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Division 293 tax

Nobody likes to pay more tax than they have to and this tax has been catching a few people by surprise so we wanted to provide further information for you.

 

Those with Division 293 income greater than $250,000 will pay 15 per cent additional tax on certain superannuation contributions. The tax is a personal tax rather than a tax deducted from super contributions by a fund.


Division 293 income includes:

  • taxable income

  • reportable fringe benefits

  • total net investment losses

Ad-hoc income

Individuals who are not usually high income earners may still be liable for Division 293 tax if they receive certain one-off payments during a year. Such payments include eligible termination payments, the taxable component of a superannuation death benefit and capital gains.


Division 293 contributions include:

  • employer contributions

  • personal deductible contributions

  • contributions for a defined benefit interest (valued by an actuary)

  • employer contributions (including salary sacrifice) to a constitutionally protected fund.

The additional tax does not apply to:

  • excess concessional contributions

  • non-concessional contributions

  • contributions to certain Government funds for senior personnel, unless they are salary sacrifice contributions

Calculation of Division 293 tax

Division 293 tax is 15% of the lesser of:

  • the amount of the Division 293 contributions

  • the amount of Division 293 income and Division 293 contributions above the $250,000 threshold.

Case study

Brian has the following Division 293 details:

Division 293 income

$240,000

Division 293 contributions

$20,000

Total

$260,000

Division 293 tax is payable on $10,000, being the lesser of:

  • $20,000

  • $260,000 – $250,000 = $10,000

The Division 293 tax amount is 15% x $10,000 = $1,500


Division 293 notice

The ATO issues an Additional tax on concessional contributions (Division 293) notice to individuals which specifies the additional amount of tax that is payable and the due date for payment along with the assessment calculation.


The notice will also explain how to avoid interest charges, view statements of accounts online and the process for disagreeing with the assessment.


Choices

When an individual receives a Division 293 assessment they can choose to pay the tax from their personal resources. Alternatively, they can elect to have the amount released from their super fund to pay the tax. The time frame for making the election is 60 days. However, this may be a greater time frame than the date upon which payment of the tax is due.


The ATO encourages people to make their election via their MyGov Account or via a form.


If an election to have the amount released from super is made, the ATO will send the super fund a release authority and the fund will make the payment to the ATO. Funds are required to make the payment within 10 business days from the date the release authority is issued by the ATO.


Importantly a fund must not release an amount until they have received the ATO release authority.


We strongly recommend you seek advice from your tax professional.


General Advice Warning - This communication has been prepared on a general advice basis only. The information has not been prepared to take into account your specific objectives, needs and financial situation. The information may not be appropriate to your individual needs and you should seek advice from your financial or tax adviser before making any investment decisions.
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