Division 293 of the ITAA 97 creates a tax on high income individuals who receive concessional superannuation contributions. Such individuals will have an additional 15% tax rate apply to some or all of their concessional contributions if their income exceeds $ 300,000
History of Division 293 tax
Originally called the “reduction of the higher tax concession for contributions of very high income earners” in the 2012 budget the two bills that comprise the measure, the Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Act 2013 and the Superannuation (Sustaining the Superannuation Contribution Concession) Imposition Act 2013 received royal assent on 28 June 2013. However the tax has effect from 1 July 2012.
What income is used for Division 293 tax?
Division 293 tax uses the ‘Income for Surcharge purposes’, which includes:
- Taxable Income
- Reportable Fringe Benefits
- Total Net Investment Loss – rental property loss and financial investment loss
- Amounts for which family trust distribution tax was paid
These amounts are totalled, and any superannuation lump-sum subject to the low-rate cap is deduced.
What is a Low Tax Contribution?
The Division 293 tax introduces the concept of a Low Tax Contribution which includes:
- Contributions included in the assessable income of the super fund
- Assessable amounts transferred from reserves
Amounts rolled-over to the fund and transferred from foreign super funds may also be included in the Low Tax Contributions. However division 293 tax does not apply to excess concessional contributions for which excess contribution tax apply or are refunded.
There is also complex treatment for defined benefit contributions – which is continuing to be developed, however this is beyond the scope of this article. For more details see the now closed Treasury consultation Sustaining the superannuation contribution concession – Division 293 tax – Calculating notional contributions for defined benefit interests
How is Division 293 tax calculated?
The amount of Division 293 tax is calculated by the ATO by adding the Division 293 income and the Low Tax Contributions, this amount is compared to the $ 300,000 threshold. If the total is higher than the threshold the ATO takes the lower of the amount above the threshold or the amount of the Low Tax Contributions – see the examples below. This amount is taxed at 15%.
The fund member has income for surcharge purposes of $ 260,000 and employer contributions of $ 25,000, so the Low Tax Contributions are $ 25,000 for a total of $ 285,000. As this is under the threshold of $ 300,000 there is no Division 293 tax:
The fund member has income for surcharge purposes of $ 260,000 and Low Tax Contributions of $ 25,000, for a total of $ 310,000. This is over the Division 293 threshold, which applies to the lower of the excess amount ($ 10,000) or the Low Tax Contributions ($ 25,000), so Division 293 tax of $ 1,500 is payable ($ 10,000 at 15%):
The fund member has income for surcharge purposes of $ 310,000 and Low Tax Contributions of $ 25,000, for a total of $ 335,000. This is over the threshold and Division 293 will apply to the full amount of the Low Tax Contributions as it is less than the amount of the excess. So $ 3,750 in Division 293 tax will be payable ($ 25,000 at 15%):
More examples can be found on the ATOs website.
When is Division 293 tax payable?
Division 293 tax is payable on or before 21 days after the notice of assessment is issued by the Commissioner of Taxation. Note that as super funds have 30 days to process a release authority the ATO will be “sympathetic” to applications for remissions of GIC which accrue if payment is not made within 21 days.
The assessment for Division 293 will include a release authority form, which can be used to request super funds to release either:
- The entire amount
- A partial amount from one fund
- Partial amounts from multiple funds
The amount released can either be paid to the taxpayer or directly to the ATO. Where the Division 293 tax hasn’t been paid within 120 after the issue of the assessment the ATO may send a release authority to a fund for payment of the tax directly to the ATO.
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