This article is for people whose income and super contributions together come to more than $250,000 a year, and for the business owners and executives who are getting close. It explains how Division 293 tax works, why it arrives as a separate bill that nothing on your payslip will have covered, how it is calculated and the choices you have when the notice arrives.
Division 293 tax is assessed after the year ends
Concessional contributions, which include your employer's super guarantee payments and any salary you sacrifice into super, are normally taxed at 15% inside your fund. Division 293 adds a further 15% for people with higher incomes, so those contributions are taxed at 30% in total.
The extra tax is not withheld through payroll and the fund does not deduct it. The ATO works it out after it has your income tax return and the contribution figures reported by your fund, and then sends a Division 293 notice. If you lodge through myTax, the notice goes to your myGov inbox. It can arrive months after the year it relates to, with its own due date.
The $250,000 threshold and what counts toward it
The threshold has been $250,000 since the 2017-18 income year. The ATO adds your Division 293 income to your Division 293 super contributions and compares the total with the threshold.
Division 293 income starts with your taxable income and adds amounts including your reportable fringe benefits. Division 293 super contributions are, broadly, your concessional contributions for the year. The general concessional contributions cap is $32,500 for 2026-27, and contributions up to that cap are counted.
The result is that a salary well below $250,000 can still trigger the tax once super is added. A taxable income of $225,000 with $28,000 of concessional contributions takes the total over the line.
How the tax is calculated
Division 293 tax is 15% of whichever is lower: the amount by which your combined total exceeds $250,000, or your Division 293 super contributions.
For example, take someone with taxable income of $235,000 and concessional contributions of $28,000. The combined total is $263,000, which is $13,000 over the threshold. The lower of $13,000 and $28,000 is $13,000, so the Division 293 tax is $1,950.
Where income alone is above $250,000, the whole of the concessional contributions is caught, and the tax is 15% of the contributions. Someone earning $320,000 with $30,000 of contributions pays $4,500.
The ATO's page on Division 293 tax sets out the full definitions and worked examples.
Why a salary adjustment does not change the result
Salary sacrifice moves part of your pay into super. It lowers taxable income by the same amount that it raises concessional contributions, so the combined figure the ATO compares with the threshold stays where it was. Changing your PAYG withholding does not help either, because Division 293 is assessed separately from income tax.
The tax does not make contributing to super a poor decision. At incomes above $190,000 the top marginal tax rate is 45%, plus the 2% Medicare levy. A concessional contribution taxed at 30% under Division 293 is still taxed less than the same dollar taken as salary, so contributing up to the cap generally still saves tax. Against salary taxed at 47%, the saving on each contributed dollar falls from 32% to 17%, and the bill for the extra 15% arrives later.
A single strong year can bring it in
Because Division 293 income starts with taxable income, anything that lifts taxable income in a particular year counts, including a capital gain. A business owner whose usual income is $180,000 and who sells an investment property for a $120,000 taxable gain has taxable income of $300,000 for that year, and their concessional contributions for the year are caught in full.
The same applies to a large bonus, a director's fee paid in a lump or a trust distribution that is higher than usual. In each case the tax applies to that year only, and the next year is assessed on its own figures.
Where the timing of a sale or a distribution is within your control, the Division 293 effect belongs in the decision alongside the capital gains tax itself. It is a smaller amount, but it is easy to calculate in advance and costs nothing to plan for.
Paying the notice, and the 60-day election
You can pay a Division 293 notice from your own money by the due date, or elect to have money released from your super fund to pay it. The election must be made within 60 days of the date of the assessment, and it cannot be withdrawn once made. The ATO then sends your fund a release authority and the fund pays the amount directly.
Paying from super keeps cash in your hands, at the cost of a smaller retirement balance. Paying personally keeps the super balance intact. Either way, paying by the due date avoids interest. Members of defined benefit funds cannot access those contributions, so their Division 293 tax is deferred until a benefit is paid, and a debt account is kept in the meantime.
It is worth checking the income and contribution figures on the notice. If either is wrong, the fix is to correct your tax return or ask your fund to correct its reporting, and the Division 293 assessment updates when they do.
Planning ahead for the bill
For business owners and executives whose income moves from year to year, the useful step is to estimate Division 293 alongside the income tax projection before 30 June, so the amount is known and set aside. Where an SMSF is involved, the release election can be planned around the fund's cash position. Our article on super contribution caps for business owners covers the caps that interact with these decisions.
Questions we are asked
What is the Division 293 threshold?
$250,000. Division 293 tax applies when your Division 293 income plus your Division 293 super contributions exceed it.
How is Division 293 tax calculated?
It is 15% of the lower of the amount over $250,000 and your Division 293 super contributions. With $235,000 of taxable income and $28,000 of contributions, the excess is $13,000 and the tax is $1,950.
Does salary sacrifice reduce Division 293 tax?
No. Salary sacrifice lowers taxable income and raises concessional contributions by the same amount, so the combined total compared with the threshold does not change.
Can I pay Division 293 tax from my super?
Yes. You can elect to release money from super within 60 days of the assessment. The election cannot be withdrawn once lodged.
Is it still worth making concessional contributions if I pay Division 293 tax?
For people on the top marginal rate, concessional contributions are taxed at 30% under Division 293, against 47% on salary including the Medicare levy, so they generally still save tax.
Working out your position
If you are close to the threshold or have received a notice, our team can estimate your Division 293 tax with your income tax projection and help you decide how to pay it. Book a time with us and bring your most recent notice of assessment and super statement.
