If you’re an Australian professional, entrepreneur, or SMSF trustee, you’re likely putting significant thought into your superannuation strategy. But if your income edges past a certain threshold, you could face a lesser-known super tax called Division 293. And unlike your regular income tax, this one can sneak up on you, often with very little warning.
At SMSF Outsourcing Services, we’ve helped countless high-income individuals and small business owners across Australia proactively manage or avoid Division 293 tax through smart planning and proper support. This guide breaks it all down—from how it works to how you can keep more of what you earn.
What is Division 293 Tax?
In plain terms, Division 293 tax is an additional 15% tax on your concessional (before-tax) super contributions. It’s designed to make super tax concessions less generous for Australians with higher incomes.
Normally, super contributions (like employer SG contributions, salary sacrifice, or deductible personal contributions) are taxed at 15%, which is a good deal compared to your marginal income tax rate. But once your combined income and concessional super contributions exceed $250,000, the government applies an extra 15% on some or all of those concessional contributions, bringing the total tax up to 30%.
It’s not a penalty, but it can feel like one, especially if you’re being diligent about growing your retirement savings through your SMSF (Self-Managed Super Fund).
Real Example: Division 293 Tax in Action
Let’s say Alex, a business consultant in Melbourne, earns $235,000 in salary and makes $20,000 in concessional super contributions (including employer SG and salary sacrifice). His total Division 293 income is now $255,000.
Because his income exceeds the $250,000 threshold by $5,000, and he contributed $20,000 to super, he’ll pay Division 293 tax on the lesser of:
- $5,000 (the amount over the threshold), or
- $20,000 (his concessional contributions)
- So, Alex pays 15% of $5,000 = $750 in Division 293 tax.
It’s not devastating, but it’s unexpected, and without planning, it can repeat each year or climb higher if your income or contributions increase.
Who Is Most at Risk?
Division 293 tax primarily targets high-income earners, but many people trigger it accidentally, especially in years when they receive large one-off payments or gains.
You might be at risk if:
- You’re a business owner or contractor drawing lump-sum profits at year-end
- You sell an investment property and realise a capital gain
- You take a redundancy or termination payout
- You use a salary sacrifice arrangement and contribute close to your cap
- You make personal concessional contributions to boost your SMSF
- You’re a medical professional, lawyer, or executive with income bonuses
The ATO calculates Division 293 income based on your taxable income + concessional contributions + other assessable amounts (like fringe benefits and investment income).
Even a one-time spike, like a capital gain from shares or property, can push you over the threshold.
Why SMSF Members Need to Pay Extra Attention
If you have an SMSF, you probably value flexibility and control in your super strategy. However, SMSF trustees often maximise concessional contributions, making them more susceptible to Division 293 tax.
Without careful contribution tracking, SMSF members can:
- Exceed their caps unknowingly
- Get hit with Division 293 on top of excess contribution taxes
- Face penalties or interest due to poor timing or reporting
That’s why smart contribution planning and professional oversight are essential, especially if you’re using strategies like carry-forward concessional caps, transition to retirement pensions, or spouse splitting.
How Can You Reduce or Avoid Division 293 Tax?
While you can’t “opt out” of Division 293 tax once you’re over the line, you can take proactive steps to stay below the threshold or reduce the tax payable. Here’s how:
1. Structure Your Income More Strategically
If you’re self-employed or running a company, consider how you draw your income. For example, retained earnings or company distributions (rather than high wages or bonuses) can help you manage the timing and size of assessable income.
This is especially useful if your business has a strong year, deferring income into the next financial year may help you stay under the Division 293 cap.
2. Review Your Salary Sacrifice & Personal Contributions
If you’re near the threshold, those extra concessional contributions might not be as tax-effective as you think. You might be better off investing personally or delaying some contributions to the next financial year.
Working with an SMSF advisor can help you decide whether to pause, reduce, or reallocate your concessional contributions without hurting your long-term super goals.
3. Offset Income with Legitimate Tax Deductions
Review your allowable deductions—such as investment property expenses, business deductions, and negative gearing. Lowering your assessable income by even a few thousand dollars could keep you safely below the $250,000 cap.
This is where regular tax planning, not just year-end scrambling, makes a big difference.
4. Use Your SMSF Strategically
SMSFs allow greater control over when and how you make contributions. If you’re managing your own fund, take advantage of:
- Timing contributions carefully
- Using carried forward concessional caps
- Spreading contributions across family members in the fund (if eligible)
Done properly, this could lower your Division 293 exposure while still maximising your super growth.
5. Double Check Reporting & Disputes
In some cases, the ATO might issue a Division 293 assessment based on incorrect reporting from your super fund. If you believe there’s been an error, or your concessional cap was exceeded by mistake, you can:
- Request a correction from your fund
- Lodge a review or objection with the ATO
- Seek professional support to handle the dispute
What Happens After You Receive a Division 293 Notice?
Once your tax return is lodged and your super contributions are reported, the ATO will determine whether Division 293 applies. If it does, they’ll send a Division 293 tax notice (usually through myGov or your registered tax agent).
From there, you have two options:
- Pay it yourself from personal funds
- Release the amount from your super fund using the ATO’s release authority
If you’re using an SMSF, make sure you process the release correctly and report it to the ATO on time to avoid compliance issues.
Final Thoughts: Smart Planning Beats Surprise Taxes
Whether you’re a high-earning specialist in Sydney, a mining executive in Perth, or a growing startup founder in Brisbane, Division 293 tax is something you can’t afford to overlook.
It’s not just about paying extra tax—it’s about strategic planning to keep your financial goals on track without letting hidden taxes eat into your retirement savings.
At SMSF Outsourcing Services, our specialists work hand-in-hand with accountants, SMSF administrators, and business owners to monitor income levels, flag upcoming risks, and recommend strategies that protect your super and cash flow.
