Div 293 Additional Contributions Tax for High Income Earners

Individuals with income over $250,000 need to be aware of both the Excess Contributions Charge, and the Div 293 Additional Contributions Tax.

The Excess Contributions Charge essentially applies marginal individual income tax rates to contributions over $25,000. Effectively bringing your concessional contributions for the year down to a maximum of $25k.

The Div 293 Assessment represents additional tax on your concessional contributions. The ATO describes Div 293 thusly:

Division 293 reduces the tax concession high income earners receive, even if this is due to a one-off event, and aligns it more closely with the concessions received by average income earners

If you are a high income earner, your marginal tax rate is higher than an average income earner. When you make concessional contributions to your fund, you receive a larger tax concession. Division 293 imposes an additional tax of 15% to bring the concession back to an amount in line with the average.

Where your "Div 293 income" is over the "Div 293 threshold", an additional 15% tax is payable on your concessional contributions.

Div 293 Income is derived from your taxable income, plus rental losses, plus concessional super contributions.

Previously the Div 293 threshold was $300k, but has reduced to $250k in 2018 and future years.

The Div 293 tax is payable on your concessional contributions rather than your income. For most people effected, their concessional contributions will have been reduced to the maximum, so $25k @ 15% = $3,750.

You can release funds from your superannuation to pay the Div 293 tax. This is ~15% more tax effective than paying with personal, after tax funds. To do so you need to access ATO online services through myGov as discussed here. If you've already paid the $3,750 from your own funds, then it's possible to release this amount from your super fund as a reimbursement to yourself.