What is the ATO Division 293 tax?
The Australian Taxation Office Division 293 tax was introduced from 1 July 2012 and applies where your combined income and Concessional Contributions is over a certain threshold. From 1 July 2017, the Division 293 tax threshold will be $250,000 per year. This is a reduction from $300,000 for the 2017 income tax year which will mean higher taxes for some people.
What is ‘income’?
Your income for Division 293 tax purposes# is your:
• taxable income (assessable income minus deductions)
• reportable fringe benefits amount, as reported on your payment summary
• total net investment loss (includes both net financial investment loss and net rental property loss)
• the amount on which family trust distribution tax has been paid.
Reportable concessional contributions are then added to this Income amount to determine whether you are subject to a Division 293 tax assessment.
Example of where Division 293 tax would apply:
Taxable income plus reportable fringe benefits = $260,000
• No investment loss or family trust distribution
• Reportable Concessional Contributions of $30,000 being the sum of:
a. Pre-tax member contributions $10,000
b. Notional employer contributions $20,000
• Combined Income and Concessional Contributions = $260,000 + $30,000 = $290,000
• This is over the threshold of $250,000 therefore the member is subject to a Division 293 tax assessment.
What is the rate of Division 293 tax?
Division 293 tax is charged at 15% of the lower of:
• Excess of combined Income and Concessional Contributions over the Division 293 tax threshold, and
• The Concessional Contributions Cap*
Example of Division 293 tax payable:
• Lower of:
a. Amount above the Division 293 tax threshold = $40,000; and
b. Concessional Contributions Cap* = $25,000
• Division 293 tax payable = (15% x $25,000) = $3,750
* From 1 July 2017, the Concessional Contributions Cap would be $25,000 per year (unless special ‘grandfathering’ rules apply). Any concessional contributions in excess of the Cap are disregarded for the purposes of Division 293 tax calculations.
How do I pay the Division 293 tax?
The ATO will advise you of the Division 293 tax and provide you with the option to pay the amount directly to the ATO or for the amount to be deducted from your superannuation account.
Once you reach the income threshold and pay the Div 293 tax in a years tax return, the ATO will place you on the installment systems. This means that you will be required to pay the 293 tax quarterly in advance for the following year.
Effect of both the Division 293 tax and Excess Concessional Contributions tax
Using the above example, the effect of the ATO Division 293 tax and Excess Concessional Contributions tax on pre-tax contributions (including notional employer contributions) can be summarised below: