Division 293 Tax – what is it? And are you affected?

Division 293 Tax is an additional tax imposed by the Government on high income earners to the normal taxes they pay. It is designed to reduce the benefit high income earners receive on taxable contributions to their superannuation fund.

The introduction of Division 293 Tax removes the larger tax savings high income earners receive and more closely aligns with the concessions received by average income earners by imposing an additional tax of 15% on superannuation contributions.

If your adjusted taxable income for the year plus your Division 293 super contributions equal or exceeds $250,000, Division 293 tax is calculated at 15% of the lower of:

• Concessional contributions received by your fund during the financial year or
• Amount of concessional contributions above the $250,000 threshold.

The rationale behind the introduction of Division 293 was that even through these individuals will be paying at on concessional superannuation contributions at 30%, this is still less than the top marginal tax rate of 47% that generally applies to high income earners who are liable for Div 293 tax.

It is important to note that the ATO calculates Division 293 tax yearly. This means that your liability can vary from year to year. For instance, you may be subject to this tax in certain years but not others due to say a salary bonus or a capital gains tax event.

Generally a Division 293 tax assessment is issued for an income year after your income tax assessment – this is because it is a separate tax form from your income tax.

It is important to review a Division 293 tax assessment quickly for its correctness. This is important because unlike income tax you can make an election to have money released from your superannuation fund to pay a Div 293 assessment however this election needs to be made within 60 days of the date the assessment is released.

If you receive a Div 293 assessment and are unsure what to do or think you may be liable for this tax in the current year please reach out to your client manager who will be able to assist you with some advice on your individual circumstances.