As an engineer, tech lead, or high-earning STEM professional in Australia, navigating the tax system requires precision. When your income crosses certain thresholds, the tax landscape shifts dramatically. One of the most significant, yet frequently misunderstood, tax adjustments is the Division 293 tax.
Designed to reduce the tax concession advantage that high-income earners receive on their superannuation contributions, Division 293 imposes an additional 15% tax on your concessional super contributions. If your combined income and super contributions exceed $250,000, you will face this surcharge.
To help you plan your cash flow and optimize your retirement contributions, this guide breaks down the mathematics of Division 293, provides worked examples with real numbers, and explains how to use our free Division 293 Tax Calculator to instantly compute your liability.
What is Division 293 Tax?
In Australia, concessional (pre-tax) super contributions are generally taxed at a flat rate of 15% within your super fund. For individuals on lower or middle marginal tax brackets, this represents a significant tax saving compared to their personal marginal tax rates.
However, for high earners, this concession is deemed disproportionately beneficial. To level the playing field, the Australian Taxation Office (ATO) levies Division 293 tax, which adds an extra 15% tax to either your concessional contributions or the amount that exceeds the $250,000 threshold—whichever is lower.
This brings the total tax rate on your targeted super contributions to 30%. While this is still lower than the top marginal tax bracket of 45% (plus the Medicare levy), it is a substantial increase that can result in unexpected tax bills of thousands of dollars if not planned for.
The Mathematical Formula Behind Division 293
Calculating your Division 293 tax liability is not as simple as checking if your base salary is over $250,000. The ATO uses a specific definition of "income" for this test, known as Division 293 Income, combined with your Low Tax Contributions (concessional contributions).
1. Determining Division 293 Income
Your Division 293 income is calculated as:
$$\text{Division 293 Income} = \text{Taxable Income} + \text{Reportable Fringe Benefits} + \text{Net Financial Investment Losses} + \text{Net Rental Property Losses} - \text{Superannuation Lump Sum Taxable Components}$$
2. Identifying Surchargeable Contributions
These are your concessional super contributions, which include:
- Employer contributions (Superannuation Guarantee)
- Salary sacrifice contributions
- Personal contributions for which you claim a tax deduction
Note: This is capped at the annual concessional contributions limit (e.g., $30,000 for the 2024/25 financial year, up from $27,500 in previous years).
3. The Comparison Test
Let $I$ be your Division 293 Income, and $C$ be your concessional contributions.
First, calculate the combined total: $$\text{Combined Total} = I + C$$
If $\text{Combined Total} \le $250,000$, your Division 293 tax liability is $0.
If $\text{Combined Total} > $250,000$, your taxable contributions ($T$) are determined by taking the lesser of:
- Your concessional contributions ($C$)
- The excess amount above the threshold: $(I + C) - $250,000$
Finally, the tax is calculated as: $$\text{Division 293 Tax} = T \times 15%$$
Practical Calculation Examples
Let's walk through two distinct scenarios to see how this formula behaves under different income levels.
Scenario A: The "Threshold Crosser" (Partial Liability)
Sarah is a Senior Systems Engineer with the following financial profile for the 2024/25 financial year:
- Taxable Income: $235,000
- Concessional Super Contributions: $25,000
- Fringe Benefits / Investment Losses: $0
Step 1: Calculate Combined Total $$\text{Combined Total} = $235,000 + $25,000 = $260,000$$
Because $260,000 is greater than $250,000, Sarah is liable for Division 293 tax.
Step 2: Determine Taxable Contributions We find the lesser of:
- Concessional contributions: $25,000
- The excess above the threshold: $$260,000 - $250,000 = \textbf{$10,000}$$
The lesser value is $10,000.
Step 3: Calculate the Tax $$\text{Division 293 Tax} = $10,000 \times 15% = $1,500$$
Sarah will receive a Division 293 assessment notice for $1,500.
Scenario B: The "High Earner" (Full Liability)
David is an Engineering Director with the following profile:
- Taxable Income: $280,000
- Concessional Super Contributions: $30,000 (maximum cap for 2024/25)
- Net Rental Property Losses: $10,000
Step 1: Calculate Division 293 Income David's Division 293 income includes his rental losses added back: $$\text{Division 293 Income} = $280,000 + $10,000 = $290,000$$
Step 2: Calculate Combined Total $$\text{Combined Total} = $290,000 + $30,000 = $320,000$$
Step 3: Determine Taxable Contributions We find the lesser of:
- Concessional contributions: $30,000
- The excess above the threshold: $$320,000 - $250,000 = \textbf{$70,000}$$
The lesser value is $30,000.
Step 4: Calculate the Tax $$\text{Division 293 Tax} = $30,000 \times 15% = $4,500$$
Because David's base income alone was well over the $250,000 threshold, his entire concessional super contributions are taxed at the additional 15%, resulting in a $4,500 bill.
How Do You Pay Division 293 Tax?
When the ATO calculates your tax return and matches it with your super fund's reporting, they will issue a Division 293 assessment notice. This is separate from your personal income tax assessment.
You have two options to pay this liability:
- Pay out-of-pocket: You can pay the bill using personal funds (BPAY, credit card, etc.). This keeps your super balance intact, allowing it to continue compounding tax-free.
- Release authority from Super: You can instruct the ATO to release the funds directly from your superannuation account. The ATO will coordinate with your super fund to pay the tax out of your super balance. This is highly beneficial if you want to preserve your personal cash flow.
Optimize Your Super Strategy with Our Free Calculator
Manual calculations can easily go wrong, especially when you have to account for reportable fringe benefits, investment losses, or carry-forward concessional contributions from previous years.
Our Division 293 Tax Calculator is designed specifically for Australian professionals to model their tax liabilities instantly. By inputting your projected taxable income, investment losses, and super contributions, you can:
- Avoid surprises: Know exactly what your Division 293 tax bill will be before the ATO sends the notice.
- Model salary packages: Evaluate whether a new job offer or salary sacrifice arrangement makes financial sense when accounting for the extra 15% tax.
- Optimize carry-forward caps: If you are using unused concessional caps from previous years, calculate how much extra tax you might incur.
Don't let tax season catch you off guard. Run your numbers through our precise, free, and secure calculator today to stay ahead of your financial planning.