Have you heard of Division 293 tax? If not, you are not alone. It has been around since 2013 however in 2018 the thresholds changed and you may now be impacted so getting on top of it should be done sooner rather than later.

Division 293 tax affects high income earners and reduces the tax concessions on superannuation contributions for those earning above the threshold. This used to be $300,000 has now been reduced to $250,000. More importantly you need to include your concessional contributions when deciding if you will be caught by the additional contribution tax.

Let’s use a fairly straightforward example of a high income earner that was previously not impacted by the Division 293 tax. Sean earns $260,000 and contributes $24,700 to super as employer concessional contributions. The tax on his contributions was previously 15% however now he is above the threshold at which the Div 293 tax kicks in and he will need to pay an additional tax of $3,705 (being 15% of $24,700). He can choose to pay this tax personally or release it from his super fund. The ATO will send Sean a release authority that he can send to his fund to make the payment.

 You may think that if you do not earn over the threshold that you are safe. This is not necessarily the case. Take Melanie for instance. Melanie earned $240,000 in 2018/19 and makes employer contributions of $22,800. She will have an additional tax to pay on the concessional contributions that push her above $250,000. Let’s see how it is calculated:

 

Salary                                                              $240,000

Plus concessional contributions               $22,800

Less the Division 293 threshold              ($250,000)

Amount taxed at 30% instead of 15%      $12,800

Additional division 293 tax                       $1,920 (15% of $12,800)

 

We have a great calculator on our website that you may find useful.

https://www.yoursuperspecialist.com.au/resource-centre/calculators-thresholds/

 

Always speak to your advisor or tax professional to ensure you are meeting your tax obligations or contact us here for more information.

 

This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.