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Division 293: the extra 15% tax over $250k

Division 293 is an additional 15% tax on concessional super contributions for individuals whose combined income and concessional contributions exceed $250,000 in a financial year. It is effectively a penalty on high earners’ super contributions, reducing the tax benefit of salary sacrificing. But the rule’s structure means it’s avoidable in some circumstances and often less punitive than high earners fear.

The basic Division 293 formula

Step 1: Calculate your Division 293 income. This includes:

  • Taxable income
  • Reportable fringe benefits
  • Reportable super contributions (mandatory super guarantee + salary sacrifice + personal deductible)
  • Net investment losses (including property negative gearing)
  • Assessable investment income

Step 2: Determine your total concessional contributions for the year (capped at $30,000 from 2024-25).

Step 3: Add Division 293 income + concessional contributions.

Step 4: If that sum exceeds $250,000, Div 293 applies to the lesser of:

  • The amount by which the total exceeds $250,000
  • Your total concessional contributions

The tax rate is 15% on the applicable portion.

Example calculation

Income $240,000, concessional contributions $20,000:

  • Total: $260,000
  • Exceeds threshold by: $10,000
  • Div 293 applies to the lesser of $10,000 or $20,000 = $10,000
  • Additional tax: $10,000 × 15% = $1,500

The taxpayer effectively paid 15% on the first $10,000 of contributions (standard) + 15% Div 293 on the same $10,000 = 30% tax on half the contributions.

Example where all contributions are hit

Income $280,000, concessional contributions $20,000:

  • Total: $300,000
  • Exceeds threshold by: $50,000
  • Div 293 applies to the lesser of $50,000 or $20,000 = $20,000
  • Additional tax: $20,000 × 15% = $3,000

Now all contributions have the extra 15% applied, making the effective contribution tax 30%.

Is Division 293 a “super tax” or “income tax”?

Technically it’s an income tax on you personally, but it’s calculated based on super contributions and typically paid from your super fund (with your authorisation). You can elect to pay from personal cash instead.

The decision: contribute or not?

Even at Div 293 rates, pre-tax super contributions usually beat post-tax savings:

High earner at 45% + 2% Medicare + 15% Div 293:

  • Contribution: $1 sacrificed
  • After 15% concessional tax: $0.85
  • After Div 293 15%: $0.70

Post-tax alternative at 47% marginal:

  • $1 salary after tax: $0.53

Pre-tax path still delivers 32% more capital into investment. Div 293 reduces the benefit but doesn’t eliminate it.

The super environment (15% on earnings vs marginal rate outside super) compounds this advantage over decades.

Strategies to minimise Div 293

1. Staggered contributions across spouses: If your spouse has lower income, direct contributions to their super using contribution splitting. They can receive up to 85% of your concessional contributions to their balance, and their own contributions count against their cap (and their Div 293 test).

2. Timing of investment gains: Division 293 income includes capital gains. Timing capital gains in a year when your base income is lower can keep your Div 293 income below the threshold.

3. Investment income shifted: Div 293 income includes net investment income. If you have positively geared investments, consider whether they can be held in a structure (family trust, spouse) that doesn’t count toward your Div 293 test.

4. Reduce discretionary income: For earners sitting just above the threshold, deferring or declining bonuses, or sacrificing more to super (increasing contributions but reducing other income), might keep you under.

When Division 293 doesn’t help your planning

For earners well above the threshold ($350k+), Division 293 is simply an accepted cost of high income. The marginal optimisation strategies don’t save much. Focus on:

  • Maximising carry-forward to get more into super overall
  • Using non-concessional contributions strategically (no Div 293 on non-concessional)
  • Investment structures (trusts, companies) where appropriate

The non-concessional alternative

Non-concessional contributions (post-tax) are not subject to Div 293. High earners can contribute:

  • $120,000 per year (standard cap)
  • Up to $360,000 using 3-year bring-forward
  • All from already-taxed money
  • Earnings inside super still taxed at 15% (concessional environment)

For earners well above $250k, combining maximised concessional contributions + non-concessional contributions creates the most effective super strategy. Annual capital moved into super: $150k-$390k.

Understanding the true cost

The “15% penalty” framing is misleading. Div 293 doesn’t take 15% of your super. It takes 15% of your CONTRIBUTION, once. Inside super, the earnings on that contribution are still taxed at the concessional 15% rate, not at your marginal rate.

Over 20 years, the cost of Div 293 on a $20k contribution is $3,000 upfront. The benefit of having that $17,000 net contribution (after contribution tax) in super vs in personal savings over 20 years at a 4% net return differential is approximately $20,000.

Div 293 is a real cost but not a reason to avoid super contributions.

Payment mechanics

After lodging your tax return, the ATO calculates Div 293 and issues an assessment notice. You can:

  • Pay from super fund (release authority given to fund)
  • Pay from personal cash
  • Elect payment method

Most high earners pay from super to preserve personal cash flow. The super balance reduction is marginal in the context of long-term accumulation.

The planning summary

For earners with income $200-$250k:

  • Your concessional contributions may push you over $250k combined threshold
  • Monitor total income + contributions carefully
  • Consider slight adjustments to stay below threshold where possible

For earners with income $250-$350k:

  • Div 293 will apply; plan for it
  • Still contribute; the math still favours super
  • Consider carry-forward strategies to smooth impact

For earners $350k+:

  • Div 293 is a cost of doing business
  • Maximise all super contribution avenues
  • Use non-concessional alongside concessional
  • Consider structural investments outside super for additional tax planning

Division 293 reduces but doesn’t eliminate the super contribution advantage. Most high earners who skip super contributions “because of Division 293” are leaving meaningful retirement wealth on the table.