Superannuation is one of the most important long-term wealth-building tools available to Australians, offering tax-efficient retirement savings through a range of super contributions. For many people, particularly high income earners, understanding how concessional contributions, assessable income, taxable income, and the broader superannuation system interact is essential. One area that often creates confusion is Division 293 tax, an additional tax that applies to certain individuals whose income exceeds a defined income threshold.
Introduced by the Australian Government to ensure fairness in the distribution of tax concessions, Division 293 tax plays a significant role in the overall superannuation framework. It specifically targets those who receive disproportionate tax concession benefits due to higher concessional super contributions. In this guide, we break down what Division 293 tax is, how it applies, how it is calculated, and the strategies available to manage your tax liability effectively.
Whether you are a professional with employment and business income, someone with income from a range of sources such as investment income or rental income, or a member of government schemes like West State Super or Gold State Super, understanding this tax is a key part of effective financial planning.
What Is Division 293 Tax?
Division 293 tax is an additional 15% tax applied to concessional contributions for individuals whose Division 293 income exceeds the $250,000 income threshold in a given income year. This measure aims to limit excessive tax concessions available to higher earners within the superannuation system.
Division 293 tax applies to:
- Concessional contributions (including Super Guarantee contributions, salary sacrifice, and personal deductible contributions).
- Notional taxed contributions for defined benefit schemes, including some state-based funds such as West State Super and Gold State Super.
Division 293 ensures high income earners do not receive a larger super tax benefit than the average Australian. The measure aligns with policies under the Australian Constitution that support fair taxation and equitable retirement outcomes.
This tax applies in addition to the standard 15% contributions tax already charged inside your super fund, meaning affected concessional super contributions may incur up to 30% tax in total.
Who Is Affected by Division 293 Tax?
The Income Threshold
Division 293 tax applies if your Division 293 income + concessional contributions exceed $250,000. This threshold is assessed annually by the Australian Taxation Office (ATO).
Division 293 Income Components
Division 293 income is based on your individual income tax return and includes:
- Taxable income
- Reportable fringe benefits
- Investment income and rental losses
- Employment and business income
- Super lump sum taxed elements (zero rate)
- Assessable FHSSS withdrawals
- Net financial losses
- Super death benefit components (where applicable)
These components reflect income from a range of sources, ensuring that overall financial position—not just salary—is considered.
One-off Income Events
Examples include:
- Large capital gains
- Redundancy packages
- Sale of property or business
- Vesting of previously held employee share schemes
These events can push you over the threshold temporarily, triggering a once-off Division 293 tax liability.
Table: Division 293 Income Components
| Component | Description |
|---|---|
| Taxable Income | Income after deductions |
| Reportable Fringe Benefits | Employer-provided non-cash benefits |
| Rental & Investment Losses | Adjustments that increase assessable income |
| Trust Distribution Tax | Tax paid on trust distributions |
| Super Lump Sum (Zero Rate) | Taxed at zero rate for assessment purposes |
| FHSS Scheme Withdrawals | Assessable withdrawals |
How Division 293 Tax Is Calculated
Step-by-Step Calculation
- Calculate Division 293 income using your income tax return.
- Add concessional contributions (e.g., Super Guarantee, salary sacrifice, deductible contributions).
- Compare the total to the $250,000 income threshold.
- Division 293 tax applies to the lesser of:
- The amount above $250,000, or
- Total concessional contributions.
The tax applied is 15%.
Example Calculation
- Salary: $260,000
- Super Guarantee + salary sacrifice: $25,000
- Division 293 Income = $260,000
- Income + Contributions = $285,000
- Amount above threshold = $35,000
- Lesser of $35,000 or $25,000 = $25,000
- Division 293 tax = 15% of $25,000 = $3,750
Table: Calculation Summary
| Item | Amount |
|---|---|
| Division 293 Income | $260,000 |
| Concessional Contributions | $25,000 |
| Total | $285,000 |
| Excess Above Threshold | $35,000 |
| Taxable Portion | $25,000 |
| Division 293 Tax | $3,750 |
Types of Super Contributions Subject to Division 293 Tax
Division 293 applies to all concessional superannuation contributions, including:
- Super Guarantee contributions (mandatory employer contributions).
- Super Guarantee payments from multiple employers.
- Salary sacrifice contributions.
- Personal deductible contributions claimed on your tax return.
- Notional contributions for defined benefit schemes including Gold State Super and West State Super.
Non-concessional superannuation contributions are not subject to Division 293 tax.
Receiving and Paying Division 293 Tax
ATO Assessment Process
After you lodge your tax return, the Australian Taxation Office compares your income and contributions. If you exceed the income threshold, they issue a Division 293 tax assessment.
You may receive:
- A Division 293 election form, allowing you to choose how to pay.
- Details of your deferred debt account if you are in a defined benefit fund.
Payment Options
- Direct Payment: Pay the ATO directly.
- Release Authority: Authorise your super provider, including MLC super account or state funds, to release funds from your super account.
Step-by-Step
- Receive ATO assessment.
- Decide whether to pay personally or via release authority.
- Submit election form if required.
- Make payment.
Strategies for Managing Division 293 Tax
- Monitor concessional contributions throughout the income year.
- Use salary packaging carefully to avoid exceeding thresholds.
- Spread income-generating events across financial years where possible.
- Seek professional superannuation advice—especially if you have multiple employers or are in a complex fund like West State Super.
- Plan around one-off spikes in assessable income.
Frequently Asked Questions
Does Division 293 tax apply every year?
Only in years when your income exceeds the threshold.
Are non-concessional contributions affected?
No.
What if I have more than one super fund?
The ATO aggregates all concessional contributions.
Does it apply to super death benefits?
Only certain taxable components may be counted.
Is Division 293 the same as the old Super Surcharge?
It replaced the previous Super Surcharge system for high income earners.
Tables & Visual Aids
Division 293 Calculation Examples
| Scenario | Income | Contributions | Taxable Amount | Div 293 Tax |
|---|---|---|---|---|
| 1 | $260,000 | $25,000 | $25,000 | $3,750 |
| 2 | $240,000 | $30,000 | $20,000 | $3,000 |
Conclusion
Division 293 tax is an important part of Australia’s superannuation system and is designed to ensure fairness across all income levels. By understanding how the tax works, who it applies to, and how it is calculated, you can make informed decisions about your super fund, concessional contributions, and long-term retirement strategy.
As a financial advisor, I work closely with clients to help them navigate Division 293 tax, optimise superannuation contributions, and manage their overall tax liability responsibly.
Disclaimer: The information provided on this blog is general in nature and does not constitute specific financial advice. It is intended for educational purposes only and should not be relied upon as a substitute for professional financial advice tailored to your individual circumstances. For personalized financial assistance, please contact Brandon Foster via the contact page.
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