What is Division 293 Tax? Managing Your Tax Obligations

Saving for retirement is a big part of life in Australia. Thanks to the superannuation system, millions of people are putting away money for the future while getting helpful tax breaks today. But if you earn a high income, there’s a special tax you should know about , the Division 293 tax.

This tax was created to make superannuation fairer. People who earn more money get bigger tax savings from super than those earning less. Division 293 tax is designed to reduce this gap by adding an extra tax on the super contributions of high-income earners.

If you’re earning over $250,000 a year or getting close to it, it’s important to understand how this tax works. In this blog, we’ll explain everything you need to know — in simple terms — so you can plan ahead, avoid surprises, and make smart choices for your future.

What Is Superannuation, and Why Is It Taxed?

Superannuation (or “super”) is money set aside for retirement. Most employers must contribute at least 11% of your income into a super fund. You can also add more money to your super on your own. These contributions are usually taxed at just 15%, which is lower than what most people pay on their regular income. That’s one of the reasons super is such a popular way to save.

But here’s the catch — the more you earn, the more you benefit from the lower super tax rate. That’s why the Australian Government introduced the Division 293 tax. It’s an extra tax for high-income earners to help balance things out.

What Is Division 293 Tax?

Division 293 tax is an additional 15% tax on certain super contributions for people whose income and contributions add up to more than $250,000 in a year. This means instead of paying 15% tax on your super, you’ll pay 30% — but only on the portion that goes over the threshold.

Even after paying this extra tax, superannuation is still a tax-effective way to save. For example, if your regular income tax rate is 45%, a 30% super tax still gives you a 15% savings. So don’t let this tax scare you off from contributing to super — just make sure you understand it.

Who Has to Pay Division 293 Tax?

You have to pay Division 293 tax if:

• Your total income (including fringe benefits, investment income, and more), plus
• Your before-tax (concessional) super contributions adds up to more than $250,000 in a single financial year.

Let’s look at a simple example.

Example:

• Your salary is $240,000
• Your employer puts $15,000 into your super

Total = $255,000
This is $5,000 over the threshold, so you pay 15% Division 293 tax on that $5,000 — which equals $750.

It’s important to note that this tax only applies to concessional contributions, which are super payments made before tax.

What Counts as “Income” Under Division 293?

The ATO doesn’t just count your regular wages. For Division 293 purposes, your income includes:

• Taxable income (your salary and wages)
• Reportable fringe benefits (like a company car)
• Investment income
• Net losses from rental properties or financial investments
• Employer super contributions (including salary sacrifice)
• Other taxable benefits

This broader view of income means more people can get caught by the tax — especially if you earn bonuses, sell an investment, or claim deductions for losses.

What Are Concessional Contributions?

Concessional contributions are the payments that go into your super fund before tax is taken out. These include:

• The Super Guarantee (employer’s required payments)
• Salary sacrifice (where you ask your employer to add part of your pay into super)
• Personal contributions that you claim a tax deduction for

There is a yearly limit for concessional contributions, known as the concessional contributions cap. As of the 2024–25 financial year, the cap is $27,500. Going over this limit can lead to even more tax, so it’s important to track how much is going into your super.

Read Blog- complete guide to the procure-to-pay (P2P) process

How Is Division 293 Tax Paid?

Once the ATO figures out that you owe Division 293 tax, they’ll send you a Division 293 tax assessment. This includes the amount you owe and your payment options.

You can:

1. Pay the tax yourself using your own bank account, or
2. Tell your super fund to pay it out of your super savings.

You have 60 days to choose which method works best for you. If you don’t act, the ATO may take the money from your super by default.

Why Does Division 293 Tax Matter?

This tax matters because it affects how much you can benefit from contributing to super. If you’re earning close to or above $250,000, Division 293 tax could reduce your tax savings — and that might change how you plan your finances.

Even though it sounds like a penalty, it’s really about fairness. The goal is to make sure that high earners don’t get too much of a tax advantage from the super system compared to everyone else.

Division 293 Tax Over Time: A Quick Look

Here’s a table showing how the income threshold has changed:

Year	Income Threshold
2012–2016	$300,000
2017–2023	$250,000
2024 (talks ongoing)	$220,000 (proposed)

There have been discussions about lowering the threshold even more. If that happens, more people will be affected.

How Many People Pay This Tax?

According to the Australian Taxation Office:

• Around 360,000 people paid Division 293 tax in 2022–23.
• This number is growing as salaries rise and people earn more from side jobs and bonuses.
• Super contributions are also increasing, so more Australians are crossing the threshold.

Current Trends and Future Changes

Rising Super Tax Concessions

Super tax concessions cost the government over $55 billion each year. A lot of this money benefits wealthier Australians. In fact, 83% of these tax breaks go to people above the median income.

Proposed Super Tax for High Balances

There’s a plan to tax earnings from super balances over $3 million at 30% instead of 15%. This could begin in July 2025 and is expected to impact around 80,000 people.

These changes show a trend: the government is trying to make the super system more equal and sustainable for everyone.

How to Manage Division 293 Tax

If you’re at risk of paying this tax, here are some tips to help you stay on top of things:

1. Track Your Income and Super Contributions

Keep an eye on your total income, including bonuses, investments, and employer contributions.

2. Limit Salary Sacrifice

If you’re near the threshold, be careful about salary sacrificing more into super. You might accidentally trigger the extra tax.

3. Use the ATO’s Tools

The ATO offers calculators and guides online to help estimate your super contributions and tax.

4. Talk to a Professional

A tax agent or financial advisor can help you plan your contributions wisely and avoid surprises at tax time.

Plan Ahead and Make Smart Decisions

If you're earning close to or above $250,000 a year, it's important to understand how Division 293 tax affects your superannuation. This extra 15% tax on concessional contributions may reduce some of your tax savings, but super is still a valuable way to build wealth for retirement. The key is to stay informed, track your income, and make smart choices about your contributions.

At Global FPO, we help high-income earners like you manage complex tax issues with ease. Our expert team provides tailored guidance on Division 293 tax, retirement planning, and long-term wealth strategies. Let us help you stay compliant, avoid surprises, and make the most of your super. Contact us today to take control of your tax strategy and secure your financial future.

FAQs

1. What is Division 293 tax?

Division 293 tax is an extra 15% tax applied to concessional super contributions if your income plus those contributions exceed $250,000 in a financial year.

2. Who has to pay Division 293 tax?

High-income earners with a total income and super contributions over $250,000 must pay Division 293 tax. This includes salary, bonuses, investment income, and before-tax super contributions.

3. How is Division 293 tax calculated?

The tax is calculated as 15% of the concessional contributions that push your income over the $250,000 threshold. Only the amount above the threshold is taxed extra.

4. How do I pay Division 293 tax?

You can pay it directly to the ATO or choose to have the amount released from your super fund. You’ll receive a notice from the ATO with instructions.

5. Can I avoid Division 293 tax?

While you can’t avoid the tax if you’re over the threshold, you can manage your income and super contributions wisely. A tax advisor can help you minimize its impact through smart planning.