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The Australian Taxation Office (ATO) imposes additional tax on concessional contributions under Division 293 of the Income Tax Assessment Act 1997 (ITAA 1997). Concessional contributions are contributions made to a superannuation fund by an individual or their employer that are taxed at a concessional rate of 15%. Division 293 applies to individuals whose income exceeds a certain threshold, and the additional tax is levied on the amount of concessional contributions above that threshold.
Who is affected by Division 293?
Division 293 applies to individuals with income and concessional contributions that exceed the following thresholds:
Income threshold: $250,000 per year
Concessional contributions threshold: $27,500 per year (currently)
If an individual's income and concessional contributions combined exceed these thresholds, they are subject to Division 293.
How does Division 293 work?
Division 293 imposes an additional tax of 15% on the amount of concessional contributions that exceed the relevant threshold. This means that the concessional contributions above the threshold are taxed at a total rate of 30%, rather than the usual rate of 15%.
For example, if an individual has an income of $300,000 and makes $32,500 in concessional contributions to their superannuation fund.
Division 293 super contributions are capped at the concessional contributions threshold which is $27,500 (currently). The excess contributions over the threshold are taxed differently, please contact us for further information.
In this example the Division 293 = $27,500 x 15% = $4,125
This means that they will pay an extra $4,125 in tax on these contributions.
It is worth noting that the additional tax can be paid by the individual or paid by the superannuation fund.
Division 293 is a tax on concessional contributions to superannuation funds that affects high-income earners. If you are subject to this tax, it is important to understand how it is calculated. Consider speaking with a financial advisor or tax professional to discuss the best strategies for your individual circumstances.
This blog has been prepared for the purposes of general information and guidance only. It should not be used for specific advice or used for formulating decisions under any circumstances. If you would like specific advice about your own personal circumstances, please feel free to contact us on 02 9411 5422. We can help make sure the right method is used to give you the maximum possible tax deduction associated with any of these methods.