Division 293 Income: A Guide for High-Income Earners in Australia

If you're a high-income earner in Australia, you might have a surprise waiting for you on your tax assessment. It’s a tax you may not have heard of: Division 293.

As expert tax advisors, we see this surcharge catch people off guard. It's an extra 15% tax on some of your super contributions, effectively doubling the tax on that portion from the usual 15% to 30%. It’s the Australian Taxation Office's (ATO) mechanism for balancing the tax concessions on superannuation for individuals with a high income.

What Is Division 293 Tax and Who Does It Affect?

So, what exactly is this tax? Think of it as a surcharge designed to make the superannuation system more equitable.

Normally, your before-tax (concessional) super contributions are taxed at a flat 15%. For most people, this is a fantastic tax saving, especially if you’re in a higher tax bracket.

But if your income and super contributions combined tip you over a specific threshold, the ATO applies an extra 15% tax. This means a chunk of your concessional contributions is suddenly taxed at 30% instead.

The Purpose Behind the Tax

The principle behind Division 293 is to reduce the tax discount high-income earners receive from their super contributions. Let’s be frank: a 15% tax rate on super is a much bigger saving for someone on the top marginal tax rate (47%, including the Medicare levy) than it is for someone on a lower income. This tax aims to close that gap.

It officially came into effect on 1 July 2012. Back then, the income threshold was $300,000. But on 1 July 2017, it was lowered to $250,000, which pulled many more individuals into its net.

The screenshot above shows a snippet of the Income Tax Assessment Act 1997 – Division 293, the official legislation that gives the ATO the power to assess and collect this extra tax.

Who Is Considered a High-Income Earner?

You could be hit with Division 293 tax if your combined "Division 293 income" and concessional contributions go over $250,000 in a single financial year. The key here is understanding that the ATO's definition of 'income' for this purpose is much broader than just your salary.

This tax isn't just for the ultra-wealthy. A one-off event like selling an investment property, receiving a large bonus, or a redundancy payment can unexpectedly push you over the threshold for a single year.

Whether you're a tradie in Ashfield having a great year, a small business owner in Belrose taking a director's loan, or an investor on the Northern Beaches with significant capital gains, this tax can catch you off guard. A surprise tax bill is the last thing you need to derail your financial goals.

If you think your income might get close to the $250,000 threshold, getting ahead of it is crucial. Don’t wait for the ATO assessment to land in your myGov inbox. Take control by talking to a professional. Book a consultation with EndureGo Tax at our Ashfield or Belrose offices, and let's build a strategy to protect your hard-earned wealth.

What Counts Towards Your Division 293 Income?

Figuring out what the ATO actually counts as ‘income’ for Division 293 is the most important—and often misunderstood—part of this tax. Many people think it’s just their salary, but the real calculation is much broader.

The ATO looks at a whole range of figures to see if you’ve crossed the $250,000 threshold.

Think of it like a bucket filling up over the financial year. Your salary is one stream, but other items like investment losses being added back, reportable fringe benefits, and even your super contributions all flow into the same bucket. A sudden bonus or a big capital gain can be enough to make it overflow, triggering the tax—even if your regular paycheque is well under the limit.

Your Income: The Building Blocks

The ATO doesn't just use your standard taxable income. Instead, they have a special formula to calculate your Division 293 income. It starts with your Adjusted Taxable Income and then adds your concessional super contributions on top.

This table breaks down what goes into that calculation.

Components of Your Division 293 Income Calculation

The ATO uses these "add-backs" to get a truer picture of your financial position. While a negatively geared property might reduce your tax bill, the ATO sees it as an investment choice, not a true drop in your earnings, so they add the loss back for this specific test.

Don't Forget Your Super Contributions

This is the part that catches many people by surprise. On top of all the income components above, the ATO adds in your low-tax concessional superannuation contributions.

Why? Because these contributions already get a significant tax break (they're taxed at 15% instead of your marginal rate). Division 293 is designed specifically to reduce this tax break for high-income earners.

Your concessional contributions include:

• Employer Contributions: The compulsory Superannuation Guarantee (SG) your boss pays.
• Salary Sacrifice: Any extra super you contribute from your pre-tax salary.
• Personal Deductible Contributions: Any after-tax contributions you make and then claim as a tax deduction.

If you want to dig deeper into what’s included here, you can learn more about reportable superannuation contributions in our detailed guide. Getting this part right is crucial for planning.

This is how it all comes together.

As you can see, it's the combination of both a high income and those super contributions that tips you over the edge and into Division 293 territory.

A Real-World Example of the Calculation

Let's see how these pieces fit together for Sarah, a project manager from Ashfield.

• Her taxable income after all deductions is $220,000.
• She has a negatively geared investment property with a net loss of $15,000 for the year.
• Her employer paid $27,500 into her super fund (her concessional contributions).

Here’s how the ATO would calculate her Division 293 income:

1. First, find the Adjusted Taxable Income:
   $220,000 (Taxable Income) + $15,000 (Rental Loss Add-back) = $235,000

2. Next, add her super contributions:
   $235,000 (Adjusted Taxable Income) + $27,500 (Concessional Contributions) = $262,500

Sarah’s total income for this test is $262,500. This puts her $12,500 over the $250,000 threshold, meaning she’ll get a Division 293 tax assessment on part of her super contributions.

This just goes to show how quickly it can all add up. A rental loss you thought was only helping your tax position can actually push you over the line for Division 293.

If you think your income might be getting close, don't wait for a surprise tax bill. Proactive planning is your best defence. Book a consultation with our expert team at our Ashfield or Belrose offices. We’ll help you understand your options and make the best choice for your financial future.

How the Division 293 Tax Is Calculated

So, the Australian Taxation Office (ATO) has tallied up your income and determined you’ve crossed the Division 293 threshold. The next step is figuring out the final tax bill.

Getting your head around this calculation is crucial, because it’s not as simple as slapping a flat 15% tax on your entire super contribution. It’s a bit more nuanced than that.

The whole thing hinges on a "lesser of" rule. This is the key. The extra 15% tax is only applied to the smaller of two specific figures, which ensures you’re not overpaying.

The Crucial "Lesser Of" Rule

The Division 293 tax is charged at a rate of 15%. But it isn’t applied to your whole super balance or even all your concessional contributions for the year.

Instead, the ATO looks at two amounts and applies the tax to whichever one is smaller:

• The total of your concessional contributions for the financial year. This is everything going into your super fund on a pre-tax basis—your employer’s compulsory payments, any salary sacrifice amounts, and personal contributions you’ve claimed a deduction for.
• The amount your Division 293 income went over the $250,000 threshold. Think of this as the "spillover"—the portion of your income that pushed you into the Division 293 zone in the first place.

By taxing the smaller figure, the ATO keeps the charge fair. If you only just tipped over the threshold, you’ll only pay the extra tax on that small excess amount, not on your entire super contribution for the year.

A Practical Example of the Calculation

Let's break this down with a real-world scenario.

Imagine your taxable income is $240,000, and your employer puts $27,600 into your super. This brings your total Division 293 income to $267,600, which is $17,600 over the $250,000 threshold.

Now, the ATO looks at the two key figures:

1. Your total concessional contributions: $27,600
2. The amount you went over the threshold: $17,600

The tax applies to the lesser of these two, which is $17,600.

So, your Division 293 tax bill would be $2,640 ($17,600 x 15%). As detailed in Australian tax research, this calculation effectively bumps the tax on that portion of your super from 15% to 30%. You can explore more on this calculation by reading further analysis on the topic.

Expert Takeaway: The tax isn't a blanket penalty. It's carefully calculated on the smaller of either your total contributions or the amount you've exceeded the threshold by. This is a critical detail that is often overlooked but essential for effective tax planning.

Receiving Your Assessment and Making the Payment

The good news is you don’t have to do these sums yourself. Once you’ve lodged your personal tax return and your super fund has reported its numbers, the ATO runs the calculation automatically.

If you have a liability, you’ll receive a Division 293 tax assessment notice. This will usually land in your myGov inbox or be sent to your tax agent, like us here at EndureGo Tax.

Once that notice arrives, you’ve got a decision to make. You have two main ways to pay the bill.

• Pay From Your Own Pocket: You can pay the assessment directly from your bank account. The big advantage here is that your superannuation balance stays untouched, leaving it to keep growing and compounding. For anyone looking to maximise their retirement nest egg, this is often the go-to choice.

• Release the Amount From Your Super Fund: Alternatively, you can complete and send an election form to the ATO to have the money released directly from your super fund. This is great for your immediate cash flow, but it does mean taking a small bite out of your retirement savings, reducing the capital you have working for you.

You have 60 days from the date of the assessment to make this choice. It’s a decision that really needs you to weigh up your current financial position against your long-term retirement goals.

Staring at a Division 293 assessment can be daunting, but you don't have to figure it out alone. Book a consultation with our expert team at our Ashfield or Belrose offices. We’ll help you understand your options and make the best choice for your financial future.

Real-World Scenarios for Business Owners and Investors

Theory is one thing, but seeing how the Division 293 income rules actually bite in the real world is another. This tax can be a nasty surprise, but walking through some practical examples for our local clients in Ashfield, Belrose, and across the Northern Beaches makes it much clearer.

Let's dive into four different stories. Each one shows how easily different financial moves can push you over the threshold and trigger this extra tax, often when you least expect it.

The Successful Tradie With Surging Profits

First up, meet Tom. He's a plumber based on the Northern Beaches whose business has had a cracker of a year. After paying all his costs and his own salary, his company books a solid profit of $250,000.

• Taxable Income: $250,000
• Concessional Contributions (Employer SG): $27,500
• Total for Division 293 Test: $250,000 + $27,500 = $277,500

Tom’s combined income is $27,500 over the $250,000 threshold. The tax is applied to the lesser of his super contributions ($27,500) or the amount he's over the threshold ($27,500).

Because they're the same, his Division 293 tax bill comes to $4,125 ($27,500 x 15%). Ouch.

The Company Director With Salary and Dividends

Now let’s look at Jane, a company director in Ashfield. She’s structured her finances smartly, paying herself a modest salary to stay in a lower tax bracket and taking the rest of her profits as company dividends.

• Salary (Taxable Income): $200,000
• Fully Franked Dividends: $50,000
• Concessional Contributions (Salary Sacrifice + SG): $27,500

Here's the catch. For the Division 293 calculation, the ATO adds back certain amounts, including the grossed-up value of her dividends. Let's say this brings her taxable income to $230,000. Her total Division 293 income is therefore $257,500 ($230,000 + $27,500).

Crucial Insight: Jane is only $7,500 over the threshold. Her tax will be calculated on this much smaller amount, not her full super contribution. The bill is a more manageable $1,125 ($7,500 x 15%).

It’s a perfect example of how other income streams can catch you out, even with careful salary planning.

The Investor Who Sold a Property

David, an investor from Belrose, decides it's time to sell an investment property he’s held for a few years. The sale goes well, netting him a significant capital gain.

• Normal Taxable Income: $150,000
• Taxable Capital Gain (after 50% discount): $120,000
• Concessional Contributions: $27,500

That one-off property sale sends David’s taxable income for the year soaring to $270,000 ($150,000 + $120,000). His total income for the Division 293 test balloons to $297,500 ($270,000 + $27,500), pushing him well over the limit.

His tax liability is calculated on the lesser of:

• His contributions: $27,500
• The income over the threshold ($297,500 – $250,000): $47,500

The tax applies to the smaller number, so David gets hit with an extra $4,125 ($27,500 x 15%) on top of his usual capital gains tax. It goes to show how a single transaction can have a painful and unexpected tax sting.

The SMSF Member Making Extra Contributions

Finally, we have Maria, who is building her retirement nest egg through her Self-Managed Super Fund (SMSF). She's using the carry-forward rules to make a large personal deductible contribution and get her super working harder.

• Taxable Income: $230,000
• Personal Deductible Contribution: $50,000

Her total Division 293 income jumps to $280,000 ($230,000 + $50,000). This puts her $30,000 over the threshold. Her tax is based on the lesser of her contributions ($50,000) or the excess amount ($30,000).

Maria's Division 293 tax is $4,500 ($30,000 x 15%). While she still gets a great tax deduction for her contribution, this extra cost is something she absolutely needs to factor into her strategy. If you're weighing up a similar move, our guide on SMSF property investment offers more context on managing your fund effectively.

These examples prove that when it comes to Division 293 tax, generic advice just doesn't cut it. Your personal financial story is what matters. If any of these scenarios feel a bit too close to home, it’s time to stop guessing and get proactive. Book a confidential consultation with our team at our Ashfield or Belrose offices. Let's work together to build a plan that protects your wealth and minimises your division 293 income liability.

Strategic Planning to Minimise Your Division 293 Tax

Getting hit with a surprise Division 293 tax bill is a sting no high-income earner wants to feel. But the good news is, you don’t have to just sit back and accept it.

Knowing how the tax is calculated is one thing. Being smart about it is where you can save yourself thousands. With some forward-thinking, you can legally minimise, delay, or sometimes avoid that extra 15% tax hit altogether.

This isn't about shady tax avoidance. It's about legitimate tax planning—structuring your finances in the most effective way possible. In fact, ATO data shows a clear "bunching" of incomes right below the threshold, proving that savvy Australians are already doing this. You can read more in this research on superannuation tax for high-income earners.

Timing Your Income and Capital Gains

One of the simplest yet most powerful strategies is managing when you receive income. Because Division 293 tax is calculated year by year, shifting a large chunk of income from one financial year to the next can make all the difference.

Imagine you're about to sell an investment property with a big capital gain. If your regular salary is already nudging the $250,000 threshold, that profit will almost certainly tip you over.

But what if you simply delayed the property settlement from late June to early July? That pushes the capital gain into the next financial year. A simple date change could completely sidestep the tax for the current year.

The same logic applies to other one-off income events:

• Timing Your Bonus: If you have any say over when a large performance bonus is paid out.
• Cashing in Shares: Choosing which financial year to sell those profitable shares.
• Lump-Sum Payouts: Planning around redundancy or termination payments if you have some flexibility.

Optimise Your Contribution Strategy

The other piece of the puzzle is your super contributions. Tweaking how and when you put money into super can be a powerful lever, especially if your income is a bit lumpy.

The introduction of carry-forward concessional contributions has been a game-changer for Division 293 planning. It allows you to use your unused contribution caps from previous years, giving you immense flexibility.

Let's say you have a year where your income is lower and you’re well under the threshold. You could make smaller super contributions that year. Then, in a high-income year when you’re on track to sail past the $250,000 mark, you could deliberately reduce your personal deductible contributions to keep your income for Division 293 purposes just under the line.

It works the other way, too. If your income is temporarily down but you have unused cap space from prior years, you could make a large one-off contribution. You’d get a great tax deduction without triggering the extra tax. For more ideas, check out our guide on how you can reduce taxable income.

Other Planning Considerations

Beyond timing your income and contributions, a few other strategies are worth exploring with your accountant:

• Review Salary Sacrificing: It’s a fantastic way to build super, but in a year where your income is high, sacrificing too much could push your concessional contributions up and increase your Division 293 liability.
• Spouse Contributions: If your spouse is a lower-income earner, it might make sense to focus on boosting their super in years where you’re at risk of breaching the threshold yourself.
• Investment Structures: Holding your investments in a structure like a family trust can give you more control over when and how income is distributed to family members.

The right game plan is completely unique to your financial situation. It’s not a one-size-fits-all solution and really benefits from an expert eye looking ahead.

Don't wait for that assessment notice from the ATO. Book a confidential consultation with our team at our Ashfield or Belrose offices. Let's work together to build a plan that protects your wealth and minimises your division 293 income liability.

Take Control of Your Tax Position Today

Getting your head around division 293 income is one thing, but acting on it is what really protects the wealth you've worked so hard to build. This isn't a tax you can just deal with later; it requires smart, forward-thinking management to avoid a nasty surprise from the ATO.

For driven tradies, small business owners, and investors across Sydney's Inner West and Northern Beaches, an unexpected tax bill can feel like a huge setback. Don't let years of hard graft be derailed by a notice you never saw coming.

Proactive tax planning isn't about dodging your obligations. It's about smart financial management to ensure you only pay what's legally required, safeguarding the future you're building.

At EndureGo Tax, we specialise in creating tax strategies for people just like you. We get the unique financial pressures facing business owners and investors in Ashfield, Belrose, and the surrounding suburbs. We're here to help you navigate the tricky rules around your division 293 income and put practical strategies in place to minimise the hit.

Ready to get on the front foot? We invite you to book a confidential chat at our Ashfield or Belrose office. Let’s build a plan that secures your financial future and gives you the peace of mind you deserve.

Got Questions About Division 293? We've Got Answers.

When it comes to something as thorny as Division 293 tax, it’s natural to have a lot of questions. As the go-to accountants for clients across Ashfield and the Northern Beaches, we hear them all the time.

So, let's cut through the jargon and get straight to what you need to know.

What if I Think the ATO Got My Division 293 Assessment Wrong?

Yes, you can absolutely challenge it. If a Division 293 tax assessment lands in your inbox and the numbers just don't look right, you have every right to object.

First things first, pull up the assessment notice and compare it against your own records. Do the taxable income, add-backs, and your super contribution figures match what you or your employer reported? Sometimes, a simple error in a tax return or a misreporting by your super fund is the culprit. Fixing that first can often resolve the issue.

But if you've done that and the notice is still incorrect, you can lodge a formal objection with the ATO. The Taxation Administration Act 1953 gives you clear rights and timelines to do this, but it's a process you want to get right from the start. We strongly recommend seeking expert advice before lodging an objection to ensure it's handled correctly.

What Happens if My Income Drops Below the $250,000 Threshold Next Year?

Good news. Division 293 tax doesn't follow you around. It's assessed on a year-by-year basis.

If your income tipped over the $250,000 threshold this year but drops back down next year, you simply won’t pay Division 293 tax for that lower-income year. We see this all the time with clients who have a one-off income spike—think a large capital gain from selling a property, a massive performance bonus, or a redundancy payout. The tax applies only for the financial year you’re over the limit.

Does This Tax Hit My After-Tax Super Contributions?

No, it doesn’t. Division 293 is aimed squarely at concessional (pre-tax) contributions—the ones that already get a tax break on the way into your super.

This includes:

• Your employer’s Superannuation Guarantee (SG) payments.
• Any salary sacrifice contributions you make.
• Personal contributions that you claim a tax deduction for.

Any non-concessional (after-tax) contributions you make from your take-home pay are safe. They aren’t part of the division 293 income calculation and don’t attract this extra 15% tax.

How Far Back Can the ATO Chase Me for This?

Generally, the ATO has a two-year window to review and amend a Division 293 tax assessment for most people. This clock starts ticking the day after your notice of assessment is sent out.

But there's a catch. This review period can be extended to four years if your financial affairs are particularly complex (like having significant overseas income) or if the ATO suspects a tax avoidance scheme was used. In clear-cut cases of fraud or evasion, there’s no time limit at all.

Navigating the complexities of division 293 income isn't something you should leave to chance. It requires a proactive strategy built on expert knowledge.

The team at EndureGo Tax provides specialist advice to business owners, investors, and high-income earners in Ashfield, Belrose, and right across Sydney. Don't let a surprise tax bill derail your financial goals. Take control by booking a consultation with us today and let's make sure your tax position is as strong as it can be. Learn more at https://www.endurego.com.au.