Get To Know Division 293 Tax

As you’re no doubt, acutely aware, running a business inAustralia requires careful oversight of your tax obligations to ensure your financial affairs are truly in order. One such tax that may not be on your radar is Division 293 tax.

Below, we will shed some light on what Division 293 tax is and why it's essential for you as an Australian business owner to be aware of it…

What Is Division 293 Tax?

Division 293 tax is an additional levy introduced by theAustralian Taxation Office with a specific target: high-income earners. Its purpose is to minimise the generous tax benefits high-income individuals might receive from their superannuation contributions. Normally, superannuation contributions are taxed at a concessional rate of 15%. However, Division 293tax essentially doubles this rate for certain high-income earners, imposing an extra 15% tax on their contributions.

Here's a key point to note: If the combined total of your adjusted taxable income and your Division 293 super contributions for a financial year equals $250,000 or more, you could be liable for this additional tax.

Am I Considered a High-Income Earner?

You might wonder if you qualify as a high-income earner. TheATO has specific criteria for this classification. You are deemed a high-income earner if your Division 293 income exceeds $250,000 in a financial year. This income is determined through the 'Adjusted Taxable Income' calculation, which takes into account various components, including your taxable income and personal concessional contributions.

Why Does Division 293 Tax Exist?

The ATO introduced this tax to bridge the gap between the tax concessions available to high-income earners and those accessible to average-income earners regarding superannuation contributions. The existence ofDivision 293 tax is basically all about promoting equity in the Australian tax landscape, ensuring that all Australians, regardless of their income, benefit from tax concessions fairly and equitably.

Examples of Division 293 Tax Calculations

Let's illustrate the application of Division 293 tax with a couple of examples:

Individual Scenario: Suppose your Adjusted TaxableIncome is $300,000 with concessional super contributions of $27,500 in the 2023 financial year.

• Division 293 Tax = $27,500 * 15% = $4,125

Business Owner Scenario: If your Adjusted TaxableIncome is $240,000 with concessional super contributions of $27,500 in the 2023 financial year.

• Division 293 Tax = $17,500 * 15% = $2,625 (since only $17,500 exceeds the $250,000 threshold).

Frequently Asked Questions

1. ‍How will I know if I owe Division 293 Tax? Once you have lodged your individual tax return and the ATO has collected information from your superannuation funds, they will assess whether you owe any Division 293 Tax. If you do, the ATO will send you a notice detailing their calculations and when the payment is due.‍
2. What are my payment options? You can choose to pay directly from your personal bank account. Alternatively, you can fill out a nomination form to have the amount deducted from your superannuation account.‍
3. Can I avoid this tax? While it's absolutely essential to adhere to all tax obligations, your Attune team member can guide you through the most appropriate strategy for your situation that may reduce your Division 293 tax liability.

If you're a small to medium-sized business owner and have questions about Division 293 Tax and its implications for you and your business, it's crucial you speak with the Attune team so we can provide clarity and the best way forward for you.

We invite you to book an appointment via our website or call us on 1300 866 113. Our team of specialists is hereto guide you through the intricacies of your tax obligations and associated laws, ensuring that you're compliant and taking advantage of the best financial strategies for your business.

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