For individuals earning over $300,000 in wages within Australia for FY2022, an important consideration is the Division 293 tax. This tax imposes an additional 15% tax on an individual’s taxable contributions. It’s worth noting that the Division 293 tax threshold was set at $250,000 before 1 July 2017.
Examining the Applicability
Currently, the Division 293 is a concern that might be relevant, particularly for individuals like Scott Morrison, with substantial earnings.
Determining Division 293 Tax Liability
Wondering how to determine if you need to pay the Division 293 tax as a high-income earner? After you’ve completed and lodged your tax return, the Australian Taxation Office (ATO) will process it and subsequently send you a notice of assessment outlining the extra 15% tax payable from your personal funds.
Consulting Division 293 Tax Experts for Clarity
Given the complexity of this area, we, as one of the prominent CPA accountants and tax agents in Inner West Sydney, Ashfield, Belrose, Northern Beaches, and Adelaide South Australia, engage in conversations with our clients, especially when their division 293 income combined with super contributions surpasses the $300,000 threshold.
Illustrating through an Example: Super Tax Concession
In the financial year 2020–21, Mark’s annual earnings were $320,000, with his employer contributing $20,000 to his super fund. Mark’s fund incurred a tax of $3,000 on his contribution (15% × $20,000).
Had Mark’s employer not contributed to super, his earnings would have been $340,000, and the additional $20,000 would have been subject to his marginal tax rate of 47%. This would have led to a tax of $9,400 on the additional amount.
Mark’s tax concession on contributions amounts to $6,400.
Although Mark pays the tax of $3,000 (15% × $20,000), his concession remains, albeit reduced.
The total tax on the contribution becomes $6,000 (30% × $20,000), comprising 15% taxed within the fund and 15% tax. The revised tax concession is now $3,400.
Seeking Clarity and Assistance
Should you have queries, feel free to reach out to us via email or the inquiry form. We’re here to provide the guidance and support you need.