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 Div 293 tax assessment. In this article, we will examine the Div 293 tax, including its definition, application criteria, and how to calculate it.
What is Div 293 Tax Assessment?
The Div 293 Tax assessment 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 Tax Assessment Introduced?
On 1 July 2012, the tax policy, Div 293 tax, was introduced in Australia via the Superannuation (Sustaining the Superannuation Contribution Concession) Imposition Act 2012, which was an overhaul the Australian Government undertook. The policy aimed to “remove the ‘perceived imbalance’ that existed while giving superannuation contribution tax concessions to high income earners, but not average income earners”.
The rules apply to concessional contributions made on or after 1 July 2012. The new tax policy was part of a wider tax reform, which supported the Henry Tax Review recommendations for a fairer taxation system for superannuation.
Since 2012, relatively minor changes have occurred:
- The threshold lowered from $300,000 to $250,000 effective on 1 July 2017
- The concessional contribution caps have changed over the years, which have also affected the amounts subject to the tax.
- ATO processes for both notification and payment improved to meet the needs of the growing number of impacted individuals due to Div 293 tax.
How Does Div 293 Tax Assessment Work?
Thresholds and Div 293 Tax Calculations
Div 293 tax applies to persons who earn income and who have specific superannuation contributions over a certain threshold in a financial year. The threshold is, at the time of writing, $250,000 per annum. When the tax was originally set up, it had a threshold of $300,000 per annum, which was reduced to $250,000 as of 1 July 2017.
Tax is charged at the rate of 15% on the lesser of:
The amount of concessional contributions made for that individual in the relevant financial year; or
the amount that the income and concessional contributions of the individual are in excess of the Div 293 income threshold.
The result is that the effective tax rate on concessional super contributions for affected individuals is 30%, rather than 15%, for any amounts in excess of the above income threshold.
What Does “Income” Include For Div 293 Tax 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, or 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 sought
The concessionally contribution caps that apply to an individual are set by the Government and may change from time to time. Currently, it is $30,000 p.a., so if you go over the cap, you may have to pay additional tax. For the Division 293 tax, the excess contribution amount is not included as part of the calculation. However, Division 293 tax will occur from any additional contributions included as part of the carried-forward concessional contribution strategy, which means when looking at making additional contributions, the additional tax implications must be considered. In addition, clients who are approaching the $250,000 threshold also need to be careful of bracket creep.
Assessment
Once assessed, the Australian Taxation Office will issue a Div 293 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 authorises 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 Tax 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 Tax Assessment Means for Those Earning Over $250,000
Div 293 Tax assessment 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 Tax?
The additional 15% tax that applies under the Div 293 Tax 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 indicates that you are obtaining more savings on your tax than an individual earning between $45,001–$135,000 (whose marginal tax rate is 30% in 2025–26).
To establish a fairer system, the Division 293 tax of 15% on high-income earners is imposed to close the gap on tax savings for their super contributions to that of a person with an average income.
The Division 293 tax is only applied when your income exceeds the $250,000 limit because of a one-off event, such as making a capital gain, receiving an eligible termination payment, or having received a salary bonus.
In which case, should you exceed the threshold, the cost of your concessional contributions for that financial year’s contribution only increases; otherwise, if your income next year goes back under the Division 293 threshold, then it will go back to regular contributions.
