Division 293 Tax Explained: What High-Income Earners Need to Know About Super Contributions

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Understanding Division 293 Tax: How High-Income Earners’ Super Contributions Are Impacted

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Introduction

Division 293 tax is an extra tax on concessional (before-tax) super contributions for individuals whose income plus those contributions exceed a specific threshold. It reduces the tax concession for high-income earners.

This blog explains how Division 293 works, how it is calculated, what counts as income, who pays it, how to respond when assessed, and strategies to manage it.

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What Is Division 293 Tax and Why It Exists

• Division 293 tax imposes an extra 15% tax on concessional super contributions when combined income and those contributions exceed $250,000 in a financial year.
• Its purpose is to narrow the tax advantage enjoyed by high-income earners, making the system fairer.
• Since 2017–18, the threshold has been $250,000 and remains unchanged.

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Who Is Subject to Division 293 Tax

• High-income earners defined: Individuals whose income plus concessional contributions exceed $250,000.
• Included income sources:
  • Taxable income
  • Reportable fringe benefits
  • Net investment and rental property losses
  • Trust distributions
  • Some lump sum super components (with adjustments)
• One-off events: A capital gain, redundancy or bonus can tip income above the $250,000 threshold in a single year.

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What Counts as Concessional Super Contributions

• Employer Super Guarantee (SG) contributions
• Salary-sacrifice contributions
• Personal deductible contributions
• Some roll-over benefits
• In defined benefit funds, contributions are measured by the increase in the defined benefit value.
• If unused concessional caps are carried forward and used, those amounts also count.

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How Division 293 Tax Is Calculated

The Division 293 tax is 15% of the lesser of:

1. The excess of combined income and contributions over $250,000
2. The total concessional contributions for the year

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Example 1
Jan has income of $240,000 and concessional contributions of $15,000.
Total = $255,000.
Excess = $5,000.
Contributions = $15,000.
Tax applies to $5,000 × 15% = $750.

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Example 2
Sarah earns $280,000 with concessional contributions of $32,200.
Total = $312,200.
Excess = $62,200.
Contributions = $32,200.
Tax applies to $32,200 × 15% = $4,830.

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How You’ll Know If You Need to Pay

• The ATO issues a "Division 293 notice" after assessing your tax return and super data.
• Notices appear in myGov or are sent to your registered tax agent.
• If super fund data arrives late, you may receive an amended assessment.

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What to Do If You Disagree with the Assessment

• Review income and contribution figures carefully.
• Amend your tax return or ask your super fund to correct their report if wrong.
• If still incorrect, lodge an objection with the ATO.

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Options for Paying Division 293 Tax

• Personal payment: Pay using your own funds before the due date to avoid interest.
• Release from super: You may elect to pay by releasing money directly from your super fund.

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Special Cases

• Defined benefit members: Assessment is issued, but payment is deferred until benefits are paid. A deferred debt account is created.
• Interest on deferred debt: Accrued annually at the 10-year Treasury bond rate.
• Voluntary early payment: You may pay deferred liabilities early to avoid interest.
• Temporary residents: Some may be eligible for refunds of Division 293 tax when leaving Australia permanently.

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Strategies to Manage or Reduce Division 293 Tax

• Claim deductions: Reduce taxable income with legitimate deductions.
• Time contributions: Delay or advance contributions into years when income is below the threshold.
• Spouse contributions: Consider boosting the lower-income spouse’s super.
• Non-concessional contributions: These after-tax contributions are not subject to Division 293.
• Manage one-off events: Plan around large capital gains, bonuses or redundancy payments.
• Perspective: Even after Division 293, concessional contributions taxed at 30% often remain more favourable than top marginal rates.

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How Division 293 Fits in the Broader Super Landscape

• Standard concessional contributions are taxed at 15%.
• Division 293 increases this to 30% for high-income earners.
• Super remains attractive because top marginal tax rates approach 47%.
• Future reforms may further alter how large super balances are taxed.

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Key Takeaways for High-Income Earners

• Division 293 applies if income plus concessional contributions exceed $250,000.
• Tax is an extra 15% on concessional contributions, up to the lesser of the excess or contributions.
• You will be notified via a Division 293 notice.
• Payment can be made personally or through your super.
• Strategies exist to minimise exposure.
• Super contributions often remain beneficial, even with Division 293 tax.

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Conclusion

Division 293 tax impacts high-income earners by reducing the tax concession on concessional super contributions. It applies when income plus concessional contributions exceed $250,000. The ATO automatically issues an assessment, and payment can be made personally or from super. Defined benefit members face special rules with deferred debt.

With careful planning—such as adjusting contribution timing, making spouse contributions, or shifting to non-concessional contributions—you can manage your exposure. For many, super contributions remain an effective way to build retirement savings, even with the Division 293 tax in place.

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For expert guidance, contact us today.

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