TAX RETURNS – MAS TAX ACCOUNTANTS SOUTH YARRA
Division 293 Tax for Higher Income Earners
Author: May Shen Date: 21st May 2015
If you’re a high income earner (taxable income over $20K), and recently received a tax bill for a Division 293 tax assessment. You may wonder what it’s Div 293 Tax and how it is calculated.
Division 293, or Div 293, is a tax on the super of higher income earners. Generally, if your income plus your before-tax super contributions are greater than $300,000, you’ll need to pay a 15% tax on the extra earnings over $300,000.
Div 293 Tax Income Base
1) Adjusted Income:
Your income is based on adjusted income based on income for Medicare Levy Surcharge purposes, which calculated as your taxable income plus other adjustment, such as reportable fringe benefits, net rental property loss and net financial investment loss. The Reportable employer superannuation contribution is disregarded as it will be added in the 2nd part of Div 293 Tax income base.
Source: Personal Tax Returns
2) Concessional (before-tax) super contribution
Your super is calculated as concessional contributions, minus any excess contributions above the concessional contribution cap. The concessional super contributions includes: employer contributed amounts, other family & friends contributions, personal contribution which is tax deductible and defined benefit contribution (funded or non-funded). The Concessional Caps for individuals during 2013-14 was $25,000 and Cap for 2014-15 is $30,000.
Source: Member Contribution Statement (MCS) and SMSF Annual Returns
Div 293 Tax Calculation
Div 293 Tax = (Div 293 Income Base – 300,000) x 15%
ATO 2012-13 example:
A complying super fund member’s income for Div 293 tax purposes was $290,000. His super fund reports his concessional super contribution of $25,000. His Div 293 tax income is $315,000 = $290,000 + $25,000. His Div 293 tax income is greater than the threshold of $300,000 and he will be assessed on the excess of $15,000 ($315,000 – $300,000), so his Div 293 tax will be $2,250 ( $15,000×15%)
When Div 293 tax is due and how to pay
The assessment is raised in respect of your personal tax return and contributions made to an accumulation fund, generally after 31st October of the financial year. You will be required to pay within 21 days after your notice of assessment is issued. You can have a choice of paying it out of your own pocket or paying from your super fund.
Reference: Division 293 Tax
If you are a high income earner and would like to strategically and legally minimise your tax liabilities, here at MAS Tax Accountants South Yarra, we can help with your tax planning and tax returns tailored suit your personal requirements. Please contact May Shen on (03) 9279 3912 or fill up the request form below:
