• Assessment of Division 293 tax

    We use the following information to assess an individual’s eligibility to pay Division 293 tax:

    • income tax return to determine the income for Division 293 tax purposes
    • MCS and/or SMSF annual return to determine contribution component for Division 293 tax (known as low-tax contributions).

    Assessments for Division 293 tax will not be issued until both pieces of information have been received.

    We will make an assessment of an individual's Division 293 tax liability for an income year equal to 15% of taxable contributions.

    Notice of Assessment for Division 293 tax

    Accumulation funds

    The majority of individuals who will receive a Division 239 tax assessment will be contributors to an accumulation fund.

    Defined benefit funds

    If an individual has a defined benefit interest, often known as an account in a defined benefit fund, we will make a determination regarding their Division 293 tax.

    A determination may be made to defer Division 293 tax that is attributable to a defined benefit account, effectively deferring the payment date of the tax. This reflects the fact that money generally cannot be released from a defined benefit account until a super benefit is paid, usually upon retirement.

    If an individual has more than one defined benefit account, all Division 293 tax attributed to those accounts will be deferred and the tax apportioned across the accounts.

    The assessment and, if applicable, the determinations, will be included in the one notice of assessment issued to the individual.

    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 is intended to represent 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 the ‘notional contributions’ amount, which was a maximum of $25,000.

    From 2013–14, an actuarial calculation is required to assess the full value of the defined benefit interest.

    Example 3

    In 2012–13, James, who was a member of a defined benefit fund, had income for Division 293 tax purposes of $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.

    Because 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 will not be due until a benefit is taken..

    End of example

     

    Example 4

    In 2013–14, James's income for Division 293 tax purposes was again $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.

    Because his Division 293 tax income is greater than the threshold of $300,000, he will be assessed for Division 293 tax on $45,000 ($345,000 - $300,000).

    The member will have a defined benefit Division 293 tax assessment of $6,750 ($45,000 x 15%) which will not be due until a benefit is taken.

    End of example

    The member’s assessment for the 2013–14 financial year is significantly higher than the 2012–13 financial year because the full amount of defined benefit contributions is taken into account, rather than the $25,000 notional contribution that was used to calculate Division 293 tax assessments in the 2012–13 transitional year.

    Find out more:

    For more information on the transitional year for Division 293 tax, read the Division 293 tax learner guide.

    The calculation – accumulation interest

    The following steps set out how to work out Division 293 tax liability for an individual who contributes to an accumulation interest in a superannuation fund:

    Step 1: Your income for Division 293 tax purposes

    The income component of the Division 293 tax calculation is based on the same income calculation used to determine if an individual needs to pay the Medicare levy surcharge (MLS), disregarding any reportable superannuation contributions reported on the income tax return.

    The components of this income calculation are:

    • taxable income (assessable income minus allowable deductions)
    • total reportable fringe benefits amounts
    • net financial investment loss
    • net rental property loss
    • net amount on which family trust distribution tax has been paid
    • super lump sum taxed elements with a zero tax rate.

    These amounts are added up (except the super lump sum amount, which is subtracted) to give the income amount.

    Example 5

    For the 2012–13 income year, David reported the following amounts on his income tax return:

    • taxable income of $290,000
    • total reportable fringe benefits of $10,000
    • net amount on which family trust distribution tax has been paid of $15,000.

    This gives David an income component for Division 293 tax purposes of $315,000.

    End of example

    Step 2: Your annual low-tax contribution

    Low-tax contributions equal an individual's low-tax contributed amounts minus any excess concessional contributions that exceed the concessional contributions cap for the year.

    From 1 July 2019, individuals who carry forward concessional contributions need to be aware that this may impact their annual low-tax contribution amount.

    Example 6

    For the 2012–13 income year, David has low-tax contributed amounts of $40,000.

    David has a concessional contribution cap of $25,000 – as a result, he has excess concessional contributions of $40,000 - $25,000 = $15,000.

    David’s low-tax contributions are his low-tax contributed amounts ($40,000) minus his excess concessional contributions: $40,000 - $15,000 = $25,000.

    End of example

    Note: Excess concessional contributions, and whether these contributions are refunded, disregarded or re-allocated, have an impact on Division 293 tax.

    Example 7

    For the 2018-19 income year, David has low-tax contributed amounts of $15,000.

    David has a concessional contribution cap of $25,000 – as a result, he has unused cap amounts of $10,000.

    For the 2019-20 income year, David has low-tax contributed amounts of $40,000.

    David has a concessional contribution cap of $25,000 + $10,000 unused cap amounts = $35,000 - as a result, he has excess concessional contributions of: $40,000 - $35,000 = $5,000

    David’s low-tax contributions are his low-tax contributed amounts ($40,000) minus his excess concessional contributions: $40,000 - $5,000 = $35,000.

    End of example

    Step 3: Your taxable contributions

    Taxable contributions are the lesser of the low-tax contributions and the amount in excess of Division 293 threshold.

    Example 8

    For the 2012–13 income year, David had income for surcharge purposes of $315,000 and low-tax contributions of $25,000.

    The amount of taxable contributions is the lesser of the:

    • amount of low-tax contributions = $25,000, and
    • amount of income and low-tax contributions above the $300,000 threshold = $315,000 + $25,000 = $340,000 - $300,000 = $40,000.

    As a result, the amount of David’s taxable contributions for the 2012–13 income year is $25,000 because it is the lesser of the two amounts.

    End of example

     

    Example 9

    For the 2017-18 income year, David had income for surcharge purposes of $235,000 and low-tax contributions of $25,000.

    The amount of taxable contributions is the lesser of the:

    • amount of low-tax contributions = $25,000, and
    • amount of income and low-tax contributions above the $250,000 threshold = $235,000 + $25,000 = $260,000 - $250,000 = $10,000.

    As a result, the amount of David’s taxable contributions for the 2017-18 income year is $10,000 because it is the lesser of the two amounts.

    End of example

    Step 4: Your assessed Division 293 tax

    Assessed Division 293 tax is 15% of taxable contributions.

    Example 10

    For the 2012–13 income year, David had taxable contributions of $25,000. His assessed Division 293 tax is 15% of this amount, as follows:

    $25,000 x 0.15 = $3,750.

    End of example
      Last modified: 07 Dec 2016QC 36275