Division 293 tax was introduced in 2012 with the aim of reducing the tax concession on superannuation contributions for people deemed to be higher income earners.
Division 293 tax only applies to individuals whose income and low tax contributions exceed the Division 293 threshold for a given financial year.
Even if Division 293 tax does not ordinarily apply to you, some one-off events, such as making a capital gain, taking lump sums of untaxed superannuation and receiving eligible termination payments, may increase your income significantly and give rise to a Division 293 liability for a particular financial year.
The Division 293 tax is only applied to the amount of your low-tax contributions that exceed the threshold. Your income is not taxed again and the amount of low-tax contributions below the threshold is also not subject to the Division 293 tax.
Income for Division 293 purposes
The income used for the purposes of the Division 293 is the same as the income used for determining whether you need to pay the Medicare levy surcharge, which includes (among other things):
- taxable income
- total reportable fringe benefits
- net financial losses, and
- distributions from family trusts.
Low-tax contributions for Division 293 purposes
Your low-tax contributions include any contributions made by you, or on your behalf, that are subject to concessional superannuation taxation, which include (among other things):
- employer contributions
- defined benefit contributions, and
- personal superannuation contributions for which you have claimed (or will claim) a tax deduction.
Your low-tax contributions do not include the amount of your concessional contributions that are over your concessional contributions cap and have been subject to excess contributions tax.
Division 293 thresholds
| Financial years | Threshold |
| 2017-18 and later financial years | $250,000 |
| 2012-13 to 2016-17 | $300,000 |
Calculation of Division 293 tax
If the total of your income for Medicare levy surcharge and your low-tax contributions exceeds the Division 293 threshold, you will be liable for an additional tax of 15% of the lesser of either:
- the amount of your income and low-tax contributions over the threshold, or
- the total of your low-tax contributions.
| Example 1 In 2016-17, Jill had income for Medicare surcharge levy purposes of $320,000 and low tax contributions of $25,000. This gives her a total of $345,000 counting for Division 293 purposes, which is $45,000 over the threshold. Her Division 293 tax will therefore be $3750, i.e. 15% of $25,000 (because Jill’s low-tax contributions are less than the amount in excess of the threshold). |
| Example 2 In 2017-18, Jack had income for Medicare surcharge levy purposes of $240,000 and low tax contributions of $20,000. This gives him a total of $260,000 counting for Division 293 purposes, which is $10,000 over the threshold. His Division 293 tax will therefore be $1500, i.e. 15% of $10,000 (because the amount in excess of the threshold is less than the total of Jack’s low-tax contributions). |
Paying Division 293 tax
The Australian Taxation Office administers Division 293 tax assessments and will write to you (or your tax agent) if you become liable for Division 293 debts.
You can pay Division 293 debts directly to the ATO or you can have the amount released from your superannuation fund by completing a Division 293 election form. Division 293 debts not paid by the due date may attract additional interest and charges.
Deferred Division 293 accounts for defined benefit schemes
Some defined benefit superannuation schemes do not allow the release of benefits early to pay Division 293 debts before you have claimed your final benefit from the scheme. Therefore, if you are a member of a defined benefit superannuation fund, your Division 293 debt will be deferred by default and outstanding debts at 30 June each year will attract end-of-year interest calculated at the average 10-year Treasury bond rate.
To avoid attracting additional interest, you can still pay your deferred Division 293 debt:
- directly to the ATO
- through the release of funds from your defined benefit scheme (if the scheme rules allow)
- through the release of funds from another superannuation fund (if you have one).
IMPORTANT: There may be different tax benefits associated with deferring your Division 293 debt, or paying defined benefits directly to the ATO or through a release from your superannuation fund. You should seek advice from a registered tax professional or a licensed financial adviser before making any decisions about how to pay a Division 293 debt.