Div 293 concessional contributions assessments

Individuals earning more than $250,000 may be subject to Div 293 tax on their concessional super contributions. This is an additional 15% tax which means the effective contributions tax on concessional contributions for those high income earners doubles to 30%. Due to a system issue, the ATO has only recently started issuing Div 293 assessments for the 2018-19 and 2019-20 income years to certain high income earners. Approximately 30,000 assessments have been issued as an initial or an amended Div 293 assessment.

Div 293 tax is imposed on individuals that exceed the high income threshold of $250,000. The consequence of this tax is that an addition 15% tax is imposed on their concessional contributions. In effect, this tax means the effective contributions tax on concessional contributions doubles from 15% to 30% for those high income earners.

The high income threshold uses a broad definition and includes the following:

  • Taxable income including any excess concessional contributions;

  • Reportable fringe benefits total; and

  • Total net investment losses including both net financial investment losses and net rental property losses.

“While any reportable super contributions is disregarded, these contributions are included in another part of the calculation to ensure no amount is double counted.”

Even though you may think that Div 293 tax won’t apply to you as you normally don’t earn over $250,000, remember that one off events may push you over the limit. For example, if you receive a large eligible termination payment or make a large capital gain in any particular income year.

To work out how much tax you’re likely to pay, here’s a simple illustrative example:

Trevor has a Div 293 income of $245,000 for the financial year. He also has $20,000 worth of Div 293 contributions in super. $245,000 + $20,000 = $265,000 which is above the threshold of $250,000 meaning that Div 293 tax applies for Trevor. The next step is to work out which amount is lower, the amount of Div 293 super contribution ($20,000) or the amount above the $250,000 threshold ($265,000 – $250,000 = $15,000). In this case, the amount above the $250,000 threshold is clearly lower at $15,000, which means the 15% Div 293 tax will be applied to that amount. The Div 293 tax payable by Trevor is then $2,250 ($15,000 x 15%).

If you’re a high income earner and has not yet received any Div 293 assessments for the 2018-19 and 2019-20 income years, it may be coming. According to the ATO, due to a system issue, concessional contributions reported in those financial years were not included in Div 293 assessments where that super account was also reported as closed during the financial year.

The ATO notes that the reporting issue was recently resolved which means around 30,000 Div 293 assessments were able to be issued for the 2018-19 and 2019-20 income years. Affected taxpayers would have received either an initial or an amended Div 293 assessment.

For taxpayers that believe they have been incorrectly assessed for Div 293 tax due to mistakes in their tax return or in the contribution amounts reported by their super funds, amendments may need to be made to the associated tax return, or a discussion may be required with the super fund. Changes made to either will update Div 293 tax assessment. If you still disagree with your assessment after changes to your tax return and having a conversation with your fund, you are able to lodge an objection challenging the decision.

Remember, unpaid Div 293 tax past the due date will attract interest, and if you have trouble paying the assessment with your own money, you may be able to make an election to release money from super to pay the amount.

Received an assessment?

If you’ve received a Div 293 tax assessment and are not sure whether it is correct, we can ensure the correct amounts of taxable income and super have been included. Contact us for assistance with this.

Jenni Anderson