Division 293 Tax: What It Is, When It Applies, and How to Pay It

If you’re a high-income earner making regular super contributions, you may have received a letter from the ATO you weren’t expecting — an Additional tax on concessional contributions (Division 293) notice. This article explains what triggers it, how the amount is worked out, and the two ways you can pay it.

What is Division 293 tax?

Concessional (before-tax) super contributions — employer contributions, salary sacrifice, and personal contributions you claim a deduction for — are normally taxed at just 15% inside your super fund, regardless of your personal marginal tax rate. For most people, that’s a significant saving compared to paying tax at their marginal rate.

Division 293 tax claws back part of that saving for high-income earners. It adds an extra 15% tax on some or all of your concessional contributions once your combined income and contributions exceed a set threshold — bringing the total tax on those contributions to 30% instead of 15%. Even at 30%, it’s still well below the top marginal rate of 47% (including the Medicare levy), so concessional contributions generally remain worthwhile — just less concessional than for lower-income earners.

When does it apply?

Division 293 tax applies when your Division 293 income plus your Division 293 super contributions together exceed $250,000 in an income year. This threshold has been fixed at $250,000 since 1 July 2017 (it was $300,000 before that) and is not indexed, so more people are drawn into it over time as wages rise.

Division 293 income is broader than your taxable income. It’s built on the same base used for the Medicare Levy Surcharge, and includes:

• Taxable income (assessable income less allowable deductions)
• Total reportable fringe benefits
• Net financial investment losses
• Net rental property losses
• Any amount on which family trust distribution tax has been paid

Certain amounts are then subtracted, such as super lump sum amounts taxed at a zero rate and assessable First Home Super Saver Scheme released amounts. Notably, reportable super contributions are not added back in for this part of the calculation (they’re accounted for separately as your Division 293 super contributions).

Division 293 super contributions are your concessional contributions — employer SG contributions, salary sacrifice, and deductible personal contributions — less any excess concessional contributions. If you’ve used carry-forward (catch-up) concessional contributions from previous years, those are included too.

A key trap: one-off events

Because the test looks at your combined income and contributions for the year, a single unusual event can tip you over the threshold even if your normal income sits well below it. Common triggers include:

• A capital gain (e.g. selling an investment property or shares)
• An eligible termination payment
• A back payment of salary or wages, including for prior years
• A one-off bonus

If you’re planning a large capital gain or expect a bonus, it’s worth modelling the Division 293 impact in advance, particularly if you’re also making concessional contributions in that year.

How is it calculated?

The tax is 15% of the lesser of:

1. The amount by which your combined income and contributions exceed $250,000, or
2. Your Division 293 super contributions (your total concessional contributions for the year).

Whichever of those two numbers is smaller is the amount that actually gets taxed at the extra 15%.

Worked example: Jan’s Division 293 income is $240,000 and her Division 293 super contributions are $15,000, for a combined total of $255,000.

• The excess over the $250,000 threshold is $5,000.
• Her super contributions are $15,000.
• The lesser of the two is $5,000.

Jan’s Division 293 tax is 15% of $5,000 = $750.

If Jan’s income had instead been $260,000 with the same $15,000 in contributions, the excess over the threshold ($25,000) would be larger than her contributions ($15,000) — so the tax would be based on the smaller figure, her full $15,000 in contributions, giving a Division 293 tax bill of $2,250.

In practice, this means the maximum Division 293 tax you can pay in a year is capped at 15% of your total concessional contributions cap — for 2026–27, with the concessional cap at $32,500, the maximum possible bill (before carry-forward amounts) is $4,875.

How you’ll know you owe it

You don’t calculate or lodge anything separately for Division 293 tax — the ATO does it automatically once it has both your tax return and the contribution details reported by your super fund. If you’re liable, you’ll receive a Division 293 notice of assessment, generally sent to your myGov inbox (or to your tax agent, if you’ve updated your communication preferences).

Because the ATO needs contribution data from your fund as well as your tax return, this notice can arrive well after you’ve lodged — and if you have more than one fund reporting late, you might even receive an amended assessment.

If you think the assessment is wrong, check the income and contribution figures shown on the notice first — most errors trace back to a tax return figure or a fund’s reported contributions. You can correct the underlying return or contribution report, or lodge a formal objection if you still disagree after that.

How do you pay it? Two options

Once you receive your Division 293 notice, you have two ways to pay:

Option 1: Pay from your own funds

You can simply pay the liability yourself, the same way you’d pay any other ATO debt — via BPAY, credit card, direct debit or bank transfer. This keeps the money inside your super fund working for your retirement, rather than being withdrawn to cover the tax.

Option 2: Release the money from your super

Alternatively, you can elect to have the ATO issue a release authority to your super fund, instructing the fund to pay the Division 293 amount directly to the ATO out of your super balance. To do this:

• You need to lodge an election form, most easily done online through ATO online services (Super → Manage → Division 293 election), or your tax agent can lodge it on your behalf.
• You have up to 60 days from the date of your Division 293 assessment to make this election.
• Importantly, the 60-day window only gives you time to decide — it doesn’t extend your actual payment due date. If you’re planning to release money from super, you still need to make sure the liability is paid by the due date shown on your notice, or interest will start accruing.
• Once lodged, your election cannot be withdrawn or reversed.
• If there’s money left over after your Division 293 liability (and any other outstanding tax or Australian Government debts) is paid, the ATO refunds the balance to you.

There’s no right answer between the two — it depends on your cashflow and whether you’d rather preserve your super balance or preserve cash outside super. Many clients with reasonable liquidity choose to pay from their own funds precisely to keep the compounding benefit of a larger super balance; others prefer the release option so the tax is funded from the same pool of money that generated it.

A special case: defined benefit members

If your concessional contributions come through a defined benefit fund, you often can’t access those amounts even with a release authority. In that situation, the ATO defers your Division 293 tax as a debt against the fund until you eventually take a benefit from it (an “end benefit”). Interest accrues on any unpaid deferred debt at the end of each financial year, so many defined benefit members choose to voluntarily pay the deferred amount before 30 June each year to avoid that interest building up, even though payment isn’t otherwise due until benefits are taken.

The bottom line

Division 293 tax isn’t a reason to stop making concessional super contributions — at 30% total tax, they’re still meaningfully more tax-effective than earning the equivalent income outside super at the top marginal rate. But because the $250,000 threshold hasn’t moved since 2017, more people are being caught by it each year, sometimes unexpectedly because of a bonus, capital gain, or one-off payment.

If your income is approaching $250,000, or you’re planning a transaction that could create a large one-off gain, it’s worth reviewing your contribution strategy and modelling the Division 293 impact before 30 June rather than after your assessment arrives.

Mike Carter
Managing Director
BLACKFOX Financial Group

This article is general information only and doesn’t take into account your personal circumstances. Get in touch with the team at Blackfox Financial Group if you’d like this applied to your specific situation.