What Is Division 293 Tax? A Guide for High-Income Earners

If you have recently received an unexpected notice from the Australian Taxation Office (ATO), you may be asking yourself, exactly “What is Division 293 tax?” and “Why does it apply to me?”

Division 293 tax is an additional tax that affects certain higher-income earners who make concessional superannuation contributions. It often catches professionals, executives, contractors and business owners off guard because it is not withheld during the year. Instead, it is assessed by the ATO after your tax return has been lodged and processed.

For individuals whose income fluctuates, even earning slightly more in a financial year can trigger an additional tax bill. 

In this guide, we explain what Division 293 tax is, who it affects, how it is calculated, what payment options are available, and whether tailored tax support can help.

WHAT IS DIVISION 293 TAX, AND WHO DOES IT AFFECT?

Division 293 tax is an additional 15% tax on certain concessional superannuation contributions made by higher-income earners. Normally, concessional contributions, including employer contributions and salary sacrifice contributions, are taxed at 15% within your super fund. This concessional rate is a key tax benefit of superannuation.

Where your income exceeds a set threshold, the government reduces that tax concession by imposing an extra 15% tax. As a result, affected concessional super contributions are effectively taxed at 30% instead of 15%.

The policy intent is straightforward: to reduce the gap between the tax advantages available to average income earners and those available to higher income earners.

Importantly, Division 293 tax is not deducted by your superannuation fund during the year. Instead, it is assessed by the ATO after your tax assessment is finalised. If you are liable, you will receive a Division 293 notice outlining the additional tax payable.

 

KEY ASPECTS OF DIVISION 293 TAX

The key threshold is $250,000 per financial year. You may become liable where your Division 293 income plus your concessional contributions exceed $250,000.

Division 293 income is broader than taxable income alone. It generally includes: 

• Taxable income.
• Reportable fringe benefit amounts. 
• Certain investment losses. 

 

Your concessional contributions can include: 

• Employer super guarantee contributions.
• Salary sacrifice contributions. 
• Any personal deductible contribution claimed.

 

If the threshold is exceeded, the additional 15% tax applies to the lesser of your total concessional contributions or the amount above $250,000. The ATO calculates this automatically using income and contribution information reported to it.

 

IMPLICATIONS OF DIVISION 293 TAX FOR HIGH-INCOME EARNERS

Division 293 tax most commonly affects professionals, senior executives and business owners whose combined income and super contributions approach or exceed the threshold. However, liability is often triggered by one-off events rather than ongoing salary increases.

Examples include: 

• The sale of a business.
• A large bonus or commission.
• Acapital gain on investments. 

 

Employer contributions can also push individuals over the limit, even where the base salary has not increased.

Because Division 293 tax is assessed after your tax return is processed, it can create unexpected cash flow pressure if not anticipated. This is particularly relevant for business owners with variable income from year to year.

DIVISION 293 INCOME AND CONTRIBUTION THRESHOLDS

The central figure for Division 293 tax is the $250,000 threshold. If your Division 293 income plus concessional superannuation contributions exceed this amount in a financial year, the additional tax may apply.

Division 293 income generally includes: 

• Taxable income.
• Reportable fringe benefits. 
• Certain net investment losses. 

 

Concessional super contributions can include: 

• Employer contributions.
• Salary sacrifice contributions. 
• Personal deductible contributions claimed as tax deductions.

 

Division 293 tax does not apply to non-concessional contribution amounts. It also does not apply to your entire income. Instead, it applies to the lesser of your concessional contributions or the amount by which your combined income exceeds $250,000.

It is also important to monitor the separate concessional contribution cap. Exceeding that cap can lead to excess concessional contributions tax in addition to any Division 293 tax.

HOW DIVISION 293 TAX IS CALCULATED

Understanding how Division 293 tax is calculated can help you anticipate potential exposure.

The process generally follows these steps:

• Step 1: Determine your Division 293 income. This includes your taxable income plus reportable fringe benefit amounts and net investment losses.
• Step 2: Add your concessional contributions. Include employer contributions, super guarantee contributions, salary sacrifice and personal deductible contributions.
• Step 3: Compare the total to the $250,000 threshold. If the combined figure exceeds $250,000, you may be liable for Division 293 tax.
• Step 4: Apply 15% additional tax. The 15% additional tax applies to the lesser of your concessional contributions or the amount exceeding the threshold.

 

For example, if your taxable income is $240,000 and your concessional super contributions are $20,000, your combined total is $260,000. This exceeds the threshold by $10,000. The additional 15% tax would apply to $10,000, resulting in a Division 293 tax liability of $1,500.

The ATO performs this calculation using your tax return and contribution information reported by your super fund, then issues a Division 293 notice of assessment.

 

WHAT HAPPENS IF YOU OWE DIVISION 293 TAX

If you are liable, the ATO will issue a Division 293 notice after your tax assessment is finalised. The notice sets out the additional tax payable and the due date.

You generally have two payment options. You can pay the liability from your personal funds, preserving your super balance but potentially affecting short-term cash flow. Alternatively, you can elect to have funds released from your superannuation fund to cover the Division 293 tax liability, reducing immediate cash pressure but lowering your retirement savings.

The right approach depends on your broader wealth management strategy and cash flow position. Planning is particularly important in years where you expect a business sale, bonus or significant capital gain.

 

GET ADVICE TAILORED TO YOUR SITUATION

Division 293 tax is complex and often triggered by positive financial outcomes such as strong business performance or investment gains. Without planning, the resulting extra tax can feel unexpected.

For higher income earners, even earning slightly more in a financial year can change your overall tax position. Understanding how your income, super contributions and investment decisions interact is essential.

At Wilson Porter, we support business owners, executives and professionals with strategic tax planning and long-term wealth creation. If you are unsure about your exposure to Division 293 tax, connect with us to gain clarity and plan with confidence.

 

FAQS: DIVISION 293 TAX

Who has to pay Division 293 tax?

Division 293 tax applies to higher income earners whose combined Division 293 income and concessional super contributions exceed $250,000 in a financial year.

What is the point of the Division 293 tax?

The purpose of Division 293 tax is to reduce the level of tax concession available to higher-income earners and ensure super tax benefits are more evenly distributed.

How can you reduce Division 293 tax liability?

While Division 293 tax cannot simply be avoided, it can be managed through careful planning. Monitoring concessional contributions, reviewing salary sacrifice arrangements and seeking professional taxation advice before major transactions can help you anticipate and manage potential 293 tax liability.