Division 293 Tax: The Extra Super Tax for High Earners
Earning over $250,000? There's an additional 15% tax on your super contributions that can catch high-income earners off guard. Here's how Division 293 works, what counts towards the threshold, and strategies to manage it.
What Is Division 293?
Division 293 is a provision in the tax law that imposes an additional 15% tax on the concessional super contributions of high-income earners. The standard contributions tax rate inside super is 15%. Division 293 effectively doubles this to 30% for individuals whose combined income and concessional contributions exceed $250,000.
The rationale behind Division 293 is to reduce the tax concession that super provides to high earners. For someone on the top marginal tax rate of 47% (including Medicare Levy), the standard 15% contributions tax represents a 32 percentage point discount. Division 293 narrows this gap, though even at 30%, super contributions are still taxed at a lower rate than personal income at the top marginal rate.
The ATO automatically calculates your Division 293 liability based on your tax return and contribution data reported by your super fund. You'll receive an assessment notice if you owe the additional tax.
Key point: Even with Division 293, super contributions are still taxed at 30% rather than the top marginal rate of 47%. That's a saving of 17 cents per dollar. Super remains advantageous for high earners, just less so than for everyone else.
How the $250,000 Threshold Works
The Division 293 threshold isn't simply your salary. The ATO uses a specific definition of "income for Division 293 purposes" which captures a broader range of income types. Understanding exactly what's included helps you anticipate whether you'll be affected.
The threshold calculation combines:
- Taxable income - your assessable income minus allowable deductions
- Reportable fringe benefits - the grossed-up value of any fringe benefits
- Total net investment losses - any investment losses added back (negative gearing, for example)
- Low tax-contributed amounts (for defined benefit funds)
This combined figure is then added to your concessional super contributions. If the total exceeds $250,000, Division 293 applies to the lesser of your concessional contributions or the amount exceeding the threshold.
Example: Calculating Division 293
Maria has a taxable income of $230,000, no fringe benefits or investment losses, and her employer contributes $26,450 in SG (11.5% of salary). She also salary sacrifices $3,550, bringing her total concessional contributions to $30,000.
Division 293 income: $230,000 + $30,000 = $260,000
Amount over threshold: $260,000 - $250,000 = $10,000
Division 293 tax: 15% of $10,000 = $1,500
Maria's total tax on that $10,000 of contributions: $1,500 (standard 15%) + $1,500 (Division 293) = $3,000, or an effective rate of 30%.
What Contributions Are Affected
Division 293 applies to concessional contributions only. These are the before-tax contributions that receive the 15% tax rate inside super. Non-concessional (after-tax) contributions are not affected because they've already been taxed at your marginal rate.
The concessional contributions captured by Division 293 include:
- Employer SG contributions - the mandatory 11.5% (2024-25)
- Salary sacrifice contributions - additional pre-tax amounts directed to super
- Personal deductible contributions - contributions you make personally and claim a tax deduction for
- Notional taxed contributions from defined benefit funds
If your concessional contributions exceed $30,000 (the concessional cap), the excess is taxed differently under excess concessional contribution rules, and Division 293 only applies to contributions within the cap.
Paying Division 293 Tax
Once the ATO issues a Division 293 assessment, you have 21 days to pay. You have the choice of paying from your personal funds or releasing the amount from your super fund.
Payment Options
- Pay personally: Use your own funds to pay the ATO directly. Your super balance remains intact.
- Release from super: Elect to have your super fund pay the tax. Complete a "Division 293 release authority" and return it to the ATO, who will instruct your fund to release the amount.
Most people elect to release from super, as it preserves personal cash flow. However, paying personally means more money stays in the super environment earning investment returns.
If you don't make an election within 21 days, the ATO will default to releasing the amount from your super fund. If you have multiple super accounts, the ATO will release from the fund that received the most recent contributions.
Strategies to Manage Division 293
While you can't avoid Division 293 if you're above the threshold, there are legitimate strategies to manage its impact and optimise your overall tax position.
Monitor the Threshold Boundary
If your income is close to $250,000, small changes can push you over or keep you under. Timing the realisation of capital gains, managing investment losses, or adjusting salary sacrifice arrangements can help you stay below the threshold in some years.
Maximise Contributions Despite Division 293
Even at 30% tax, concessional contributions to super are still significantly cheaper than paying the top marginal rate of 47%. If you're a high earner, the question isn't whether to contribute to super, but how much. Maxing out the $30,000 concessional cap still saves you 17 cents per dollar compared to taking the income as salary.
Consider Non-Concessional Contributions
Since Division 293 doesn't apply to non-concessional contributions, high earners may benefit from contributing after-tax money to super. While there's no upfront tax deduction, the investment earnings inside super are taxed at just 15% (or 0% in retirement phase), which is considerably lower than personal investment tax rates at high income levels.
Spouse Contribution Splitting
If your spouse earns less than $250,000, splitting your concessional contributions with them can be an effective strategy. Up to 85% of your concessional contributions from the previous year can be transferred to your spouse's super account. While this doesn't reduce your Division 293 liability for the year the contributions were made, it can help with estate planning and balancing super across the couple.
Remember: Division 293 is assessed after you lodge your tax return. By the time you receive the notice, the financial year has already ended. Planning ahead is essential. Review your expected income and contributions before 30 June each year.
How Talk Through Wealth Helps
Managing Division 293 effectively requires a clear view of how your income, contributions, and tax interact. Talk Through Wealth helps you model these scenarios with precision.
- Calculate your Division 293 income and identify whether you'll exceed the threshold
- Model the net tax benefit of super contributions at different income levels
- Compare the after-tax value of concessional vs non-concessional strategies
- Project the long-term impact of paying Division 293 from super vs personal funds
- Optimise contribution timing around variable income years
Optimise Your High-Income Super Strategy
Model Division 293 impacts and find the best approach for your situation.
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