Assessing your Division 293 tax debt
We use the following information to assess whether you’re liable to pay Division 293 tax:
- income tax return to determine income for surcharge purposes
- MCS and SMSF annual returns to determine low-tax contributions.
Assessments for Division 293 tax are issued once we have your income tax return and an MCS or SMSF annual return.
Note: if you have more than one fund and it reports contributions for you after you have lodged your income tax return, you may receive an amended Division 293 tax assessment.
The threshold at which a Division 293 tax calculation will result in an assessment being issued is $300,000.
Two types of original Division 293 tax assessments can be issued:
- due and payable liability
- deferred liability.
Defined benefit contributions
For the 2013-14 and later financial years, funds are required to report defined benefit contributions.
The amount of defined benefit contributions represents the annual increase in a defined benefit superannuation account based on the benefit individuals are expected to receive when they leave the fund.
The amount of defined benefit contributions could be substantial for some people.
2012-13 was a transitional year for defined benefit calculations
The 2012-13 financial year was a transitional year for Division 293 tax, where the full value of a defined benefit contribution was not taken into account.
Division 293 tax for defined benefit contributions was calculated on a notional contributions amount which was a maximum of $25,000.
A defined benefit fund member's income for Division 293 tax purposes was $290,000.
His super fund reports the maximum notional contributions of $25,000.
His Division 293 tax income is $315,000 = $290,000 + $25,000.
As his Division 293 tax income is greater than the threshold of $300,000 he will be assessed for Division 293 tax on $15,000 ($315,000 - $300,000).
The member will have a defined benefit Division 293 tax assessment of $2,250 ($15,000 x 15%) which is not due until a benefit is taken.
End of example
A defined benefit fund member had income for Division 293 tax purposes of $290,000.
His super fund uses an actuary to calculate defined benefit interest contributions of $55,000.
His Division 293 tax income is $345,000 = $290,000 + $55,000.
As his Division 293 tax income is greater than the threshold of $300,000 he is assessed for Division 293 tax on $45,000 ($345,000 - $300,000).
The member has a defined benefit Division 293 tax assessment of $6,750 ($45,000 x 15%) which is not due until a benefit is taken.
Note: the member’s assessment for the 2013-14 financial year is significantly higher than the 2012-13 financial year. This is because the full amount of defined benefit contributions is taken into account, rather than the $25,000 notional contribution used to calculate Division 293 tax assessments in the 2012-13 transitional year.
End of example
When your Division 293 tax debt is a due and payable liability
A Division 293 tax assessment is a due and payable liability if raised on contributions made to an accumulation fund.
You will be required to pay within 21 days after your notice of assessment is issued.
When your Division 293 tax debt is deferred
Payment of Division 293 tax is deferred if raised on a defined benefit account from which no super benefit has yet become payable.
Money generally can't be released from a defined benefit account until a super benefit is paid (usually on retirement).
If you have more than one defined benefit account, all Division 293 tax attributed to those accounts will be deferred.
How will you know if your Division 293 tax debt is deferred?
If you're assessed as having a Division 293 tax debt, a notice of assessment will be issued to you. The notice of assessment will identify the deferred amounts, and any amounts due and payable within a specified timeframe.
If you have multiple defined benefit accounts, the Division 293 tax is apportioned between them and deferred separately.
Division 293 tax deferred to a debt account
We establish a debt account for deferred Division 293 tax amounts.
A separate debt account is created for each defined benefit account you hold with Division 293 tax attributed to it. You receive a statement of account from this debt account whenever the account balance changes, so you can keep track of your deferred liability.
When your Division 293 tax is revoked
If your end benefit was paid prior to the deferred debt account being created, your Division 293 tax deferral will be revoked and your debt will become due and payable.
When your deferred Division 293 tax becomes payable
A deferred Division 293 tax debt must be paid when a super benefit becomes payable from the defined benefit super account it is attributed to – this is known as the end benefit.
However, these super benefits are not considered end benefits:
- rollovers to a successor fund in the case of fund mergers
- severe financial hardship payments
- funds released under compassionate grounds
- family law super payments.
If you request a super benefit from your super fund, and you have a Division 293 debt account attributable to that fund, you must advise us of your request via the End Benefit Notice – Individuals form.
You must submit this form within 21 days after making the request.
Note: failure to lodge an approved form may result in a failure to lodge penalty being applied.
After we receive the form, we process your information and issue you a debt account discharge liability notice, which provides details of the amount you need to pay.
This amount may be the figure held in the debt account, or the end benefit cap amount – whichever is lower. The end benefit cap amount is calculated and provided to us by the super fund.
Payment of your debt account discharge liability is due 21 days after the day your benefit was paid.