As super balances grow and contribution strategies become more flexible, one tax rule is quietly catching out more Australians: Division 293 tax.
Originally introduced to make the system fairer, Division 293 adds an extra 15% tax on concessional super contributions when your income plus super exceeds $250,000 in a financial year. That means concessional contributions – like employer SG or salary sacrifice – can be taxed at 30% instead of the usual 15%.
While 30% may sound steep, it’s still far lower than the top marginal tax rate of 47%, so super remains tax-effective. But timing is everything.
It’s Not Just for the Ultra-Wealthy
You don’t need to be a high-flyer to get hit. Division 293 can be triggered by:
- A one-off capital gain (e.g. from selling property or shares)
- A redundancy or bonus payout
- Using carry-forward concessional contributions
Even people who normally earn under $250,000 can face this tax in a big year.
Quick Example
Sarah earns $280,000 and her employer contributes $32,200 to super. Her combined total is $312,200 – that’s $62,200 above the threshold.
Division 293 tax applies to the lesser of the excess or the concessional contributions. In this case, Sarah pays an extra $4,830 in tax (15% of $32,200).
What Income is Counted?
It’s not just salary. The ATO also includes:
- Fringe benefits
- Net investment or rental losses
- Trust distributions
- Certain lump sum super payments
- First Home Super Saver withdrawals
All of this is added to your super contributions to determine if the $250k threshold is breached.
How to Stay Ahead
If you’re in or near the threshold, consider these strategies:
- Time contributions – Defer them in high-income years.
- Use after-tax (non-concessional) contributions – These aren’t taxed again.
- Split contributions with a spouse – Reduces the risk of one partner breaching the cap.
- Manage capital gains – Spread asset sales across financial years if possible.
- Use projections – Model income and super before acting.
Final Thought
Division 293 isn’t going away. With rising incomes and smarter super strategies, more Australians will encounter it.
The key is not to avoid super, but to plan smartly. If you’ve had a strong year or are considering large super contributions, check in with your SWU Group financial adviser. A little foresight now can save thousands later. 👉 financialsuccess@simonwu.com.au