Division 293 Tax Explained: Why High Earners Are Paying More
What Is Division 293 Tax?
Division 293 is a federal tax measure designed to reduce the tax concession high-income earners receive on superannuation contributions.
Normally, super contributions made before tax (such as employer or salary-sacrificed contributions) are taxed at 15% when they enter your fund. However, once your income and concessional contributions combined exceed $250,000 in a financial year, you'll be charged an additional 15% Division 293 tax — bringing the total tax on those contributions to 30%.
The policy aims to make the super tax concession more equitable between higher and lower income earners. Because high-income earners have marginal tax rates of 45% (or 47% including the Medicare levy), they receive a much larger tax benefit from concessional super contributions than those on middle incomes. The additional 15% tax helps level this advantage.
Who Does It Apply To?
Division 293 applies when your Division 293 income (which includes several components) exceeds $250,000 in a financial year.
Division 293 income includes:
Your taxable income (salary, wages, business income, investment income)
Reportable fringe benefits
Reportable employer superannuation contributions (salary sacrifice and personal deductible contributions, but excluding employer Super Guarantee)
Total net investment losses (if applicable)
Division 293 super contributions include:
Employer Super Guarantee contributions (12% from 1 July 2025)
Salary-sacrifice contributions to super
Personal deductible contributions you've claimed in your tax return
Certain other concessional contributions within the $30,000 annual cap
Important note: Contributions that exceed your concessional cap are not subject to Division 293 tax, as they're already penalized under excess contribution rules.
How the Threshold Works
If your Division 293 income plus Division 293 super contributions exceed $250,000, you'll pay the additional 15% tax on either:
The amount over $250,000, OR
Your total concessional contributions
...whichever is less.
Example 1: Sarah earns a taxable income of $240,000 and her employer contributes $30,000 to super (including SG and salary sacrifice).
Her Division 293 income calculation:
Division 293 income: $240,000
Division 293 super contributions: $30,000
Total: $270,000
She has exceeded the threshold by $20,000. The taxable amount is the lesser of her super contributions ($30,000) or the excess over the threshold ($20,000) = $20,000.
Division 293 tax payable: $20,000 × 15% = $3,000
Example 2: Michael earns $243,000 and salary sacrifices $25,000 into super.
His Division 293 income calculation:
Division 293 income: $243,000
Division 293 super contributions: $25,000
Total: $268,000
He has exceeded the threshold by $18,000. The taxable amount is the lesser of his super contributions ($25,000) or the excess over the threshold ($18,000) = $18,000.
Division 293 tax payable: $18,000 × 15% = $2,700
One-Off Income Spikes
Division 293 tax can catch people unexpectedly in years when one-off events push their income over the threshold, such as:
Receiving a redundancy or termination payment
Realizing a large capital gain from selling property or investments
Receiving an unusually large bonus
Higher trust distributions from family trusts
This is why monitoring your income throughout the year is important, especially if you're close to the threshold.
How the ATO Calculates It
The ATO automatically assesses Division 293 tax using information from:
Your income tax return
Member contribution statements from your super fund(s)
Annual returns from your SMSF (if applicable)
Once your tax return and fund data are processed (typically a few months after lodgment), the ATO issues a Division 293 notice of assessment showing:
The total income used to calculate the threshold
The concessional contributions subject to the additional tax
The amount of Division 293 tax payable
The due date for payment
If you lodge your tax return using myTax, your Division 293 notice will be sent to your myGov inbox. Otherwise, it will be mailed to you.
Important: Division 293 tax is not automatically withheld from your income like PAYG tax. You must actively pay it or arrange for release from super.
How It's Paid
You have two options to pay Division 293 tax:
Option 1: Pay Personally
Pay the ATO directly via BPAY, credit card, or other payment methods. This preserves your super balance and allows it to continue growing in the tax-effective super environment.
Option 2: Release from Super
Instruct your super fund to release the money by completing a Division 293 tax release authority form through myGov or your fund portal. You have 60 days from the date on your assessment to make this election.
Which option is better?
This depends on your circumstances:
Pay personally if: You have sufficient cash flow, want to maximize your super balance, and can afford the payment without financial stress. Over time, the compounding effect of keeping money in super (where earnings are taxed at up to 15%) versus paying tax personally can be significant.
Release from super if: You prefer not to use personal savings, are younger with many years until retirement, or don't have readily available cash.
Special Rules for Defined Benefit Funds
If you're a member of a defined benefit fund (common in public sector employment), different rules apply. The Division 293 tax is not immediately payable. Instead, the ATO sets up a debt account and the tax (plus interest at the 10-year Treasury bond rate) is deferred until you receive a super benefit from that fund.
The $250,000 Threshold Has Never Been Indexed
The Division 293 threshold has remained at $250,000 since 2017-18 (it was previously $300,000 from 2012-13 to 2016-17). Because it has not been indexed with inflation or wage growth, more Australians are affected each year as incomes rise.
This "bracket creep" effect means Division 293 tax now captures a growing proportion of middle-to-high income earners, not just those at the very top of the income distribution.
How to Manage or Reduce Division 293 Tax
While you can't avoid the tax if your income exceeds the threshold, there are legitimate strategies to manage or minimize its impact:
1. Time Contributions Strategically
If you anticipate a high-income year (due to a bonus, capital gain, or business profit spike), consider:
Deferring discretionary salary-sacrifice contributions to the following financial year
Bringing forward deductible expenses to reduce taxable income in the high-income year
Spreading major income events across financial years where possible
2. Use Spouse Contributions
Instead of making additional salary sacrifice contributions yourself, consider making spouse contributions (if eligible) to your partner's super fund. These contributions:
Don't count towards your Division 293 income
May make you eligible for the spouse contribution tax offset (up to $540 per year if your spouse earns less than $37,000)
Build your household super without triggering Division 293
3. Consider Non-Concessional Contributions
After-tax (non-concessional) contributions don't attract contributions tax and aren't counted for Division 293 purposes. If you have after-tax savings and are eligible to contribute (total super balance under $2 million), non-concessional contributions can be an effective alternative.
The annual non-concessional cap is $120,000 from 1 July 2025 (or up to $360,000 under the bring-forward rule if you're under age 75).
4. Track Contributions Through myGov
Monitor your concessional contributions regularly through myGov → ATO → Super to ensure you're not inadvertently exceeding the $30,000 cap or triggering higher-than-expected Division 293 tax.
5. Review Carry-Forward Contributions
If you're using carry-forward (catch-up) concessional contributions, remember that all contributions—including carry-forward amounts—are counted for Division 293 purposes. A large catch-up contribution in a high-income year could result in substantial Division 293 tax.
Important caveat: These strategies must align with your overall retirement plan, cash flow needs, and long-term goals. Professional financial advice is strongly recommended before implementing any strategy to manage Division 293 tax.
Why Super Still Makes Sense
Even with Division 293 tax, super remains one of the most tax-effective investment structures available to Australians.
The math:
Top marginal tax rate: 45% (or 47% including Medicare levy)
Super contributions tax with Division 293: 30%
Tax saving: 17 percentage points
For someone on the top marginal rate, contributing to super still delivers a 17% tax benefit per dollar contributed, even after Division 293 tax. This is substantial.
Additionally, once your super is in retirement phase:
Investment earnings are tax-free (within the $2 million transfer balance cap)
Capital gains are tax-free
Pension payments are tax-free (if you're 60 or over)
This makes super an essential tool for long-term wealth building and retirement planning, regardless of Division 293 tax.
Division 293 vs Division 296
It's important not to confuse Division 293 tax with the proposed Division 296 tax:
Division 293 applies to contributions and has been in effect since 2012
Division 296 (if legislated) would apply to earnings on super balances above $3 million from 2025-26 onwards
These are separate taxes with different thresholds, calculations, and purposes.
Key Takeaway
Division 293 tax affects Australians whose combined income and super contributions exceed $250,000, but it doesn't make super any less worthwhile. The key is awareness and planning — knowing when you might cross the threshold and how to structure contributions efficiently.
Because the threshold has not been indexed since 2017, more Australians are being caught by this tax each year as wages and incomes grow. Staying informed and reviewing your position annually can help you make better decisions and avoid surprises.
Important: This article provides general information only and should not be relied upon as financial advice or tax advice. Division 293 tax calculations can be complex, particularly when:
You have multiple sources of income
You've received one-off payments like redundancies, capital gains, or trust distributions
You're using carry-forward concessional contributions
You're a member of a defined benefit fund
You have reportable fringe benefits
Before implementing any strategy to manage Division 293 tax, you should:
Review your complete income and contribution picture through myGov
Consider the long-term implications of paying personally vs releasing from super
Understand how your specific income components affect your Division 293 income calculation
Assess whether timing strategies are appropriate for your circumstances
Seek personal financial and tax advice from licensed professionals who can assess your individual situation and help you develop an appropriate strategy.
Need help managing your Division 293 tax? The team at Redwood Financial Planning can review your income, model your Division 293 exposure, and help you develop a tax-effective super contribution strategy that aligns with your retirement goals.
For more information about Division 293 tax, visit the ATO website at ato.gov.au or speak with a registered tax agent.
Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute financial, tax, or investment advice. We recommend speaking with a qualified financial adviser before making any decisions regarding your superannuation. Every individual’s financial situation is unique, and personalised advice is essential to ensure the best outcome for your specific circumstances.
