Division 293 tax is an additional Australian tax applied to certain superannuation concessional contributions made by higher-income earners. It effectively increases the tax rate on some concessional super contributions from 15% to 30% once an individual’s income for Division 293 purposes exceeds the legislated threshold.
The tax is administered by the Australian Taxation Office (ATO) and is designed to reduce the difference between the concessional tax treatment available inside superannuation and the higher marginal tax rates paid outside super. It does not apply to all super contributions, and it is separate from standard contribution caps or ordinary income tax.
For many Australians, Division 293 tax only becomes relevant once income, bonuses, employer contributions, or investment arrangements move into higher income ranges.
How Division 293 Tax Works
Division 293 tax adds an extra 15% tax to certain concessional super contributions once a person’s income exceeds the applicable threshold.
Under normal superannuation rules, most concessional contributions are taxed at 15% when they enter a super fund. This generally includes:
- Employer Superannuation Guarantee contributions
- Salary sacrifice contributions
- Personal concessional contributions claimed as a tax deduction
Division 293 tax applies an additional 15% tax on some or all of these concessional contributions once a person’s adjusted income exceeds the threshold set by legislation.
In practical terms, this means affected concessional contributions may ultimately be taxed at 30% instead of 15%.
The tax is calculated by the ATO after lodgement of your tax return and super contribution reporting by your super fund. Individuals who are liable receive a Division 293 assessment notice from the ATO.
What Income Counts for Division 293 Tax?
One common misunderstanding is that Division 293 tax only applies to salary.
The calculation uses a broader income definition that may include:
- Taxable income
- Salary sacrifice contributions
- Certain reportable fringe benefits
- Net investment losses
- Some employer super contributions
This broader calculation is important because people can trigger Division 293 tax unexpectedly after receiving bonuses, realising investment gains, or making larger concessional contributions late in the financial year.
For example, someone earning below the threshold through salary alone may still become liable once concessional contributions and other adjustments are added back into the calculation.
Why the Tax Exists
Australia’s superannuation system provides concessional tax treatment to encourage retirement savings. Without additional limits, higher-income earners would generally receive a larger relative tax advantage from concessional contributions than lower-income earners.
Division 293 tax was introduced to partly reduce that gap.
The policy objective is not to remove concessional treatment entirely. Even after Division 293 applies, super contributions may still receive more favourable tax treatment than income earned personally at the top marginal tax rate.
When Australians Typically Encounter Division 293 Tax
Many Australians first become aware of Division 293 tax after receiving an ATO assessment notice following the end of a financial year.
The tax commonly arises after a significant increase in taxable income or concessional contributions. This can happen after a promotion, a large bonus, the sale of an investment asset, or unusually high employer super contributions. It can also become relevant for business owners, people using salary sacrifice arrangements heavily in the years before retirement, and members of defined benefit super schemes.
Because the assessment is performed after tax returns and contribution data are reported to the ATO, some individuals do not realise they exceeded the threshold until the notice is issued.
Paying Division 293 Tax
Division 293 tax is assessed separately by the ATO after concessional contribution and income information has been reported.
Individuals can generally either pay the liability personally or elect to release money from superannuation using the ATO release authority process.
The assessment does not create a new super contribution or a separate contribution category. It is simply an additional tax linked to concessional contributions already made.
Division 293 Tax and Defined Benefit Funds
Division 293 tax becomes more complex in defined benefit superannuation arrangements.
Unlike standard accumulation funds, contributions into defined benefit schemes are not always directly visible as cash contributions. Instead, the tax calculation may involve notional taxed contributions determined under specific formulas.
This is one reason senior public sector employees and long-serving defined benefit members sometimes receive Division 293 assessments that are difficult to interpret without specialist advice.
Some liabilities for defined benefit interests may also be deferred until a benefit becomes payable rather than requiring immediate payment.
The Relationship Between Division 293 Tax and Contribution Caps
Division 293 tax is separate from concessional contribution caps. This distinction is important because many Australians confuse the two systems.
A person can:
- Stay within concessional contribution caps but still pay Division 293 tax
- Exceed contribution caps without triggering Division 293 tax
- Trigger both simultaneously
The rules operate independently.
Remaining under the concessional contributions cap does not prevent Division 293 tax from applying if income exceeds the relevant threshold.
Why Financial Advisers Discuss Division 293 During Retirement Planning
Division 293 tax often arises during higher-income years immediately before retirement, when people are making larger concessional contributions to strengthen retirement savings.
At that stage, financial advice discussions commonly involve balancing:
- Contribution timing
- Tax efficiency
- Carry-forward concessional contribution rules
- Retirement income modelling
- Preservation age considerations
- Transition-to-retirement strategies
The issue is usually less about avoiding tax completely and more about understanding whether additional contributions still improve long-term retirement outcomes after accounting for the extra tax.
For that reason, Division 293 tax is often discussed alongside broader superannuation and retirement planning rather than as a standalone tax issue.
Regulatory Context
Division 293 tax forms part of Australia’s superannuation tax framework administered through federal taxation legislation and overseen by the ATO.
Financial advisers discussing Division 293 implications for clients providing personal advice must operate under an Australian Financial Services Licence (AFSL) and comply with best interests obligations when making contribution or retirement planning recommendations.
Where complex tax consequences arise, advisers often work alongside registered tax agents regulated under the Tax Practitioners Board framework, because broader tax advice may extend beyond the scope of financial product advice alone.
The broader superannuation framework continues evolving through reforms affecting contribution strategies, retirement income planning, and advice documentation requirements.
Frequently Asked Questions
Is Division 293 tax the same as excess contributions tax?
No. Division 293 tax is separate from excess concessional contributions tax. Division 293 is based primarily on income level, while excess contributions tax relates to breaching contribution caps.
Does Division 293 tax apply to non-concessional contributions?
No. Division 293 tax generally applies to concessional contributions only. Non-concessional contributions are governed under different contribution and tax rules.
Can I avoid Division 293 tax by reducing salary sacrifice contributions?
Reducing concessional contributions may affect whether Division 293 tax applies, depending on your overall income and contribution levels. However, the impact varies between individuals and should usually be considered alongside broader retirement and tax planning objectives.
Does Division 293 tax mean super is no longer tax effective?
Not necessarily. Even after the additional 15% tax applies, concessional super contributions may still receive more favourable tax treatment than income taxed personally at top marginal tax rates.
Can Division 293 tax be paid from super?
Yes. The ATO generally allows individuals to elect to release funds from superannuation to pay the liability after an assessment notice is issued.
Related glossary terms
Concessional Contributions
Non-concessional Contributions
Self‑Managed Super Fund (SMSF)
Account‑Based Pension
Transition to Retirement (TTR)
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