Division 293 Tax
Division 293 tax is a tax paid by the SMSF or a Member when the Member exceeds the Division 293 Income Threshold. There is a list of income types used by the ATO to assess if the $250k threshold has been reached.
The additional tax rate of 15% applies to Members with income over the $250,000 threshold. This extra 15% tax on concessional contributions can then be paid by the SMSF or the Member in an individual capacity.
If your Division 293 Income is over $250,000 and you’ve made concessional contributions to super, you will receive a Division 293 tax assessment.
Division 293 Income
Your Division 293 tax calculation will consist of a calculation of your income and contributions. The income calculation is quite similar to the calculation used to determine if an individual is liable to pay the Medicare surcharge levy.
The most important point of the Division 293 Income calculation is that it does not include reportable superannuation contributions. This means that you will not be able to use personal tax deductions to reduce your Division 293 Income below the $250,000 threshold. For a more detailed breakdown of the components making up Division 293 Income please see the link here.
Division 293 Calculation
Your Division 293 Tax will be based on the lesser of your Division 293 Super Contributions and the amount by which you exceed the Division 293 Threshold. Below is an example which further illustrates this point.
For the 2021 Financial Year, John had Division 293 Income of $300,000 and Division 293 Super Contributions of $25,000
His amount of taxable contributions is the lesser of either:
- The amount of Division 293 Super Contributions ($25,000) or
- The amount of Division 293 Income and Super Contributions above the threshold ($300,000 + $25,000 – $250,000 = $75,000)
Note that not all contributions are necessarily taxable contributions as there could be excess super contributions at play. These will be taxed under a different arrangement.
Election to release for Division 293 payment
A Member can pay for Division 293 payment from the SMSF Member balance. Before making the payment Member needs to elect the SMSF to pay for it and this is completed via MyGov ATO online services or paper copy.
Division 293 Downloadable Forms
Complete the Division 293 Due and Payable election form if you have received a Division 293 notice of assessment with an amount in the ‘Tax payable now’ section, ‘Outcome of this notice field’.
Complete Division 293 Deferred debt account election form if you have received a Division 293 notice of assessment with an amount in the ‘Deferred amount’ field.
For ATO guidance on the working of the Div 293, see the ATO website here.
Div 293 tax was announced in the 2012 Federal Budget as an additional tax on superannuation contributions for higher income earners. From early February 2014, the Tax Office has started issuing Division 293 tax notices of assessment to affected individuals. Initially the Div 293 tax kicked in for earning over $300k, but has now been lowered to $250k.
For more information on taxation in SMSF’s see our main Tax page.