If you’ve ever received an unexpected tax bill from the ATO and had no idea where it came from, chances are you’ve just met Division 293 tax.
It’s a rule that catches many higher-income earners off guard—mainly because it’s not something your employer considers in your PAYG withholding, and it usually doesn’t appear on your radar until the ATO comes knocking.
Let’s unpack what Division 293 tax actually is, how it works, and what you can do about it.
What is Division 293 tax?
In simple terms, Division 293 tax is an extra 15% tax on certain super contributions for higher income earners. It applies when your income plus certain super contributions exceed the Division 293 threshold.
For the 2025/26 financial year, the threshold remains at $250,000.
If your income + concessional contributions push you over this threshold, the concessional contributions above the limit may be taxed at an extra 15%—on top of the usual 15% already applied in super.
How the ATO works it out
The ATO adds up two things:
- Division 293 Income
- Division 293 Super Contributions
If the total exceeds $250,000, then a portion (or all) of your super contributions may be hit with the additional tax.
Division 293 income
This includes more than just your salary. It’s a broad measure of income that may include:
- Taxable income (after deductions)
- Reportable fringe benefits
- Net investment or rental property losses
- Distributions from family trusts
- Termination payments or bonuses
Less any:
- Super lump sums taxed at 0%
- Released First Home Super Saver amounts
Word of warning: This is why some people get unexpectedly stung in years where they’ve had a one-off capital gain, property sale, or large bonus—they’re pushed over the threshold unknowingly.
Division 293 super contributions
These are your concessional (pre-tax) super contributions, such as:
- Employer contributions (including Super Guarantee, employer additional contributions and salary sacrifice)
- Personal deductible contributions
- Allocations from defined benefit schemes
- Any other assessable concessional contributions
If you exceed the $30,000 cap, only the non-excess amount is counted for Division 293 purposes. This means, if you are eligible to utilise unused carry-forward contributions from previous financial years, the carry-forward additions are included in the Division 293 calculation.
If the sum of Division 293 income + Division 293 super contributions is greater than the Division 293 threshold, Division 293 Tax will apply. Taxable contributions are the lesser of the Division 293 super contributions and the amount in excess of the threshold.
Real life examples
Let’s break this down with a couple of practical examples.
Example 1 – Partial Division 293 Tax Applies
Jane earns a salary of $230,000 + superannuation. Based on the current Super Guarantee rate of 12%, her employer contributes $27,600 into super. In addition to this, Jane also receives $10,000 family trust distribution.
- Janes Division 293 Income = $230,000 + $10,000 = $240,000 (A)
- Janes Division 293 Contributions = $27,600 (B)
A + B = $267,600. She has exceeded the Division 293 threshold by $17,600.
The taxable contribution is the lesser of the Division 293 super contributions ($27,600) and the amount in excess of the threshold ($17,600). In this instance the taxable contribution is the excess above the threshold of $17,600.
As a result, Jane would be required to pay Division 293 tax of $2,640 ($17,600 x 15%).
Example 2 – Full Division 293 Tax Applies
Now let’s assume that Jane’s income remains the same, but her trust distribution jumps to $100,000.
- Janes Division 293 Income = $230,000 + $100,000 = $330,000 (A)
- Janes Division 293 Contributions = $27,600 (B)
A + B = $357,600. She has exceeded the Division 293 threshold by $107,600.
The taxable contribution is the lesser of the Division 293 super contributions ($27,600) and the amount in excess of the threshold ($107,600). In this instance the taxable contribution is the Division 293 super contribution of $27,600.
Jane would be required to pay Division 293 tax of $4,140 ($27,600 x 15%).
Strategies to manage (or minimise) Division 293 tax?
While you can’t always avoid Division 293 tax, there are some strategies that may help reduce your exposure, especially if you’re sitting near the $250,000 threshold.
Here are a few to consider:
- Structure investment assets wisely – Where appropriate, consider holding income-generating investments in structures like your spouse’s name, family trusts, investment bonds, companies, rather than in your personal name. This can help manage how much income is assessed to you personally.
- Time capital gains – If you’re planning to sell an asset with a large gain, consider whether it can be timed for a lower-income year or spread across multiple financial years (if the asset is sold in stages).
- Review business structures – If you’re self-employed, you may be able to adjust how your business income is distributed. Some structures may allow for more tax-efficient income splitting or deferral.
- Claim eligible deductions – Consider legitimate deductions such as:
- Income protection premiums paid personally
- Charitable donations
- Investment-related expenses
Just be aware: net investment losses (like negative gearing losses) are added back for Division 293 purposes.
While it’s worth being mindful of the $250,000 threshold, don’t lose sight of the bigger picture. Super remains one of the most tax-effective ways to build long-term wealth, even if Division 293 tax applies. The key is to make informed decisions that align with your overall financial goals.
Paying the tax – what are your options?
Once assessed, you’ll receive a notice from the ATO. You then have 60 days to choose how to pay:
- Pay personally from your savings, or
- Release funds from your super using the ATO’s election form.
Which option is right for you depends on your situation.
If you’re approaching retirement and want to maximise your super balance, it often makes sense to pay the tax personally and leave your super intact to grow in a tax-effective environment.
But if you’re younger and would prefer not to dip into your savings—especially if you’re already contributing extra to super—then releasing the tax from your super might be the more practical option.
Is Super Still Worth It If Division 293 Tax Applies?
Absolutely.
Even if your super contributions are taxed at 30% (15% standard + 15% Division 293), this is still lower than the top marginal tax rate of 47% (including Medicare Levy) for high income earners.
So if you’re taxable income is over $190,000:
| Option | Tax Rate |
|---|---|
| Keep income in your hands | 47% (inc. Medicare levy) |
| Contribute to super | 30% |
That’s a 17% tax saving—still a strong incentive.
However, keep in mind: super is a long-term strategy. The younger you are, the more cautious you need to be, as you’re locking money away until you meet a condition of release. You’ll also want to factor in your goals, timeframe, and legislative risk, given the rules around super can change.
As always, it’s about weighing up the short-term trade-offs for long-term gain.
The Guided Investor approach
Division 293 tax can be frustrating—mainly because it often catches people off guard. But once you understand how it works, you can plan around it with confidence.
If you’ve had a higher income year due to bonuses, capital gains, trust distributions or business profits, it’s worth checking whether you’ve crossed the Division 293 threshold. This becomes especially important when reviewing super strategies and how income is structured.
At Guided Investor, we always consider the impact of Division 293 tax in the context of your broader financial strategy under Tailored Advice. If you’re in Phase 2 or 3 of Wealth Creation, contributing extra to super may still be worthwhile—even with the additional 15% tax. The long-term benefits of super’s tax-effective environment often outweigh the short-term cost.
