Planning for Division 293 Tax? Understanding Your Super Tax

Division 293 tax is an additional tax imposed by the Australian government on high-income earners in addition to the normal taxes they pay. Division 293 tax is calculated separately from income tax and is specifically applied to concessional superannuation contributions that exceed the concessional contributions cap or to an individual’s income for surcharge purposes that exceeds the Division 293 threshold (currently at $250,000).

This additional tax aims to maintain sustainability and fairness in the Australian Tax system by targeting concessions toward those who need them most, rather than benefiting high-income earners disproportionately.

Individuals should be aware of several key aspects regarding Division 293 tax:

1. Thresholds: Division 293 tax applies to individuals with combined income and concessional superannuation contributions exceed $250,000 in a financial year. It is important to note this tax threshold can change over time due to legislative updates or government decisions.  

2. Concessional Contributions Cap: Concessional contributions include employer contributions (such as employer superannuation guarantee contributions and salary sacrifice contributions) and personal contributions claimed as a tax deduction. It is important for individuals to monitor their concessional contributions to avoid exceeding the cap.

3. Calculations: Division 293 tax is calculated as 15% of the lesser of:

• The individual’s concessional superannuation contributions that exceed the concessional contributions cap
• The amount by which the individual’s income for surcharge purposes exceeds the Division 293 threshold.

4. Impact on Retirement Savings: Division 293 tax reduces the tax concession individuals receive on their superannuation contributions. High income earners may need to reassess their retirement savings strategies to account for the reduced tax benefit.

5. Planning Opportunities: While Division 293 tax increases the tax burden on high-income earners’ superannuation contributions, there may be planning opportunities to minimise the impact, such as contribution timing, alternative tax-efficient investment strategies and consider non-concessional contributions.

6. Reporting and Compliance: Individuals subject to Division 293 tax must ensure accurate reporting of income and superannuation contributions and plan for additional tax payments.

Paying Division 293 tax in Australia typically involves the following steps:

1. Receive Notice from the Australian Taxation Office (ATO): If you are subject to Division 293 tax, the ATO will notify you of your tax liability. This notice will outline the amount of Division 293 tax you owe and provide instructions on how to pay it.
   
   
2. Review the Notice: Carefully review the notice from the ATO to ensure accuracy. Check that the calculated tax amount aligns with your income and superannuation contributions made for the relevant financial year.
   
   
3. How to pay:

• Option 1: With your own money (via EFT, BPAY, Credit Card, Direct Debit or payment by mail), or
• Option 2: By releasing money from super, by completing an election form via myGov (quickest way) or a paper form. Most defined benefit funds are not able to release amounts for you, check with your fund before completing the election form. Once ATO receive and process the election form, they will send an “Authority to Release Statement” to you with instructions on how to make payment.

4. Keep records: After making the payment, retain records of the transactions as it may be required for future verification.
   
   

Overall, Division 293 tax introduces considerations for high-income earners regarding their retirement savings, tax planning and overall financial management. We recommend that you seek advice from us or your financial advisors to help you understand the implications of Division 293 tax and implement appropriate strategies to help you manage your tax obligations and retirement savings.

For More information

For more information on the implications of Division 293 tax, how to implement appropriate strategies or an initial consultation, please contact the Archer Gowland Redshaw team on (07) 3002 2699 | info@agredshaw.com.au.