Division 293 tax is an additional tax on super contributions which reduces the tax concession for individuals whose combined income and contributions are greater than the Division 293 threshold.
From 1 July 2017 the Division 293 threshold is $250,000. Prior to this it was $300,000.
Division 293 tax is charged at 15% of an individual’s taxable contributions.
Who does Division 293 tax apply to?
You’re liable to pay Division 293 tax if you exceed the income threshold and you have taxable contributions for an income year.
If your Division 293 income plus your Division 293 super contributions are greater than the Division 293 threshold, the taxable contributions will be the lesser of the Division 293 super contributions and the amount above the threshold.
Income
Division 293 tax is calculated based on your Division 293 income, which is similar to the calculation for income for Medicare levy surcharge purposes. This information is collected from your income tax return.
Contributions
Division 293 tax uses contribution information reported on member contributions statements (MCS) and the self-managed super fund (SMSF) annual return, which are lodged to ATO via your super fund, to determine taxable contributions.
The contributions counted for Division 293 tax purposes are your super contributions made before tax, also known as concessional contributions. To calculate which contributions are the Division 293 super contributions, we disregard any contributions that attract certain additional tax.
One-off events
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.
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
- you decide to salary sacrifice some of your income to super.
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. In the same way your contributions may also increase for a particular year.
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