Understanding the Division 293 Tax

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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.

Why do I have to pay this?

Normally, contributions into a superannuation fund are taxed at 15% immediately. This is so when you turn 65 you will receive income from your superannuation fund which will be tax free.

But, because you’re adjusted taxable income exceeds $250,000, the ATO requires you to pay 30% (instead of 15%) on money that goes into superannuation.

How is it calculated?

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

The Australian Taxation Office (ATO) uses the below information to determine whether a taxpayer is liable to pay the Division 293 tax:

  • Lodged income tax returns
  • Lodged MCS & SMSF annual returns

The assessments for Division 293 tax are only issued once all the required information has been provided to the ATO in the above lodgements.

If you have more than one fund and it reports contributions for you after you have lodged your individual income tax return, you may receive amended Division 293 tax assessments.

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.

These components 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

What do I do now?

Firstly, this is not something that can be changed. This is to be paid as stated by the ATO. However, you can nominate your superannuation fund to pay this on your behalf so you’re not out of pocket. To do this, contact your superannuation fund, provide them with the payment details provided by the ATO and request it to be paid.

Fore more information on Division 293 please call us on (08) 9248 8124 to set up a consultation. Please note charges will apply.

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Warren Kruger

Specialist Tax Consultant - “Helping YOU Pay The Correct Tax And Not A Penny More”. My story starts on Christmas Eve, back in 1983 in South Africa.

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