Division 293 Tax: What You Need to Know
Here’s a summary of what you need to know about Division 293 Tax:
- What is Division 293 Tax?
- How will you know if you owe the tax?
- How is Division 293 Tax calculated?
- Special cases & considerations
- Releasing money from Super for Division 293 Tax
- Final thoughts
Division 293 tax is an extra levy on superannuation contributions aimed at reducing tax concessions for high-income earners. If your combined income and concessional super contributions exceed $250,000 annually, you may be liable for this tax. This tax is charged at 15% of the surplus above the threshold or on the taxable super contributions, depending on which is lower.
How Will You Know If You Owe the Tax?
The Australian Tax Office (ATO) will notify you with an “Additional tax on concessional contributions (Division 293) notice” after assessing your income tax return and receiving contribution information from your super fund. If you use myTax, the notice will be in your myGov inbox.
How Is Division 293 Tax Calculated?
The ATO uses:
- Your tax return to determine your Division 293 income.
- Contribution data from your super fund to decide on the Division 293 super contributions.
The tax applies if you have taxable super contributions in an income year. It’s worth noting that taxable contributions are not the same as your Division 293 super contributions.
Special Cases & Considerations:
- Defined Benefit Members: If you’re part of a defined benefit super fund, you may not have access to these contributions. But, you’ll still be assessed for Division 293 tax. Payment will be deferred until you get a benefit from your defined benefit fund.
- Higher Level Office Holders: State higher level office holders who make specific super contributions to a constitutionally protected fund (CPF) are exempt from Division 293 tax on those contributions.
- Commonwealth Judges: Justices of the High Court or a court created by the parliament making contributions to a fund established under the Judges’ Pensions Act 1968 are exempt from Division 293 tax on those contributions.
- Temporary Residents: Former temporary residents might qualify for a Division 293 tax refund if they received a departing Australia super payment.
- Super Guarantee Amnesty Contributions: Contributions made under the super guarantee (SG) amnesty are not considered for Division 293 purposes.
Releasing Money from Super for Division 293 Tax
You can opt to pay your Division 293 tax liability by releasing funds from your super. There’s a 60-day window from the date of your Division 293 assessment to decide. However, this doesn’t change the payment’s due date.
High-income earners should be aware of the Division 293 tax and how it might impact their super contributions. Regularly consulting with your advisor can help you understand and manage your obligations. Contact us at [email protected] if you have any questions.