Government looking at lowering Div 293 threshold to $180k

Budget 2016/17, lowering Division 293 tax threshold from $300,000 to $250,000, contributions tax for high income earnersUpdate: The AFR is reporting that sources indicate the Government has dropped the plan to reduce the concessional contributions cap and will only reduce the Division 293 threshold to $250,000 – the same level as the ALP policy.

The Government is reportedly considering increasing the number of high income earners paying more contributions tax in the upcoming Federal Budget by lowering the Division 293 tax threshold.

According to a report in the Australian Financial Review ($), the Government is considering lowering the Division 293 threshold from $300,000 to $180,000. Read more...

Higher contributions tax for those on over $180,000: Mercer

Mercer four point plan: higher contributions tax (Div 293), lifetime contributions caps, limit ECPI and changes to LISC.Extending Division 293 tax to everyone on the highest income bracket is one of the four points in a plan to improve the superannuation system released by consulting firm Mercer.

The four points of the plan are:

  1. Division 293 tax to apply to everyone on the highest tax rate bracket
  2. No-one in the 19% tax bracket to pay contributions tax
  3. Introduce lifetime contribution caps in addition to annual contributions caps
  4. Limit tax-free status of income supporting a pension via an asset cap

Currently Division 293 tax increases the contributions tax for high income earners, those earning more than $300,000, by 15%. Under Mercer’s plan this would extend to people earning more than $180,000. Based on the the 2014/15 tax rates these people would pay 30% on their contributions and have a marginal tax rate of 45%. Read more...

Division 293 Tax on Contributions by High-Income Earners

Division 293 taxWhat is Division 293 tax?

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. Read more...