Division 293 Tax Explained: What High-Income Earners Need to Know About Super

For many professionals, superannuation is meant to be the “easy” part of wealth building. Your employer contributes, the tax rate is lower, and you do not have to think about it too much.

That is why receiving a Division 293 tax notice often comes as a surprise.

Clients usually say something like “I thought super was taxed at 15%. Why am I paying more?”

The short answer is that Division 293 tax exists to reduce super tax concessions for higher-income earners. The longer answer, and the one that actually matters, is how it works, when it applies, and what you can do about it.

This article walks through Division 293 in plain English, using real numbers and real situations.

What Is Division 293 Tax, Really?

Division 293 tax is an additional 15% tax on concessional super contributions for individuals whose income is considered “high” under the rules.

The policy intent is simple. Super contributions are usually taxed at 15%. For people on high marginal tax rates, that concession is very generous. Division 293 narrows that gap by adding another 15% tax, bringing the total tax on concessional contributions closer to personal tax rates.

It does not apply to everyone. It only applies when your combined income and concessional super contributions exceed $250,000 in a financial year.

How the $250,000 Threshold Is Calculated

This is where most of the confusion starts.

The $250,000 threshold is not just your salary. The ATO calculates a special income figure for Division 293 purposes.

It starts with your taxable income from your tax return. To that, the ATO adds certain amounts that are often overlooked. These can include net rental property losses, net financial investment losses, and any reportable fringe benefits.

Once that income figure is calculated, the ATO then adds your concessional super contributions. This includes employer super contributions and any salary-sacrificed or personal concessional contributions you have made.

Importantly, it does not stop at the annual cap. Even if you have used carry-forward unused caps from earlier years, the full amount of concessional contributions is counted for Division 293.

This is why some people cross the $250,000 threshold without realising it.

One-Off Events That Trigger Division 293

Many people who receive a Division 293 notice do not earn over $250,000 every year.

A common trigger is a one-off event. Selling an investment property, realising a large capital gain on shares, or receiving a significant bonus can temporarily push your income over the threshold.

In those years, Division 293 applies even if it is not part of your usual income pattern. This is often why the notice feels unexpected.

How the Tax Is Actually Calculated

Once your Division 293 income exceeds $250,000, the calculation itself is relatively simple.

The additional tax is 15% of the lower of the two amounts. The first is the excess over $250,000. The second is your total concessional super contributions for the year.

Only the lower of those two amounts is taxed.

A real example makes this clearer.

A Real Division 293 Example

In one case, the taxable income reported in the tax return was $225,553. There was also a net rental property loss of $2,580. This brought the adjusted income to $228,133.

Employer super contributions for the year were $26,224. When those contributions were added, the Division 293 income became $254,357.

That meant the income exceeded the $250,000 threshold by $4,357.

Division 293 tax applied to the lower of the excess amount ($4,357) and the concessional contributions ($26,224). The excess amount was lower, so that was used.

The additional tax was 15% of $4,357, which came to $653.55.

The tax is not large, but it is unexpected if you are not aware of the rules.

When You Find Out About Division 293 Tax

The timing often adds to the confusion.

The ATO cannot issue a Division 293 assessment until it has two pieces of information. It needs your tax return, and it needs contribution data from your super fund.

This means the notice usually arrives after you lodge your tax return. Depending on whether you lodge by the October deadline or through a tax agent with a May deadline, the notice can arrive many months after the end of the financial year.

The assessment comes as a separate notice, commonly referred to as a Division 293 notice.

What to Do If the Assessment Does Not Look Right

If you receive a Division 293 notice and something does not make sense, do not ignore it.

Errors can occur if income is amended later or if contribution data has been reported incorrectly by a super fund. The first step is to review the figures carefully.

If the issue relates to your income, it may require an amended tax return. If the issue relates to the contribution amounts, it is usually a discussion with your super fund.

If you still disagree after corrections are made, you have the right to lodge an objection with the ATO.

Paying Division 293 Tax From Your Super

One option many people choose is to pay the tax from their super fund rather than from their after-tax cash flow.

You can do this by lodging a Division 293 election to release superannuation. The election must be made within 60 days of the notice date.

It is important to understand that this 60-day period does not change the due date of the tax itself. The tax must still be paid by the due date shown on the notice of assessment.

For example, if the notice is dated 14 November with a due date of 8 December, the tax must be paid by 8 December even though you have until January to lodge the election.

Once you lodge an election to release super, it cannot be withdrawn or reversed.

What Happens If You Pay First and Elect Later

If you pay the Division 293 tax personally and then later lodge an election to release super, the process still works.

The ATO will request the release amount from your nominated super fund. The released amount is applied to your Division 293 liability. If that liability has already been paid, the funds are applied to other ATO or government debts first. Any remaining balance is refunded to you.

Final Thoughts

Division 293 tax is not a penalty. It is a design feature of the superannuation system that applies once income reaches a certain level.

The key issue is not whether it applies, but whether you understand why it applies and how to manage it calmly.

For many professionals, Division 293 becomes part of the landscape as income grows. Understanding it early avoids confusion, missed deadlines, and unnecessary stress.

Like most things in tax, clarity changes everything.