As payroll services specialists, we enjoy learning and chatting about tax.

The ATO describes a Division 293 tax as an additional tax on super contributions, which reduces the tax concession for individuals whose combined income and contributions are greater than $250,000.

You’re liable to pay Division 293 tax if you exceed the $250,000 income threshold and you have concessional superannuation contributions for an income year.

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This example from the ATO website explains the working out the tax concession on super

In the 2017–18 financial year Mark earns $320,000 and his employer contributes $20,000 to his super fund. Mark’s fund pays tax of $3,000 on his contribution (15% × $20,000).

If Mark’s employer had not contributed to super, Mark would have earned $340,000 and the additional $20,000 would have been taxed at his marginal rate of 49%. Mark would have paid $9,800 tax on the additional $20,000.

The tax concession Mark would receive on his contributions is $6,800.

By paying Division 293 tax of $3,000 (15% × $20,000) Mark still receives a concession but it is reduced. 

The total amount of tax paid on the contribution is $6,000 (30% × $20,000, made up of 15% taxed in the fund and 15% Division 293 tax). The tax concession is now $3,800.

Source: ATO website

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If you have a Division 293 tax liability, you have the option to pay the tax by releasing money from super. Information about how to do so is on the ATO website. Be sure to run your decision through your financial adviser to ensure the decision is best for your situation.

The ATO website contains some great information to help you be more informed about you income and tax.

 

If you’d like to chat about maximising your contractor income, give our payroll services team a call on (02) 6161 8580 or email us at contact@bookssorted.com.au.

 

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