Understanding Division 293 Tax

Jit Chowdhury

Chartered Accountant · CA SMSF Specialist & SMSF Auditor

i-accountant Pty Ltd

⏱ 5 min read · Superannuation & Tax

At a Glance

Division 293 is an additional 15% tax on concessional super contributions for individuals whose income plus super exceeds $250,000. Learn how it works, who pays it, and practical strategies to manage it.

What Is Division 293 Tax?

If you earn a high income in Australia, chances are you've heard the term "Division 293 tax" — but what does it actually mean for your superannuation strategy? For many professionals, business owners, and senior executives, this tax can come as an unwelcome surprise at tax time.

Division 293 tax is an additional layer of tax that reduces the superannuation tax concession enjoyed by individuals with higher incomes. Australia's superannuation system taxes concessional contributions (such as employer contributions and salary sacrifice) at a flat rate of 15% inside the fund — a significant discount for most taxpayers, whose marginal rate is much higher.

Division 293 is designed to make that concession less generous for high earners. It does this by imposing an additional 15% tax on top of the 15% already paid by the fund, effectively bringing the total tax rate on those contributions to 30% — closer to the marginal tax rate for individuals in the highest income bracket.

Key point: Division 293 does not eliminate your super tax concession — it simply reduces it. You still generally pay less tax on super contributions than on ordinary income, even after Division 293 applies.

Who Pays Division 293 Tax?

Division 293 applies to any individual whose combined income plus concessional super contributions exceed $250,000 in a financial year (the threshold for the 2023–24 financial year and beyond, having been reduced from $300,000 in earlier years).

This typically affects:

Senior executives and high-earning professionals
Small business owners drawing a significant salary
Individuals with investment income pushing them above the threshold
Those making large salary sacrifice contributions who cross the threshold as a result

You do not need to be earning $250,000 in salary alone for Division 293 to apply. If you earn $230,000 and make $25,000 in concessional super contributions, your combined amount is $255,000 — and Division 293 would apply to $5,000 of those contributions.

How Is the Tax Calculated?

The Australian Taxation Office (ATO) calculates Division 293 tax once your tax return and super contribution information are both lodged. The tax is 15% of the lesser of:

The amount by which your combined income and concessional contributions exceed $250,000, or
Your total concessional contributions for the year

Example: If your taxable income is $240,000 and you make $25,000 in concessional contributions, your combined total is $265,000. The excess over $250,000 is $15,000. Division 293 tax = 15% × $15,000 = $2,250.

What Income Does the ATO Include?

For Division 293 purposes, the ATO uses a broad definition of income. The calculation includes:

Taxable income (assessable income minus allowable deductions)
Total reportable fringe benefits amounts
Net financial investment losses
Net rental property losses
Net amount subject to family trust distribution tax
Super lump sum taxable components taxed at a zero rate
Amounts released under the First Home Super Saver scheme

This broad income definition means that even if your salary is below the threshold, investment losses or reportable fringe benefits could push you into Division 293 territory.

How Does the ATO Collect the Tax?

Once the ATO determines that you are liable, it will issue a Division 293 tax assessment — typically after processing both your income tax return and the contribution reporting from your super fund.

You have two main options for payment:

Pay directly to the ATO: You can pay the assessment amount personally from your own funds, just as you would a regular tax bill. This preserves your super balance intact.
Release from super fund: You can authorise your super fund to release the amount on your behalf by completing a Division 293 release authority form. The fund pays the ATO directly from your contributions.

If you have an SMSF, you should consider which option best aligns with your cashflow and retirement strategy. There are investment and liquidity implications in either case — speak with your adviser before choosing.

Strategies to Manage Division 293 Tax

While Division 293 cannot always be avoided entirely, there are legitimate strategies that may reduce your exposure:

Monitor your combined income carefully — track your taxable income, reportable fringe benefits, and super contributions throughout the year to avoid unexpectedly crossing the threshold
Adjust salary sacrifice arrangements — if you are close to the threshold, calibrating your salary sacrifice can reduce the amount subject to Division 293
Timing of contributions — in some circumstances, deferring or bringing forward contributions to a different financial year may be beneficial
Maximise deductions — legitimate deductions that reduce your taxable income can reduce the amount above the threshold
Spouse contributions and splitting — where appropriate, contribution splitting or spouse contributions may form part of a broader strategy

Planning Tips

Review your income and contribution position mid-year, not just at 30 June.
If you are in a defined benefit scheme, special rules apply — seek specific advice.
Division 293 assessments can arrive well after the end of the financial year; budget accordingly.
Seek advice from a qualified tax agent or financial adviser before making significant changes to your super strategy.

Final Thoughts

Division 293 tax is part of Australia's broader effort to ensure the superannuation tax concession remains proportionate across income levels. For high-income earners, it is simply a fact of the tax landscape — but with proper planning, its impact can be managed effectively.

The key is to stay informed throughout the year, not just at tax time. If you think Division 293 may apply to you, or if you want to review your super contribution strategy, we encourage you to seek tailored professional advice.

Disclaimer: This article is intended for general information purposes only and does not constitute personal financial, tax, or legal advice. The information reflects Australian tax law as at the date of publication. Individual circumstances vary — please consult a registered tax agent or licensed financial adviser before acting on any information contained herein.