• The calculation – defined benefit interest

    The following steps set out how to work out Division 293 tax liability for an individual who contributes to a defined benefit 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. This calculation is known as income for surcharge purposes.

    The calculation for income for surcharge purposes includes reportable super contributions. However, for Division 293 tax, the calculation disregards any reportable super contributions, because these contributions are picked up in the low-tax contribution calculation.

    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 9

    For the 2012–13 income year, Louise reported the following amounts on her income tax return:

    • taxable income of $320,000
    • net rental property loss of $20,000
    • super lump sum taxed elements with a zero tax rate of $10,000

    This gives Louise an income component for Division 293 tax purposes of $330,000 ($320,000 plus $20,000 minus $10,000).

    End of example

    Step 2: Your annual low-tax contribution

    For defined benefit interests, low-tax contributions equal:

    Defined benefit contributions are calculated and reported to us by the super fund on an individual's member contribution statement.

    Example 10

    For the 2012–13 income year, Louise has low-tax contributed amounts of $50,000.

    Louise has a concessional contribution cap of $25,000 – as a result, she has excess concessional contributions of $50,000 - $25,000 = $25,000.

    She has defined benefit contributions of $15,000.

    Louise’s low-tax contributions are her low-tax contributed amounts ($50,000) minus her excess concessional contributions ($25,000) plus her defined benefit contributions ($15,000): $50,000 - $25,000 + $15,000 = $40,000.

    End of example

    Step 3: Your taxable contributions

    Taxable contributions are the lesser of the low-tax contributions and the amount in excess of $300,000.

    Example 11

    For the 2012–13 income year, Louise had income for Division 293 tax purposes of $330,000 and low-tax contributions of $40,000.

    The amount of taxable contributions is the lesser of the:

    • amount of low-tax contributions = $40,000, and
    • amount of income and low-tax contributions above the $300,000 threshold = $330,000 + $40,000 = $370,000 - $300,000 = $70,000.

    As a result, the amount of Louise’s taxable contributions for the 2012–13 income year is $40,000 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 12

    For the 2012–13 income year, Louise had taxable contributions of $40,000. Her assessed Division 293 tax is 15% of this amount, as follows:

    $40,000 x 0.15 = $6,000.

    End of example

    Step 5: Identifying your defined benefit tax

    An individual's defined benefit tax for an income year is attributable to the defined benefit interest in the superannuation fund. We need to identify which portion of the tax is attributed to the defined benefit interest, because this portion is treated differently when paying the tax.

    Defined benefit tax for an income year is the amount worked out using the formula:

    Division 293 tax for the income year times (Defined benefit contribution component divided by Taxable contributions for the income year)

    The defined benefit contribution component is worked out as follows:

    Step 1: Take the lesser of the low-tax contributions and the total defined benefit contributions – from this amount, then

    Step 2: Subtract the difference between taxable contributions and the low-tax contributions.

    Example 13

    To work out Louise's defined benefit tax, first we need to work out her defined benefit contribution component.

    For the 2012–13 income year, Louise had low-tax contributions of $40,000, a defined benefit contribution amount of $15,000, and taxable contributions of $40,000.

    Step 1: Take the lesser of low-tax contributions ($40,000) and ($15,000), which is $15,000.

    Step 2: From $15,000, subtract the difference between her taxable contributions ($40,000) and her low-tax contributions ($40,000), which is $0.

    As a result, the defined benefit contribution component is $15,000 ($15,000 minus $0).

    Putting this figure into the defined benefit tax calculation:

    • Division 293 tax ($6,000) x [Defined benefit contribution component ($15,000) / taxable contributions ($40,000)] = $6,000 x 0.376 = $2,250.

    Louise's defined benefit tax amount is $2,250.

    End of example
      Last modified: 06 May 2015QC 36275