Division 293 Tax – Threshold Calculation Eligibility Guide

Division 293 tax is an additional 15% charge imposed on concessional superannuation contributions for high-income Australian earners. The tax applies when combined income and super contributions exceed $250,000 in a financial year, effectively raising the contributions tax rate from 15% to 30% on affected amounts. The Australian Taxation Office administers this provision under Division 293 of the Income Tax Assessment Act 1997, targeting individuals whose super tax concessions would otherwise exceed those available to lower-income earners.

Introduced to address the disparity between tax treatment of super contributions for high earners versus ordinary taxpayers, Division 293 tax brings the effective tax rate on super contributions closer to marginal income tax rates. Those facing the highest marginal rate of 45% (income exceeding $190,000) are most likely to trigger this additional liability. Understanding how this tax works helps affected individuals plan their super contributions more effectively and avoid unexpected tax bills.

The calculation relies on two components assessed against a fixed $250,000 threshold: Division 293 income derived from tax return data, and Division 293 super contributions that include employer guarantee payments, salary sacrifice arrangements, and deductible personal contributions. Unlike some super thresholds that adjust annually, the Division 293 threshold has remained unchanged since 1 July 2017, when it was reduced from $300,000.

What is Division 293 tax?

Division 293 tax represents an additional layer of taxation on superannuation contributions for Australians with substantial income. When combined income and contributions exceed the $250,000 threshold, the ATO applies a 15% charge on the affected portion of contributions, stacking on top of the standard 15% contributions tax already deducted at fund level. This produces a combined 30% effective tax rate on the taxable contributions.

Concessional contributions included

Division 293 super contributions encompass all concessional contributions made during the financial year. This includes employer super guarantee contributions mandated by legislation, voluntary salary sacrifice arrangements agreed with employers, personal contributions claimed as tax deductions, and certain rollover amounts from other super funds. Each of these contribution types counts toward the Division 293 calculation, even when individuals utilise carry-forward unused cap amounts from prior years.

The carry-forward mechanism allows individuals with total super balances below $500,000 at the previous 30 June to contribute beyond the standard annual cap using unused capacity from prior years. However, these contributions still trigger Division 293 tax if the combined income and contribution test is satisfied. Excess concessional contributions, which exceed the annual cap and are taxed at marginal rates, fall outside the Division 293 calculation entirely.

Who is liable for Division 293 tax?

Liability for Division 293 tax arises when an individual’s Division 293 income combined with their Division 293 super contributions exceeds $250,000 in a financial year. The threshold operates as a single combined test rather than applying separately to income or contributions. This means high-income earners with modest super contributions may still trigger the tax if their income alone approaches or surpasses the threshold.

Income threshold details

Division 293 income encompasses several components drawn from an individual’s tax return. Taxable income forms the foundation, supplemented by reportable fringe benefits received through salary package arrangements. Net investment losses across all investment activities count toward the calculation, as do reportable super contributions such as certain rollover amounts. Adjusted fringe benefits, calculated as total fringe benefits value minus any employee contribution amounts, complete the picture.

The $250,000 threshold has remained fixed since 1 July 2017, when legislation reduced it from the original $300,000 threshold that applied from 2013-14 through 2016-17. No automatic indexation applies to this threshold, meaning it only changes through future legislative amendments. Current rules for 2024-25 and 2025-26 maintain the $250,000 level with no announced changes to the liability test.

How is Division 293 tax calculated?

The calculation process involves three distinct steps to determine both the taxable contribution amount and resulting tax liability. First, the combined total of Division 293 income and Division 293 super contributions is established. Second, the excess over the $250,000 threshold is calculated by subtracting $250,000 from this combined total. Third, the taxable super contributions are identified as the lesser of either the Division 293 super contributions themselves or the calculated excess amount.

Step-by-step calculation

Consider a worker named Jan with Division 293 income of $240,000 and Division 293 super contributions of $15,000. The combined total reaches $255,000, which exceeds the threshold by $5,000. Since $5,000 represents the lesser amount when compared against the $15,000 in contributions, the taxable super contributions equal $5,000. Applying the 15% Division 293 tax rate produces a liability of $750.

A second example involves Alex, whose Division 293 income totals $235,000 with $20,000 in contributions. The combined $255,000 again exceeds the threshold by $5,000. With contributions of $20,000, the taxable amount remains $5,000, resulting in the same $750 tax liability. These examples illustrate how modest contribution levels can still trigger liability when income approaches the threshold.

A more substantial scenario involves contributions using carry-forward caps. Russell Investments outlines a case where Division 293 income reaches $300,000 with $37,500 in contributions, including $2,500 excess that is excluded from the calculation. After excluding excess contributions, the adjusted combined total of $335,000 produces an $85,000 excess over the threshold. With $35,000 in Division 293 contributions (excluding excess), the taxable amount equals $35,000, resulting in a Division 293 tax of $5,250.

Tax rate applied

The Division 293 tax rate is a flat 15%, applied directly to the taxable super contributions identified through the calculation process. This rate doubles the standard contributions tax already paid by super funds at 15%, creating a 30% combined tax burden on affected contribution amounts. The ATO issues the Division 293 tax notice as a separate assessment from income tax, with payment due according to the notice terms.

When and how do you pay Division 293 tax?

The ATO determines Division 293 liability after receiving both income tax return data and super fund contribution reports for the relevant financial year. During online tax return preparation, the ATO system alerts individuals who appear likely to exceed the threshold, prompting consideration of Division 293 implications. However, the official notice only issues after super funds report their annual contribution data, typically by mid-October following the financial year end.

Payment notices

The ATO issues a formal notice of assessment for Division 293 tax, separate from the income tax assessment. Payment arrangements follow standard ATO debt collection processes, including the ability to dispute the assessment through established objection procedures if the individual believes the calculation contains errors. In cases where multiple super funds report contributions and data arrives at different times, the ATO may amend assessments if late-filed information changes the liability calculation.

The timing of notices means Division 293 liability crystallises after the financial year has concluded, unlike income tax which is typically assessed progressively throughout the year. Individuals who receive large one-off income payments in a financial year may not know their Division 293 liability until months after making contribution decisions that triggered the tax.

Deduction options

Division 293 tax itself is not deductible. No provision in tax legislation allows individuals to claim deductions for this additional superannuation tax. Similarly, no offsets or credits apply to reduce the liability. The tax represents a standalone charge that cannot be offset against other tax obligations or superannuation balances.

Current available information does not indicate any planned changes to deduction rules or offset provisions for Division 293 tax in future years. Individuals should monitor ATO guidance and legislation for any updates that may affect treatment of this tax liability.

History of Division 293 tax

1. 2011: Legislation enacting Division 293 tax received Royal Assent, establishing the framework for additional taxation of super contributions for high-income earners.
2. 2012-13: Legislative framework finalised with regulations and administrative processes developed by the ATO in preparation for implementation.
3. 2013-14: First financial year Division 293 tax applied, with the original $300,000 threshold in effect and liability arising for those exceeding the combined income and contribution test.
4. 2017-18: Threshold reduced from $300,000 to $250,000 from 1 July 2017, bringing more individuals within scope of the additional tax.
5. 2024-25 onwards: Current rules apply with the $250,000 threshold unchanged and no announced legislative modifications.

What is established versus what remains unclear

Why Division 293 tax exists

Division 293 tax addresses a fundamental inequity in superannuation tax concessions. High-income earners receive substantially larger tax benefits from concessional contributions than lower-income earners, since the 15% contributions tax applies regardless of marginal tax rate. Someone on the 45% marginal rate effectively enjoys a 30 percentage point tax concession on contributions, compared to just 15 percentage points for someone on the 30% rate.

By applying additional taxation to super contributions for those with combined income and contributions exceeding $250,000, the legislation reduces the disparity. The policy rationale centres on ensuring superannuation tax concessions align more closely with ability to pay and with the tax treatment of other income. For individuals earning at the highest marginal rates, Division 293 brings the effective super tax rate closer to their ordinary income tax rate.

The Government is addressing the unfairness that exists where high income earners receive a larger tax concession in dollar terms on their super contributions than low or middle income earners.

— ATO guidance on Division 293 tax objectives

Summary

Division 293 tax adds a 15% charge to concessional super contributions when combined income and contributions exceed $250,000, resulting in an effective 30% tax rate on affected amounts. The ATO calculates liability using a straightforward formula comparing contributions against the excess over threshold, with notices issued after annual data reconciliation. No deductions or offsets apply to this tax, which applies regardless of irregular income events. The threshold has remained fixed since 2017 with no announced changes for current and upcoming financial years.

High-income earners should monitor their contribution patterns and projected income to anticipate potential Division 293 liability. Consulting the official ATO guidance on Division 293 tax helps verify current rules and thresholds before making contribution decisions. Those with complex financial situations may benefit from professional advice to optimise their super and tax outcomes while managing Division 293 exposure. For related financial information, see our guide to AUD to CLP rate.

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