what is division 293 tax

Division 293 tax is an additional 15% tax that applies to certain superannuation (super) contributions made by higher‑income earners in Australia when their income plus concessional super contributions exceed a set threshold (currently $250,000 per year). Its purpose is to reduce the extra tax advantage that high‑income earners receive from the low 15% tax rate on concessional contributions into super.

What is Division 293 tax?

Division 293 tax is a superannuation tax rule in Australia that targets high‑income earners. It does not tax all your income again; it adds an extra tax specifically on some of your before‑tax (concessional) super contributions.

Key points:

• It only kicks in if your “Division 293 income” plus concessional super contributions go over $250,000 in a financial year (for 2017–18 onwards).

• The extra tax rate is 15%, on top of the usual 15% contributions tax inside super.

• It is designed so that people on very high marginal tax rates do not get disproportionately large tax breaks from super compared with low and middle‑income earners.

Who actually pays it?

You only pay Division 293 tax if you cross both the income/contribution rules that define “taxable contributions” for this measure.

You are likely to pay Division 293 tax if:

• Your income (for Division 293 purposes) plus concessional super contributions are above $250,000 in that year.

• You have concessional contributions such as employer Superannuation Guarantee (SG), salary‑sacrifice contributions, or personal deductible contributions.

You will not pay Division 293 tax if:

• Your total of income plus concessional contributions is at or below $250,000.

• You have no concessional contributions for that year (for example, no employer super and no personal deductible contributions).

How is Division 293 tax calculated?

The calculation has a few moving parts, but the core idea is that the 15% tax is applied to the smaller of “taxable super contributions” or the amount by which you exceed the threshold.

In simplified steps:

1. Work out your Division 293 income (taxable income plus certain adjustments such as reportable fringe benefits, some investment losses, etc.).

2. Add your relevant concessional super contributions (employer, salary sacrifice, deductible personal, and certain roll‑over components) to that figure.

3. Compare the total to the Division 293 threshold of $250,000 (for 2017–18 and later years).

4. Determine your “taxable contributions” as the lesser of:
   • Your concessional contributions, and
   • The amount by which your total (income + contributions) exceeds $250,000.

5. Apply 15% to those taxable contributions – that is your Division 293 tax bill.

Importantly, Division 293 tax does not apply to excess contributions above the concessional cap (those are handled under separate rules).

Why does Division 293 tax exist?

The policy goal is to make the super system feel more equitable between high‑income earners and everyone else. High‑income earners often face marginal income tax rates up to 45%, but only 15% is paid on concessional super contributions, which is a much larger tax saving than for someone on a lower tax rate.

Division 293 tax:

• Reduces that gap by charging an extra 15% on some contributions, taking the effective rate on those contributions to 30% for affected people.

• Is intended to “trim” the advantage, not remove the super tax concession entirely, so super can still remain attractive for retirement saving even if Division 293 applies.

How is it paid and what can you do?

Once your tax return is processed and your super funds report your concessional contributions, the ATO works out if Division 293 applies and issues an assessment.

Main practical points:

• You can pay the assessment personally from your bank account, or you can choose to release money from your super fund to pay it.

• Financial planners often suggest reviewing salary‑sacrifice arrangements, the timing and size of personal deductible contributions, and your overall income structure if you are close to or above the $250,000 threshold.

Note: Division 293 tax is a complex area and the impact can depend heavily on your broader tax position, current year income, and long‑term retirement strategy, so personalised advice from a tax agent or financial adviser is usually recommended.

TL;DR: Division 293 tax is an extra 15% tax on certain concessional super contributions when your income plus those contributions exceed $250,000, aimed at keeping super tax concessions fairer for high‑income earners versus everyone else.

Information gathered from public forums or data available on the internet and portrayed here.