If you earn close to or over $250,000, or receive a large lump sum payment during the year, there’s an additional tax lurking in the background that could unexpectedly impact your superannuation strategy.
What is Division 293 tax?
Division 293 tax is an additional 15% tax that applies to certain superannuation contributions when your income exceeds the high income threshold of $250,000. This tax targets what are called “low tax contributions” – essentially your concessional contributions within your annual limit, such as employer contributions and personal after-tax contributions for which you’ve claimed a tax deduction. When this tax applies, the total tax on these contributions jumps to 30% – comprising the standard 15% contributions tax paid by your super fund, plus the additional 15% Division 293 tax that you pay personally.
How is it calculated?
The Division 293 tax applies to the lesser of: your low tax contributions for the year; and the amount of your income that exceeds $250,000. If your regular income sits below $250,000 but adding your low tax contributions pushes you over the threshold, the extra tax only applies to the portion of contributions that exceed the threshold.
A practical example
Consider Sarah, whose taxable income is $230,000 for 2025–2026. Her low tax contributions total $30,000, bringing her Division 293 income to $260,000. Since this exceeds the $250,000 threshold by $10,000, Sarah’s taxable contributions under Division 293 are $10,000 (the lesser amount). Her additional Division 293 tax bill is $1,500 (15% of $10,000).
What counts as income for Division 293 tax purposes?
The income calculation is broader than your regular taxable income. It includes: taxable income (excluding any First Home Super Saver released amounts); amounts subject to family trust distribution tax; reportable fringe benefits total; total net investment losses (including negative gearing losses and net rental property losses); and your low tax contributions. This comprehensive definition means that common tax reduction strategies like negative gearing and salary sacrificing to super generally won’t help you avoid Division 293 tax. Even though these strategies reduce taxable income, these components are be added back into Division 293 income as net investment losses and low tax contributions.
A few traps to look out for
If you receive a lump sum payment in the year, these payments are included in your taxable income in the year of payment, regardless of which year they actually relate to. This means the taxable amount of a redundancy payment, or payments of unused annual leave or unused long service leave, could unexpectedly push you over the $250,000 threshold in the year you receive them. Sometimes the ATO may disregard or reallocate certain super contributions due to ‘‘special circumstances’’. While this may help you avoid excess concessional contributions tax, the contributions will still count towards the $250,000 threshold in the year they are actually received (although any excess concessional contributions are excluded). The maximum Division 293 tax isn’t necessarily capped at $4,500 (15% of the standard $30,000 concessional contributions cap). If you have unused concessional contribution capacity from previous years under the carry-forward rules, larger contributions could attract proportionally higher Division 293 tax.
Take action
If you’re approaching or exceeding the $250,000 income threshold, it’s crucial to factor Division 293 tax into your superannuation strategy. The timing of contributions, salary sacrifice arrangements and other income decisions all play a role in managing this additional tax burden. Contact our office to discuss how Division 293 tax might affect your situation and explore strategies to optimise your superannuation contributions.