Division 293 tax is an additional 15% tax on superannuation contributions for high-income earners. It applies when your income plus concessional contributions exceeds $250,000 in a financial year. Combined with the standard 15% contributions tax, it brings the effective rate on those contributions to 30% — still well below the top marginal income tax rate of 47%.
The tax is assessed by the ATO after you lodge your tax return and can be paid from your super balance or from personal savings.
Key Takeaways
- Division 293 is an additional 15% tax on concessional contributions for high earners
- It applies when income plus concessional contributions exceeds $250,000 — a threshold that has not been indexed
- Total contributions tax becomes 30% — still well below the top marginal rate of 47%
- The ATO assesses Division 293 after your tax return — you choose to pay from your super balance or personally
- Defined benefit fund members and certain public sector employees have a modified Division 293 calculation
What Is Division 293 Tax?
When you or your employer make concessional (pre-tax) super contributions, those contributions are taxed at 15% inside the fund. This concessional rate is the primary tax advantage of superannuation.
However, for high earners, the 15% rate represents a very large subsidy compared to the marginal rate they would otherwise pay. Division 293 of the Income Tax Assessment Act 1997 (Cth) was introduced to reduce this advantage for people earning above $250,000 by imposing an additional 15% tax — bringing the effective contributions tax rate to 30%.
At 30%, super contributions are still significantly more tax-effective for high earners than receiving the same amount as salary (taxed at 47%), but the subsidy is reduced.
Who Pays Division 293 Tax?
You are liable for Division 293 tax if your Division 293 income exceeds $250,000 for the financial year.
Division 293 income is the sum of:
- Your taxable income (including salary, investment income, net capital gains, etc.)
- Reportable fringe benefits
- Total net investment losses (losses added back)
- Low-tax concessional contributions (i.e., your concessional contributions that were taxed at 15% — generally all concessional contributions)
In practice, for most people, this means: taxable income + concessional contributions. If this total exceeds $250,000, Division 293 applies.
Example
| Amount | |
|---|---|
| Taxable income | $240,000 |
| Employer SG (12% of salary) | $28,800 |
| Salary sacrifice contributions | $1,200 |
| Total concessional contributions | $30,000 |
| Division 293 income | $270,000 |
| Amount over $250,000 threshold | $20,000 |
| Division 293 tax payable (15% on lower of: excess income or total contributions) | $3,000 |
Division 293 tax is calculated on the lower of:
- Your concessional contributions for the year, or
- The amount by which your Division 293 income exceeds $250,000
This means if only part of your income pushes you over the threshold, you only pay Division 293 on the amount that crosses it — not your entire contributions.
How the Tax Is Assessed
Division 293 is not deducted by your super fund. It is assessed separately by the ATO after you lodge your tax return.
The process:
- You lodge your individual tax return for the financial year
- The ATO cross-references your return with contribution data reported by your super fund(s)
- If you are liable, the ATO issues a Division 293 tax assessment — a separate notice from your regular income tax assessment
- You choose how to pay: from your own savings or from your super balance
Paying from Super
If you elect to pay from super, the ATO sends a release authority to your super fund. Your fund deducts the amount from your balance and remits it to the ATO. This reduces your super balance but preserves your cash flow.
Paying from Personal Savings
If you prefer to pay from savings, you pay the ATO directly (like paying income tax). Your super balance is untouched.
There is no blanket right or wrong choice — paying from savings preserves super’s tax-advantaged investment environment; paying from super avoids the immediate cash outflow. The decision depends on your personal cash flow and investment preferences.
Division 293 and Salary Sacrifice — Does It Still Make Sense?
For high earners subject to Division 293, the effective tax rate on concessional contributions is 30%. The question is whether salary sacrifice into super is still worthwhile compared to receiving the income as salary.
At the top marginal rate of 47% (including 2% Medicare levy):
- Receiving income as salary → taxed at 47%
- Contributing to super via salary sacrifice → taxed at 30% (15% in fund + 15% Division 293)
- Tax saving per $1,000 contributed: $170
Salary sacrifice still saves $170 for every $1,000 contributed, even with Division 293. It remains a meaningful tax strategy for high earners — just less generous than it is for those below the threshold.
Division 293 and Defined Benefit Funds
For members of defined benefit super funds (common in public sector employment), the Division 293 calculation uses a notional taxed contribution rather than actual cash contributions. The rules are more complex for defined benefit members.
If you are a member of a defined benefit fund and believe you may be subject to Division 293, consult your fund or a tax adviser — the interaction between Division 293 and defined benefit accruals can be particularly complex.
History of the $250,000 Threshold
The Division 293 threshold was originally set at $300,000 when the tax was introduced in FY2012–13. It was reduced to $250,000 from 1 July 2017. The threshold has not been indexed and remains at $250,000.
The lower threshold means a larger number of Australians now pay Division 293, including many senior employees, doctors, engineers, and executives who earn well above average wages but not necessarily in the ultra-high earner category.
Frequently Asked Questions
Is Division 293 deducted from my super account automatically? No. Your super fund does not calculate or deduct Division 293 tax. It is assessed by the ATO separately after you lodge your tax return. You receive an assessment notice and then elect how to pay.
Will Division 293 always apply if my income is over $250,000? Division 293 applies to the extent your concessional contributions push your Division 293 income over $250,000 — or if your income alone already exceeds $250,000, the tax applies to all your concessional contributions (up to the cap). If your income is just over the threshold, only a portion of your contributions are taxed under Division 293.
Can I reduce or avoid Division 293 by contributing less to super? Division 293 only applies to concessional contributions. Reducing concessional contributions reduces the amount subject to Division 293 tax, but also reduces the overall super contribution and the associated tax shelter. Whether reducing contributions to avoid Division 293 is sensible depends on individual cash flow and investment preferences — it generally is not efficient to forgo super contributions just to avoid a 30% tax rate when the alternative is 47%.
Does Division 293 apply to non-concessional contributions? No. Division 293 applies only to concessional (pre-tax) contributions. After-tax non-concessional contributions are not subject to Division 293.
What if I don’t pay the Division 293 assessment? Unpaid Division 293 tax accrues interest like any unpaid tax debt. If you do not pay or arrange payment from super, the ATO can take recovery action. If you believe an assessment is incorrect, you can object through standard ATO review processes.
See also: Super Contributions. For advice tailored to your situation, speak with a licensed financial adviser. You can find one through the ASIC financial advisers register or MoneySmart.