Australia’s superannuation system is in place to help people save for retirement in a tax-effective manner. Superannuation contributions are often tax-effective, but the government has designed the tax system to be equitable, especially in relation to high-income earners. One of these measures is the Division 293 tax. In this article, we will examine the Div 293 tax, including its definition, application criteria, and the context of its introduction.
Div 293 Assessment
What is the Div 293 assessment tax? The Div 293 assessment tax is the tax applied to superannuation contributions paid for a high-income earner whose income and certain super contributions exceed the threshold limits. The purpose of the Division 293 tax is to limit the extent to which high-income earners receive tax concessions compared to those of average income, thereby improving fairness in the tax system.
When Was The Div 293 Assessment Introduced?
Div 293 tax was first introduced in Australia as part of the Superannuation (Sustaining the Superannuation Contribution Concession) Imposition Act 2012, which was part of an overhaul that the Australian Government made. The changes aimed at “removing the ‘perceived imbalance’ in tax concessions for superannuation contributions for high income earners versus average income earners”.
The tax applies to concessional contributions made on or after 1 July 2012. Its introduction was part of an overall tax reform and was supported by the Henry Tax Review recommendations for a fairer system of superannuation taxation.
Since its inception in 2012, relatively minor changes have occurred:
- The threshold was lowered from $300,000 to $250,000 from 1 July 2017.
- The caps for concessional contributions have adjusted over time, thus affecting the amounts subject to tax.
- ATO processes for notifying and making payments have improved to cater to the ever-growing number of affected individuals.
How Does Div 293 Assessment Work?
Thresholds and Calculations
Div 293 tax is imposed on individuals whose income and particular superannuation contributions exceed a certain threshold in a financial year. At the time of writing, the threshold is $250,000 per annum. When the tax was first introduced, the threshold was $300,000, which was reduced to $250,000 starting 1 July 2017.
The tax is calculated at a rate of 15% on the lower of:
The amount of concessional contributions made for the individual in the relevant financial year, or
The amount by which the individual’s income and concessional contributions exceed the Div 293 income threshold.
In this way, the effective tax rate on concessional super contributions for impacted individuals is increased from 15% to 30% on amounts over the threshold.
What Does “Income” Include For Div 293 Assessment?
For Div 293, “Income” is considered quite broadly, and can be more than the taxable income that is reported on an individual’s tax return. This includes:
Taxable income
Reportable fringe benefits
Net investment losses (including rental losses)
Reportable employer superannuation contributions
Other adjustments, such as some family trust distributions
If you then total the income amount and concessional contributions, and it is above the current threshold of $250,000, Division 293 tax will apply.
Definition Of Concessional Contributions
Concessional contributions, which are contributions to superannuation funds made before tax, are made by:
Employer contributions (which include superannuation guarantee, salary sacrifice, and other contributions by an employer)
Personal contributions for which a tax deduction is requested
The concessionally contribution caps applicable to an individual are determined by the Government and may be adjusted from time to time. Currently, the cap is $30,000 p.a., so if the cap is breached, you may incur additional tax.
For the Division 293 tax, any excess contribution amount is not included as part of the calculation. That said, Division 293 tax will arise as a result of additional contributions that are included as part of the carried-forward unused concessional contribution strategy, which means that when considering any additional contributions, the additional tax consequences need to be considered accordingly. Additionally, clients who are near the $250,000 threshold need to be wary of bracket creep.
Assessment
Once assessed, the Australian Taxation Office will issue a Div 29t 3 notice of assessment. The individual may pay the tax in two basic ways:
Direct from their own private savings or resources
By choosing the option to withdraw some of the funds released from their superannuation account and completing the *Release Authority* form, which authorizes the super fund to direct the payment to the ATO
There are timeframes to adhere to for lodging and payment, and there may be interests or penalties for late payment.
The Div 293 assessment is another example of Australia’s targeted approach to fairness in the distribution of tax concessions provided via the super system. The Division 293 tax imposes an additional 15% tax on the concessional super contributions of high-income earners, bringing into play how retirement savings incentives are balanced with fairness and fiscal responsibility. Superannuation and tax law are ever-evolving, and high-income earners should continue to keep up with thresholds, calculations, and changes to other tax laws to meet the long-term goal of managing retirement suitably.
What the Division 293 Assessment Means for Those Earning Over $250,000
Div 293 assessment tax is an additional tax on some of the super contributions made by high-income earners to lower the tax advantages available to them within the super system.
If the sum of your income and any low tax contributions exceeds $250,000 in a financial year, you will be subject to a tax of 15% on the amount of low tax contributions in excess of the $250,000 threshold.
Low tax contributions refer to concessional contributions that are within your concessional contributions cap.
Why Do I Have To Pay Div 293 Assessment Tax?
The additional 15% tax that applies under the Div 293 assessment provisions is because, as a high-income earner, you will be subject to the marginal tax rate (excluding the 2% Medicare levy) of 45% for income amounts over $190,000 (in 2025–26). However, when you make a concessional contribution into your superannuation account, you will only pay 15% tax on this contribution.
This means you are receiving greater savings on your tax than someone earning between $45,001–$135,000 (whose marginal tax rate is 30% in 2025–26).
To create a fairer environment, Division 293 levies an extra tax of 15% on high-income earners to reduce the difference in tax savings on their super contributions to be closer to that of a person on an average income.
Unfortunately, the Division 293 tax is only considered when you go over the $250,000 threshold due to a one-off circumstance, such as making a capital gain, receiving an eligible termination payment, or receiving a salary bonus.
In this case, should you exceed the threshold, the tax rate for your concessional contributions for that financial year’s contribution only increases, and if your income goes back under the Division 293 threshold next year, it will go back to the normal rate.
