In this article, we'll provide an overview of Division 293 Tax, how it works, and what you need to do if you receive a Division 293 Election form.
What is Division 293 Tax?
Division 293 Tax is payable in addition to the standard 15% tax that is paid on concessional contributions by your super fund, increasing the overall tax paid on CCs to 30%.
If your income and concessional contributions exceed $250,000, you may be liable to pay an additional 15% tax on some or all of your concessional contributions. Income from a range of sources counts towards this limit, including employment and business income, investment income, reportable fringe benefits and income you may receive from one-off payments such as redundancy and termination payments.
What are Concessional Superannuation Contributions?
Concessional superannuation contributions are like a tax-deductible gift to your future self, helping you save more for retirement while reducing your taxable income now. Win-win! Concessional contributions include contributions made by an employer on behalf of an employee including the Super Guarantee contributions, and contributions made under an effective salary sacrifice arrangement. Personal contributions may also be treated as concessional contributions where the person making the contribution claims a personal tax deduction for their contribution.
What are Non Concessional Superannuation Contributions?
Non-concessional superannuation contributions are like adding extra sprinkles to your retirement savings sundae (or your spouse's or under 18 year old child's) from income that you’ve already paid tax on, which means they’re not taxed when received by your super fund. Be sure to check the rules and regulations !
How to Avoid Division 293 Tax
Unfortunately, there’s no way to avoid Division 293 Tax if you’re a high-income earner, but you should consider tax planning strategies to reduce income below $250k to avoid exceeding the Div 293 threshold. Ultimately, paying this tax is still better than paying tax at 47%.
Received a Division 293 Election Form?
Division 293 Tax isn’t paid or assessed formally as part of your tax return. When completing your tax return, there should be a prompt indicating that Division 293 Tax is payable. The ATO won’t send a notice of assessment for Div 293 Tax until after the individual tax return is lodged and the contribution information received.
If you do receive a Division 293 Election Form, don’t ignore the notice or leave it aside to deal with later. You have 60 days to respond, and the good news is you can choose for the tax payable to be paid from your super, not your own pocket. If paying from your super, you must allow time to submit that election and have the ATO write to your fund with instructions to release the payment.
Get in touch with our wealth advisors and certified financial planners to determine whether or not releasing funds from super is the right move for you.
How to Elect to Pay Division 293 Notice from Your SMSF or Alternative Superannuation Account.
Now we’re getting into the nitty gritty. Our advisors are here to help clients prepare and submit this documentation on your behalf. But if you prefer the DIY option, here it is!
To complete an election form online, you need to have registered for myGov and linked to the ATO Online Services. If you’re not already registered for myGov or your account isn’t linked to the ATO, you can do so by visiting the online services portal. Once you’re correctly linked to the ATO, you should see the Australian Taxation Office listed under your services when you log in to myGov. This is your starting point to make an election.
To make your election, follow the steps below:
- Login to myGov and click on the ATO image to access ATO Online Services.
- Select the Super tab from the top menu.
- Scroll down to Manage and click on that to get the sub-menu.
- Click on Division 293 election (you may have other elections available – it is essential that you select Division 293 election).
- View your available elections. You may have elections for a due and payable account and/or a deferred account. You may also have elections available for different years.
- Choose which super fund you want to pay the Div 293 Tax from (Your SMSF should be listed, if not contact your SMSF administrator).
- Complete the declaration and lodge for the election that you would like to complete.
After completing the election form, wait for the ATO to send you a Notice to pay as the trustee of your super fund. It’s important to note that this may go to your SMSF tax agent or administrator, so be sure to inform them to expect it.
Talk to a Superannuation Expert or Tax Advisor about Division 293
Luckily, we’ve got both in-house here at BlueRock! So don't let the Div 293 Tax law catch you off guard. If you need help figuring out how it applies to you, get in touch with BlueRock's superannuation and tax experts. We've got your back and can guide you through the process hassle-free. So, what are you waiting for? Submit the form below and let's tackle Div 293 Tax together.
Disclaimer: The information in this article is intended as general information only and should not be considered as advice on any matter and should not be relied upon as such. This information has been prepared without taking into account any individual objectives, financial situation or needs. You should therefore consider the appropriateness of the information before acting or seek advice before making any financial decisions.
