Division 293 Tax Calculator
Calculate your additional tax liability under Division 293 for high-income earners
Comprehensive Guide to Division 293 Tax Calculation Method and Rates
Division 293 tax is an additional tax on superannuation contributions for high-income earners in Australia. Introduced to ensure that high-income individuals pay tax on their super contributions at rates comparable to their personal income tax rates, Division 293 imposes an extra 15% tax on certain concessional contributions when your income exceeds the specified threshold.
What is Division 293 Tax?
Division 293 tax is designed to reduce the tax concession that high-income earners receive on their superannuation contributions. While most Australians pay 15% tax on their concessional super contributions (which is typically lower than their marginal tax rate), high-income earners may be subject to an additional 15% tax under Division 293, bringing the total tax on these contributions to 30%.
Who is Affected by Division 293 Tax?
You may be liable for Division 293 tax if:
- Your income for Division 293 purposes (which includes your taxable income, reportable fringe benefits, and certain other amounts) plus your low tax contributions exceeds the Division 293 threshold ($250,000 for 2023-24 financial year)
- You have made concessional contributions (such as employer contributions, salary sacrifice contributions, or personal deductible contributions) during the financial year
How is Division 293 Tax Calculated?
The calculation involves several steps:
- Determine your income for Division 293 purposes: This includes your taxable income, reportable fringe benefits, net financial investment loss, net rental property loss, and certain other amounts.
- Add your low tax contributions: These are generally your concessional contributions (capped at the concessional contributions cap for the year).
- Compare to the threshold: If the total exceeds $250,000 (for 2023-24), the excess amount is subject to Division 293 tax.
- Calculate the tax: 15% of the lesser of:
- Your low tax contributions, or
- The amount by which your income for Division 293 purposes exceeds $250,000
Division 293 Thresholds Over the Years
| Financial Year | Division 293 Threshold | Concessional Contributions Cap |
|---|---|---|
| 2023-24 | $250,000 | $27,500 |
| 2022-23 | $250,000 | $27,500 |
| 2021-22 | $250,000 | $27,500 |
| 2020-21 | $250,000 | $25,000 |
| 2019-20 | $250,000 | $25,000 |
| 2018-19 | $250,000 | $25,000 |
| 2017-18 | $250,000 | $25,000 |
| 2016-17 | $250,000 | $30,000 (if under 49) / $35,000 (if 49+) |
| 2015-16 | $300,000 | $30,000 (if under 49) / $35,000 (if 49+) |
| 2014-15 | $300,000 | $30,000 (if under 49) / $35,000 (if 49+) |
| 2013-14 | $300,000 | $25,000 (if under 59) / $35,000 (if 59+) |
| 2012-13 | $300,000 | $25,000 |
What Counts as Income for Division 293 Purposes?
Your income for Division 293 purposes includes:
- Taxable income: Your assessable income minus allowable deductions
- Reportable fringe benefits: The grossed-up value of certain fringe benefits you receive from your employer
- Reportable super contributions: Reportable employer super contributions (generally salary sacrifice amounts)
- Net financial investment loss: Losses from financial investments (like negative gearing on shares)
- Net rental property loss: Losses from rental properties
- Amounts on which family trust distribution tax has been paid
What Are Low Tax Contributions?
Low tax contributions generally include:
- Concessional (before-tax) super contributions, including:
- Employer contributions (including super guarantee contributions)
- Salary sacrifice contributions
- Personal contributions for which you claim a tax deduction
- Notional taxed contributions for members of defined benefit funds
Note that low tax contributions are capped at your concessional contributions cap for the year (e.g., $27,500 for 2023-24).
How is Division 293 Tax Paid?
If you’re liable for Division 293 tax, the Australian Taxation Office (ATO) will:
- Calculate the amount of Division 293 tax you owe
- Issue you with a Division 293 assessment (usually after you lodge your tax return)
- Give you the option to:
- Pay the tax directly to the ATO, or
- Release an amount from your super fund to cover the tax liability
You’ll have 21 days from the date of your assessment to choose your payment option. If you don’t respond, the ATO will automatically issue a release authority to your super fund.
Strategies to Manage Division 293 Tax
If you’re likely to exceed the Division 293 threshold, consider these strategies:
- Make non-concessional contributions: These aren’t subject to Division 293 tax as they’re made from after-tax income
- Bring forward non-concessional contributions: If eligible, you can contribute up to 3 years’ worth of non-concessional contributions in one year
- Contribute to your spouse’s super: If your spouse has a lower income, contributing to their super may be more tax-effective
- Time your income: If possible, defer income to a later year to stay under the threshold
- Consider transition to retirement strategies: If you’re approaching retirement age, transition to retirement strategies might help manage your tax position
Division 293 Tax for Defined Benefit Fund Members
If you’re a member of a defined benefit fund, special rules apply. The ATO calculates a “notional taxed contribution” for defined benefit interests, which is included in your low tax contributions for Division 293 purposes. The calculation is complex and depends on factors like:
- The value of your defined benefit interest
- Your years of service
- The fund’s accrual rate
The ATO will calculate this amount for you and include it in your Division 293 assessment.
Common Mistakes to Avoid
When dealing with Division 293 tax, be aware of these common pitfalls:
- Ignoring reportable fringe benefits: Many people forget to include these in their income calculations
- Overlooking investment losses: Net financial investment losses and rental property losses are included in your income for Division 293 purposes
- Not considering salary sacrifice: Salary sacrificed amounts are included in both your income for Division 293 purposes and your low tax contributions
- Missing the payment deadline: Failing to respond to your Division 293 assessment within 21 days may result in automatic release from your super
- Not reviewing your super contributions: Regularly check your contributions to avoid unexpected Division 293 tax liabilities
Division 293 Tax vs. Other Super Taxes
| Tax Type | When It Applies | Rate | Who Pays |
|---|---|---|---|
| Division 293 Tax | When income + low tax contributions exceed $250,000 | 15% (additional to the 15% contributions tax) | High-income earners |
| Concessional Contributions Tax | On all concessional contributions | 15% | All super fund members |
| Excess Concessional Contributions Tax | When concessional contributions exceed the cap | Marginal tax rate + excess concessional contributions charge | Individuals who exceed the cap |
| Non-Concessional Contributions Tax | When non-concessional contributions exceed the cap | 47% (including Medicare levy) | Individuals who exceed the cap |
| Earnings Tax in Accumulation Phase | On investment earnings in accumulation phase | 15% | Super funds |
| Earnings Tax in Pension Phase | On investment earnings supporting retirement phase income streams | 0% | Super funds |
Recent Changes and Proposed Reforms
The Division 293 tax rules have evolved since their introduction in 2012. Key changes include:
- 2017-18: The threshold was reduced from $300,000 to $250,000
- 2021-22: The concessional contributions cap was increased from $25,000 to $27,500 (indexed annually)
- Proposed changes: There have been discussions about further reducing the threshold or increasing the additional tax rate, though no changes have been legislated as of 2024
Always check the ATO website for the most current information, as tax laws can change.
Case Study: Division 293 Tax Calculation
Let’s look at an example for the 2023-24 financial year:
Scenario: Sarah has a taxable income of $220,000, reportable fringe benefits of $20,000, and made concessional super contributions of $25,000.
- Income for Division 293 purposes: $220,000 (taxable income) + $20,000 (reportable fringe benefits) = $240,000
- Add low tax contributions: $240,000 + $25,000 = $265,000
- Excess over threshold: $265,000 – $250,000 = $15,000
- Division 293 tax: 15% of the lesser of:
- Low tax contributions ($25,000), or
- Excess over threshold ($15,000)
Sarah would receive a Division 293 assessment for $2,250, which she can choose to pay personally or release from her super fund.
Frequently Asked Questions About Division 293 Tax
Q: What happens if I don’t pay my Division 293 tax?
A: If you don’t pay your Division 293 tax by the due date, the ATO may issue a release authority to your super fund to pay the amount from your super benefits. You may also incur interest charges on any unpaid amounts.
Q: Can I claim a deduction for Division 293 tax?
A: No, Division 293 tax is not deductible in your income tax return.
Q: How do I know if I have to pay Division 293 tax?
A: The ATO will assess your liability after you lodge your tax return. If you’re liable, they’ll send you a Division 293 assessment notice.
Q: What if my income varies significantly from year to year?
A: Division 293 tax is assessed annually based on your income for that specific financial year. If your income fluctuates, you might be liable in some years but not others. You may want to consider strategies to smooth your income or contributions across years.
Q: Does Division 293 tax apply to self-managed super funds (SMSFs)?
A: Yes, Division 293 tax applies regardless of what type of super fund you have, including SMSFs. The tax is levied on the individual member, not the fund itself.
Q: What if I have multiple super accounts?
A: All your concessional contributions across all your super accounts are added together when calculating your low tax contributions for Division 293 purposes.
Q: How is Division 293 tax different from the excess concessional contributions tax?
A: These are separate taxes that can apply in different situations:
- Division 293 tax applies when your income plus low tax contributions exceed $250,000, regardless of whether you’ve exceeded the concessional contributions cap.
- Excess concessional contributions tax applies when your concessional contributions exceed the annual cap ($27,500 for 2023-24), regardless of your income level.
Planning Ahead for Division 293 Tax
If you’re approaching the Division 293 threshold, proactive planning can help manage your tax position:
- Monitor your income: Keep track of your taxable income, fringe benefits, and other amounts that count toward the Division 293 threshold.
- Track your super contributions: Regularly check your concessional contributions to avoid unexpected liabilities.
- Consider timing: If you’re close to the threshold, you might defer bonuses or other income to a different financial year.
- Review your salary packaging: Be aware that salary sacrificed super contributions count toward both your income for Division 293 purposes and your low tax contributions.
- Consult a professional: If you’re regularly affected by Division 293 tax, consider speaking with a financial advisor or tax professional about strategies to manage your position.
Remember that superannuation and tax laws can be complex, and individual circumstances vary. The information provided here is general in nature and doesn’t constitute personal financial advice. Always consider your personal circumstances and consult with a qualified professional before making financial decisions.