In this guide
For most high-income earners, saving for retirement through super is a sensible, tax-effective strategy; but there are limits. As your income rises, you could end up paying extra tax on your concessional (before-tax) super contributions.
Under the Division 293 tax rules, if your income and concessional contributions total more than $250,000 in a financial year, you may have to pay an additional 15% tax on some or all of your super contributions.
Division 293 tax is imposed on top of the normal 15% contributions tax paid on concessional contributions when they enter your super account.
Division 293 tax: What it means for high-income earners
Division 293 tax is an extra charge imposed on some of the super contributions made by higher-income earners to reduce the tax benefits they receive from the super system.
If your income plus any concessional (before-tax) super contributions totals more than $250,000 in a particular financial year, you are liable for Division 293 tax of 15% on the amount of concessional contributions above this threshold.
Need to know: Where your income excluding your concessional contributions is under the $250,000 threshold, but your concessional contributions push you over the limit, the extra 15% tax is only applied to the concessional contributions exceeding the threshold.
Why do I have to pay Division 293 tax?
The extra 15% tax imposed under the Division 293 rules is applied because, as a high-income earner, your marginal tax rate (without the 2% Medicare levy) for income amounts over $190,000 is 45% (in 2024–25). When you make a concessional contribution into your super account, however, you only pay a 15% tax rate.
This means you are receiving a bigger saving on your tax bill by making super contributions than someone earning between $45,001 and $135,000 (whose marginal tax rate is 30% in 2024–25).
To make things fairer, Division 293 imposes an additional tax of 15% on higher income earners to bring the amount of tax they save on their super contributions closer to that paid by someone on an average income.
Unfortunately, Division 293 tax is applied even if your income goes over the $250,000 threshold due to a one-off event – such as making a capital gain or receiving an eligible termination payment or salary bonus.
In these situations, the tax rate for your concessional contributions during that financial year increases if you exceed the threshold but drops back the following year when your income goes back under the Division 293 threshold.
Good to know: Background to Division 293
From 1 July 2017 onwards, the annual combined income and super contribution threshold for paying Division 293 tax was reduced to $250,000. Between 2012–13 and 2016–17, the threshold for paying Division 293 tax was $300,000.
The government claimed lowering the threshold for Division 293 tax would better target the tax concessions provided within the super system and ensure it remained equitable and sustainable – not to increase the amount of tax revenue it collected. The threshold for Division 293 tax has not been indexed since 2017, so in future years more Aussies will be paying this tax as their income increases.
Calculating your Division 293 tax
The ATO calculates your Division 293 income and Division 293 super contributions by:
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