• Information for first time Division 293 clients

    You may have received a Division 293 assessment for the first time and be unsure why this has been sent to you.

    Division 293 reduces the tax concession high income earners receive and aligns it more closely with the concessions received by average income earners.

    Super contributions made before tax, 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:

    In the 2015-16 financial year Mark earns $320,000 and his employer contributes $20,000 to his superannuation 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 49%. Mark would have paid $9,800 tax on the additional $20,000.

    The tax concession Mark would receive on his contributions is $6,800.

    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 $3,800.

    End of example

    We use information from your income tax return and your contributions reported by your super fund(s) to work out your Division 293 tax.

    For 2016-17 and earlier financial years if your income for surcharge purposes plus concessional contributions is over $300,000, you are taxed at 15% on either your contributions, or the amount that is over $300,000 – whichever amount is lower. From the 2017-18 financial year the threshold is reduced from $300,000 to $250,000.

    Example:

    Income for surcharge purposes

    $290,000

    Concessional contributions

    $15,000

    Total

    $305,000

    Division 293 tax payable is lesser of concessional contributions ($15,000 or the amount above the threshold $5,000).
    Division 293 tax payable is 15% of $5,000
    Division 293 tax payable is $750

    End of example

    If you believe your Division 293 Assessment is incorrect

    If you have been assessed for Division 293 tax incorrectly it is usually because of mistakes in your income tax return or in the contribution amounts reported by your fund.

    Check the income and contribution amounts on your Division 293 Notice of Assessment carefully. If you disagree with either of these amounts, you may need to correct your income tax return or discuss your reported contributions with your fund. Changes made to your income tax return or your super fund reporting will update your Division 293 tax.

    Other commonly asked questions

    One-off increases to annual income

    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.

    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.

    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.

    Impact of excess concessional contributions

    When we work out your concessional contributions for Division 293, we don’t include any amounts that are above your excess contribution cap. Excess contributions are taxed at your income tax rate so you are no longer receiving a concession for them.

    Unlike excess contributions, the Commissioner of Taxation does not have discretion to disregard or reallocate contributions in the calculation of Division 293 tax.

    Therefore, if you choose to not be taxed on your excess contributions, by asking the Commissioner to disregard or reallocate them to another year, then they will remain concessional and need to be included back into the Division 293 calculation.

    Impact of carry forward concessional contributions

    From the 2019-20 financial year if your total superannuation balance is less than $500,000 on 30 June of the previous financial year you may be able to increase your concessional contributions cap.

    Any unused concessional contributions you use will form part of your low-tax contributions.

    How to pay your Division 293 tax

    By paying Division 293 tax to us by the due date you will avoid paying interest.

    To make a payment you can either:

    • pay the whole amount yourself with your own money
    • use the release authority form that was included with your notice to ask your super fund to pay all or some of it for you.

    Deferred Division 293 tax

    If you are a member of a defined benefit super fund, you do not have access to contributions even if the Commissioner gives authority for amounts to be released. In these instances, you will still be assessed for Division 293 tax but the Commissioner will defer payment of the amount until a benefit is paid from your defined benefit fund.

    Any deferred debts that are not paid by 30 June each year will attract end of year interest. The full amount of all unpaid deferred debts and interest will be used to calculate the amount you need to pay when you take a benefit from your fund.

    By voluntarily paying your deferred Division 293 tax by 30 June each year, you will avoid paying end of year interest.

    To make a voluntary payment you can either:

    • pay the whole amount yourself with your own money
    • use the release authority form that was included with your notice to ask your super fund to pay all or some of it for you. In most cases to do this you will need to have a second super fund that will allow you to access your contributions.

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      Last modified: 01 Dec 2016QC 36272