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You may recall from our previous news bulletins the details of an additional 15% tax on superannuation contributions applying to some high income earners.

This was one of the final measures enacted by the Labor Government before its departure, and applies from 1 July 2012 for the 2012/2013 financial year and future years.

The ATO has recently begun issuing assessments, known as Division 293 Tax Assessments, for this additional tax in respect of the 2012/2013 financial year.

How is Division 293 tax calculated?

Individuals with "personal income" greater than $300,000 are liable for Division 293 tax, which is an additional 15% tax on their concessional superannuation contributions.

An expanded definition of "income" is used for this purpose which will be the sum of the following:

  • taxable  income (after deductions) plus
  • reportable fringe benefits plus
  • an add back of net investment losses e.g. from negative gearing less
  • taxable components of any lump sum super benefits .

If an individual's income excluding their concessional contributions is less than $300,000, but the inclusion of their concessional contributions pushes income over the threshold, the extra 15% tax will only apply to that part of the contribution that is in excess of the threshold, not the whole contribution.

All superannuation funds currently pay tax of 15% on concessional contributions so this additional tax adds another 15%, bringing the total to 30%. Since high income earners are already taxed at 46.5% on income over $180,000, there is still a tax saving of 16.5% on concessional super contributions (46.5% - 15% -15% = 16.5%) made in these circumstances.

Where families have an ability to split income (for example where income is earned through a discretionary trust), Division 293 tax should now be a consideration in any pre-year end tax planning.

What happens if I receive a Division 293 tax assessment?

You will have 21 days to pay your assessment of Division 293 tax to the ATO from the date of issue.

There are 3 options to pay this assessment:

  • Pay personally, out of your own pocket.
  • Elect to have your superannuation fund pay the assessment to the ATO. A release authority will be issued with any assessment, and must be completed and sent to your superannuation fund for payment prior to the due date. There is no extension to the payment due date using this method.
  • You can also pay the assessment personally and, using the release authority discussed above, have the superannuation fund reimburse you.

 

Should you have any further queries about Division 293 tax and how this may affect you, or your 2013/14 tax planning considerations please contact Chris CampbellClive ToddJamie Towers or your usual Hanrick Curran advisor.