Do you have a Division 293 tax liability?

Division 293 tax is an extra charge imposed on some of the super contributions made by higher income earners to reduce the tax benefits they receive from the super system.

Who does Division 293 tax apply to?

You're liable to pay Division 293 tax if you exceed the income threshold of $250,000 and you have taxable contributions for an income year.

If your Division 293 income plus your Division 293 super contributions are greater than the Division 293 threshold, the taxable contributions will be the lesser of the Division 293 super contributions and the amount above the threshold.

Division 293 tax is charged at 15% of an individual’s taxable contributions.

One-off events

Sometimes certain events can increase your income to the threshold level for a particular year.

For this reason Division 293 might apply to you for only one year where:

• you receive an eligible termination payment
• you make a capital gain
• for another reason your income significantly increases
• you decide to salary sacrifice some of your income to super.

In these cases your marginal tax rate for the year increases and therefore the concession you have received on your concessional contributions also increases.

To reduce this concession to an equitable level, you may be assessed for Division 293 tax. In the same way your contributions may also increase for a particular year.

Timescales and process

Once an individual receives a Division 293 notice from the ATO they have 60 days to elect to release funds from superannuation to pay the debt. Please note this does not impact on the due date for payment.

There are two steps required for a SMSF to release amounts:

• The individual member must have made an election to release money from their super, and

• The SMSF must have received a release authority from the ATO.

The released funds are provided directly to the ATO which will apply them to pay the Division 293 liability. Any remaining amount will be offset against other debts of the taxpayer before being paid to the individual member.

How we can help

TaxAssist Accountants are here to manage all of your tax, accounting, bookkeeping and payroll needs.

Give us a call on 1300 513 332 or fill in our enquiry form and we can set up a free initial consultation.

Last updated: 20th April 2023