Div 293

Have you received a Div 293 tax notice from the ATO?

Do you understand what the tax notice means?

Div 293 tax is an additional tax of up to 15% on concessional super contributions if you earn over $250,000 in 2020/21.

To break this down further, any contributions made by your employer (concessional contribution) to superannuation fund is taxed at 15%. Generally, this tax is paid via your super fund.

However, if your salary + super are more than $250,000 in 2020/21, the Government has been kind enough to tax you an additional 15% tax on your concessional contributions. Effectively taxing you 30%.

The ATO will work out if you need to pay Div 293 tax based on information in your tax return and data they receive from your super fund(s).

They will issue you with a notice of assessment stating the amount of tax payable.

How can you pay the tax?

You can pay the tax from your personal bank account or from your superannuation fund.

Many people look to protect their personal cashflow and pay this additional tax from their super fund.

Case Study

Bob earns a salary of $225,000 and his employer contributes $21,375 into super for him.

He earns no other sources of income. His total income is therefore $246,375, which is within the limit of $250,000. Bob’s entire CCs would therefore be taxed at 15%.

Let’s now assume Bob also earns $10,000 in bank interest.

This takes his total income to $256,375, which is $6,375 over the income threshold.

Here, the first $15,000 of his CCs of $21,375 would be taxed at 15% and the remaining $6,375 would be taxed at 30%.

If we instead assume that Bob earns a total income of $290,000, comprising salary, bank interest, dividends from shares and CCs, all his CCs would be taxed at 30%.

What next?

Make sure the tax assessment is correct.

Ensure your super fund is the most appropriate super fund for your specific circumstances (not just now, but for the next 10-15 years), including reviewing your insurance, risk tolerance, asset allocation and underlying investments.

Should you have any questions, please do not hesitate to contact our team for further advice & support.

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