The superannuation system is designed to be tax-effective, with concessional contributions taxed at 15% inside the fund rather than at the member's marginal rate. For most Australians, that concessional rate creates a genuine tax benefit. But for high earners, the benefit is partially clawed back by Division 293 — an additional 15% tax on concessional contributions that effectively brings the tax rate on those contributions to 30% for individuals above the income threshold.
Understanding how Division 293 works, who it applies to, and what bookkeepers should be alert to helps add value to high-earning clients without straying into territory that requires a tax agent registration.
What Division 293 Tax Is
Division 293 is not a new concept — it was introduced in 2012 and extended in 2017 when the threshold was reduced from $300,000 to $250,000. The tax applies when an individual's Division 293 income (defined below) plus their low-tax contributions exceeds $250,000 for the income year.
The tax rate is 15% on the lesser of:
- The individual's low-tax contributions (concessional contributions taxed at 15% inside the fund), or
- The amount by which the total of Division 293 income and low-tax contributions exceeds $250,000
In plain terms: if an individual earns $280,000 and their employer makes $20,000 in concessional contributions (SG plus salary sacrifice), the combined total is $300,000 — $50,000 over the threshold. But the excess of the contributions (which are the low-tax component) over the threshold is only $20,000. Division 293 is 15% of $20,000, or $3,000.
What Counts as Division 293 Income
Division 293 income is broader than taxable income. It includes:
- Taxable income (which already includes reportable fringe benefits, reportable employer super contributions, and net investment losses added back under the income test)
- Total net investment losses (negatively geared property or shares)
- Reportable employer super contributions (salary sacrifice amounts above the SG)
- Concessional contributions to defined benefit funds (on a notional basis)
The inclusion of net investment losses and salary sacrifice is significant. An individual with $200,000 in salary, $50,000 in concessional contributions, and $20,000 in negative gearing losses has Division 293 income of $270,000 ($200,000 + $50,000 + $20,000) — over the threshold, even though their taxable income might be lower.
How the ATO Assesses and Collects Division 293
Division 293 is assessed on the individual, not the employer. The ATO issues a Division 293 assessment after the individual lodges their tax return. The assessment shows the amount of Division 293 tax owing, with two options for payment:
- Pay from personal funds: The individual pays the ATO directly, like any other tax liability
- Release authority to the fund: The individual can request that their super fund release the amount from their account to pay the ATO
The release authority option means the tax is effectively paid from the same super account that received the concessional contributions — which is administratively convenient but reduces the account balance. Individuals with defined benefit interests in government super funds have a different deferral arrangement and may be able to defer the tax until they receive their benefit.
What Employers and Bookkeepers Need to Know
The Division 293 liability is not an employer obligation. The employer makes SG and salary sacrifice contributions as normal; the Division 293 assessment happens at the individual level through the tax return process.
However, bookkeepers managing payroll or advising high-earning clients should be aware of several practical issues:
Salary sacrifice can increase Division 293 exposure. An employee who salary sacrifices heavily to reduce taxable income may bring their Division 293 income to or above $250,000 because the sacrifice amount is counted in the calculation. The tax benefit of the salary sacrifice is partially reduced by Division 293 for individuals near the threshold.
Reportable employer super contributions must be correctly reported. Under STP Phase 2, salary sacrifice super is reported separately as reportable employer super contributions. If these are incorrectly coded, the ATO's calculation of Division 293 income will be wrong, and the resulting assessment may be incorrect.
Multiple employers create compounding risk. An employee with two employers, each making SG contributions, may reach the concessional cap faster and may have a higher Division 293 exposure than expected. Bookkeepers managing payroll for such employees should flag the position to the employee's tax agent.
When to Raise Division 293 With a Client
The appropriate time to raise Division 293 is when a client's income is approaching $250,000 — particularly where they are considering increasing salary sacrifice contributions, taking on a more senior role with a higher salary, or where investment income has increased significantly.
Division 293 advice — including whether to pay the assessment from personal funds or via a release authority, and whether to adjust salary sacrifice contributions — is tax agent advice and should be referred appropriately. Bookkeepers can flag the issue, explain what it is at a high level, and ensure the payroll reporting is correct to avoid compounding the problem. That's a meaningful contribution without overstepping.