General / Sep 07, 2020

Additional tax on concessional contributions

Duc Hong
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by Duc Hong

Today’s article is simply to show the calculations, and reality, of how Additional tax on concessional contributions work.

Application of Division 293 of the Income Tax Assessment Act results in high income earners paying additional tax on their concessional superannuation contributions.

From 1st July 2017 it applies to individuals with Division 293 income plus Division 293 superannuation contributions of $250,000 or more.

Division 293 income includes:

  • taxable income (assessable income minus allowable deductions)
  • total reportable fringe benefits amounts
  • net financial investment losses
  • net rental property losses
  • net amounts on which family trust distribution tax has been paid
  • Less:
    • Assessable first home super saver released amounts
    • Any taxable components of a lump sum superannuation benefit within the low rate cap.

Division 293 superannuation contributions include:

  • employer contributed amounts
  • other family and friend contributions
  • assessable foreign fund amounts
  • assessable amounts transferred from reserves
  • personal contributions for which you have been allowed a deduction
  • defined benefit contributions
  • but excludes any excess concessional contributions.

The Division 293 tax is calculated at 15% on the lower of:

  • the individual’s Division 293 superannuation contributions, or
  • the amount by which the individual’s Division 293 income plus Division 293 superannuation contributions exceeds the $250,000 threshold.

The ATO matches information from individual tax returns and superannuation fund reporting to calculate and issue Additional tax on concessional contributions (Division 293) notices. There are two options to pay the Division 293 tax assessment:

  • Pay the tax personally, or
  • Elect to nominate a super fund(s) to release the tax payable. An election must be made within 60 days of the issue date which can be done via MyGov or by completing a Division 293 tax due and payable election form.

In practice the provisions of Division 293 make it very difficult to plan and manage the tax liability in any meaningful way, particularly where an individual has triggered a capital gain or receives an eligible termination payment that pushes them over the $250,000 limit for a year.

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