If your income exceeds certain thresholds, your concessional super contributions may be taxed at a higher rate than you expect.
What Is Division 293 Tax?
Ordinarily, concessional contributions — such as employer super guarantee and salary sacrifice contributions — are taxed at 15% within super.
However, if your “Division 293 income” exceeds $250,000 in a financial year, an additional 15% tax may apply to some or all of your concessional contributions.
This effectively increases the tax on those contributions from 15% to 30%.
How Is It Calculated?
Division 293 tax is calculated as 15% of the lesser of:
• The amount by which your Division 293 income exceeds $250,000, or
• Your concessional (low-tax) contributions for the year
This means not all high-income earners automatically pay 30% on their entire concessional contribution. The calculation depends on how far above the threshold your income sits.
For example:
If your total income plus concessional contributions equals $280,000, you are $30,000 over the $250,000 threshold. Division 293 tax would apply to the lesser of:
• $30,000 (the excess over threshold), or
• Your concessional contributions
This nuance is important and often misunderstood.
Who Is Most Affected?
Division 293 tax commonly impacts:
• Senior executives
• Medical professionals
• Business owners
• Individuals receiving large bonuses
• Those with significant capital gains in a financial year
Because employer super guarantee contributions are included in the income calculation, some individuals are caught unintentionally.
Does It Still Make Super Worthwhile?
Even at 30%, concessional contributions can remain tax-effective compared to marginal tax rates of up to 47% (including Medicare levy).
However, without proactive planning, Division 293 can create unexpected tax notices and disrupt contribution strategies.
Planning Around Division 293
Effective planning involves forecasting total income early in the financial year. This is particularly important in years involving:
• Bonuses
• Business profit fluctuations
• Capital gains events
• Large dividend payments
In some situations, it may be appropriate to adjust salary sacrifice amounts or manage the timing of income recognition.
Division 293 tax is not a reason to avoid superannuation contributions altogether. It is, however, a reminder that super strategy must align with broader income planning.
For high-income earners building wealth within super, modelling and proactive review can prevent unpleasant surprises and improve long-term outcomes.
Disclaimer: This information is general in nature and does not consider your personal objectives, financial situation or needs. You should consider seeking professional advice before making any financial decisions. Past performance is not a reliable indicator of future performance.
