the excess concessional contributions used to calculate excess concessional contribution tax.
To calculate low-tax contributions, the excess concessional contributions disregarded for the excess contributions tax continue to be treated as excess concessional contributions and are deducted from low-tax contributed amounts. This prevents the refunded excess concessional contributions from being subject to Division 293 tax.