Division 293: The High-Income Super Tax Explained
If you’ve recently received a surprise notice from the ATO mentioning "Division 293," you aren't alone. It is one of the most common queries we receive from high-income earners.
Essentially, the government thinks you are saving too much tax through your superannuation, in comparison with middle income earners.
Here is the no-nonsense breakdown of what it is, why you have to pay it, and your options for clearing the debt.
What is Division 293 Tax?
Division 293 is an additional 15% tax on your concessional (pre-tax) super contributions.
Normally, money put into super is taxed at a flat 15%. However, if your combined income and super contributions exceed $250,000 in a financial year, the ATO applies this extra levy.
This brings the total tax on those contributions to 30% (15% standard contributions tax + 15% Division 293 tax).
Why is the government doing this?
It ultimately comes down to "fairness" in the tax system.
The tax benefits of superannuation are designed to encourage saving for retirement. However, the benefit is skewed toward high earners:
Average Earner: Pays ~32-37% income tax. Putting money into super (taxed at 15%) saves them about 17-22%.
High Earner: Pays 47% income tax (including Medicare Levy). Putting money into super (taxed at 15%) used to save them 32%.
The government decided this gap was too generous. Division 293 reduces the tax concession for high earners so that it is roughly in line with what average earners receive.
How is it calculated?
The tax is not applied to your entire income, nor necessarily your entire super contribution. It is calculated on the lesser of these two amounts:
Your total concessional super contributions.
The amount your income (plus super) exceeds the $250,000 threshold.
The "Income" Definition
For Division 293, the ATO uses a special definition of income. It includes:
Taxable income (salary, business income, dividends).
Reportable fringe benefits.
Total net investment losses (e.g., negative gearing losses are added back in).
Example Calculation
Salary: $240,000
Super Contributions: $27,500
Total Combined: $267,500
The Threshold Excess: Your total ($267,500) is $17,500 over the $250,000 threshold.
The Calculation: The ATO compares your contributions ($27,500) vs. the excess ($17,500). They tax the lesser amount.
$17,500 x 15% = $2,625 tax payable.
How do I pay it?
You generally receive a Notice of Assessment for Division 293 after you have lodged your tax return. You have two payment options:
Option 1: Pay with personal funds
You can pay the bill directly to the ATO using your own cash (BPAY, credit card, etc.).
Pros: Your super balance remains higher, compounding for retirement.
Cons: It impacts your current cash flow.
Option 2: Release money from Super
You can ask your super fund to pay the tax for you. You must complete a Division 293 election form via your myGov account. The ATO will then direct your fund to release the specific amount to them.
Pros: No impact on your personal bank account.
Cons: You reduce your retirement savings.
Can I avoid it?
In short: No.
Unlike other taxes, you cannot "scheme" your way out of Division 293 because the calculation adds back negative gearing losses and fringe benefits. The only way to avoid it is to earn less than $250,000 (including super).
The Silver Lining
Even with Division 293, you are paying 30% tax on that money inside super. If you had taken that money as salary instead, you would likely have paid 47% tax.
Superannuation remains one of the most tax-effective vehicles for wealth creation, even for high-income earners.
Is your Division 293 calculation looking unusually high? Sometimes the ATO data matching can be incorrect, especially regarding defined benefit funds or complex payrolls. You can query your super fund about the information they provided to the ATO, in addition to your payroll department.