Division 293 Tax in Australia: Why High Income Earners Pay an Extra 15% on Super Contributions
If you have opened a letter from the ATO this tax season with the words Division 293 printed at the top and felt a jolt of confusion, you are not alone. Division 293 tax is an extra 15% charged on part of your concessionally taxed superannuation contributions once your income, combined with those contributions, passes $250,000 in a financial year. It is not a penalty and it is not a new rule, but because the notice usually lands months after your tax return has already been processed, it tends to catch otherwise well-organised people off guard.
Most years it is a genuinely high income that triggers it. Some years it is something less obvious - a bonus, an asset sale, or a jump in reportable fringe benefits that pushes someone over the line for the first time, even though their regular salary and contributions alone would not have. Either way, the letter arrives separately from your tax assessment, which is exactly why it feels like it has come out of nowhere.
Baron Tax & Accounting is a registered tax agent based in Rochedale South, Brisbane, and we see Division 293 notices land in client inboxes every year around this time of the tax season, usually with more questions attached than answers.
What Division 293 Tax Actually Is
Most people know that contributions going into superannuation through an employer or a salary sacrifice arrangement are taxed at a flat 15% inside the fund, well below the marginal rate many of us pay on our wages. Division 293 narrows that gap for people who earn more. Once your income combined with your concessionally taxed contributions passes $250,000 in a financial year, the ATO applies a further 15% on top of that initial 15%, so the portion caught by the rule effectively ends up taxed at 30% rather than 15%. It is not an extra tax on your salary. It is specifically aimed at the superannuation contributions you or your employer put in at the concessional rate.
The name comes from Division 293 of the Income Tax Assessment Act 1997, which is why the ATO's own letters and online services still use that exact label rather than anything more descriptive. Once clients understand it is really a second 15% on part of their super rather than a surprise income tax bill, most of the anxiety around the notice settles down fairly quickly.
The $250,000 Threshold and What Counts Toward It
The ATO tests two figures against the $250,000 threshold combined: your Division 293 income and your Division 293 super contributions. Division 293 income follows much the same calculation as the Medicare levy surcharge income test (see the ATO's Division 293 guidance), and includes:
Taxable income
Reportable fringe benefits
Net investment and rental property losses
Certain assessable amounts from some family trust distributions
Super lump sums taxed at a zero rate and amounts released under the First Home Super Saver Scheme are subtracted rather than counted. Division 293 super contributions, on the other hand, generally means concessional contributions - employer super guarantee payments, salary sacrifice, and personal contributions you have claimed a deduction for - along with certain rollovers, minus any excess concessional contributions that have already been taxed at your marginal rate.
The threshold itself has sat at $250,000 since the 2017-18 income year, and the ATO's current rates and thresholds page confirms it has not moved for 2025-26 or 2026-27 either. That is in contrast to the concessional contributions cap, which actually increased this year, from $30,000 in 2025-26 to $32,500 in 2026-27, a detail we cover in more depth in our guide to superannuation contribution tax deductions.
How the Extra 15% Tax Is Calculated
The ATO's own example is the clearest way to see how the number is worked out. Someone with Division 293 income of $240,000 and concessional contributions of $15,000 has a combined total of $255,000, which is $5,000 over the threshold. Because that excess is smaller than the contributions, only $5,000 is treated as a taxable contribution, and the extra tax is 15% of that figure, which comes to $750. If the excess were larger than the contributions, the contributions amount would be used instead. The smaller of the two numbers is always what gets taxed, so you are never charged on more than the concessional contributions you actually made.
In practice, the figure that catches people off guard is rarely the contributions line itself. It is usually a one-off item elsewhere in the return, a capital gain, an annual bonus, or a jump in reportable fringe benefits, that pushes combined income over $250,000 for a single year, even though a client's regular salary and contributions alone would have sat comfortably under it.
Why the Notice Often Comes as a Surprise
A Division 293 notice is not issued at the same time as your tax assessment. The ATO can only raise it once it has both your tax return lodgement and your super fund's contribution data for the same year matched up, and funds do not always report on the same timetable individual taxpayers lodge on. That gap often means the notice for a given income year lands well into the following tax season, so it is common to be dealing with a Division 293 assessment for one year while your accountant is preparing the next year's return.
We see this pattern regularly among our Brisbane and wider Queensland clients who have had a particularly strong year of overtime, bonuses or investment gains. If a fund reports contributions late, the ATO can also issue an amended assessment afterwards, which is worth knowing before assuming a second letter is a mistake.
Defined benefit fund members are treated a little differently again. Rather than paying Division 293 tax upfront, the amount is assessed but deferred to a debt account, and generally only becomes payable when a benefit is eventually paid out. If that deferred debt is not settled by 30 June, it can attract interest for the year, which is a detail members of these funds sometimes overlook.
Division 293 Tax Is Not the Same as Division 296
The two names get confused constantly, and it is easy to see why. Division 293 tax has actually applied since the 2012-13 income year, originally with a $300,000 threshold that was lowered to $250,000 from 2017-18 onward, and it is about contributions: it is triggered year by year when your income and concessional contributions together exceed that combined threshold, regardless of how much you actually have sitting in superannuation. Division 296 is a different, much newer tax that applies from the 2026-27 financial year onward, and it targets the earnings on total super balances above $3 million, rather than contributions. We have covered that one separately in our guide to Division 296 tax in Australia.
The practical point worth remembering is that a client with no superannuation balance anywhere near $3 million can still receive a Division 293 bill, purely because of income and contribution timing in a single year. Conflating the two usually just adds confusion at exactly the moment someone is trying to work out what they actually owe.
Paying the Bill: Your Own Money or a Release From Super
Once a Division 293 notice is issued, you generally have two ways to settle it: pay the amount from your own funds, or elect to have it released from your superannuation account. Paying by the due date on the notice avoids interest either way. If you would rather use super to cover it, the election needs to be made within 60 days of the assessment date, and making that election does not extend the actual due date for payment, so the timing matters.
An election, once made, cannot be withdrawn, and if a release from super produces more than is owed, the surplus is applied to any other outstanding tax or government debts before whatever is left is refunded to you. This is one of the areas where getting advice before you act is worth more than after, since once the election is lodged there is no undoing it.
This is exactly where we come in. When a Division 293 notice lands on a client's desk, we review it against their contribution and income data, work out whether paying personally or releasing from super genuinely suits their situation, and handle the election and any follow-up with the ATO on their behalf, so the decision gets made properly the first time rather than worked out under time pressure close to the 60-day cutoff.
Common Mistakes We See With Division 293
A handful of the same misunderstandings come up every year. A few of the most common:
Assuming the notice is an error because the tax return was already lodged correctly, rather than recognising it as a separate assessment tied to how quickly the super fund reported contributions
Missing the 60-day election window and then being stuck paying personally even where a release from super would have suited them better
Not realising that a one-off reportable fringe benefit, bonus or investment gain pushed combined income over the threshold for that year only
Overlooking the different, deferred payment path that applies to defined benefit fund members
Confusing Division 293 with Division 296 and worrying about the wrong set of rules entirely
How Baron Tax & Accounting Can Help
As a registered tax agent operating out of Rochedale South in Brisbane, we handle Division 293 assessments regularly across our individual and sole trader clients, from salaried professionals through to small business owners juggling their own contribution strategy alongside business income.
If you have received a Division 293 notice and are not sure whether it is right, or you simply want your contributions managed so the threshold stops being a surprise each year, get in touch and we will take it from there. You can also start your online tax return with us, or take a look at our fees if you would like an idea of cost before reaching out.
Frequently Asked Questions
What is the Division 293 income threshold for 2026-27?
It is $250,000, combining your Division 293 income and your concessionally taxed super contributions. The threshold has not changed since the 2017-18 financial year.
Is Division 293 tax the same as Division 296 tax?
No. Division 293 is an existing rule about contributions that applies once combined income and contributions pass $250,000 in a year. Division 296 is a new tax from 2026-27 on the earnings of total super balances above $3 million, which is a different trigger entirely.
Can I avoid Division 293 tax altogether?
Not if your income and concessional contributions genuinely sit above the combined threshold for that year, since the tax applies automatically once the ATO matches your return with your fund's contribution data. Planning ahead on the timing and size of contributions can reduce how often a one-off year tips you over, which is worth discussing before rather than after the fact.
What happens if I do not pay my Division 293 assessment on time?
Interest can start accruing from the due date on the notice, so it is worth settling it, or at least deciding how you intend to pay it, as soon as the notice arrives rather than leaving it until the 60-day election window is almost closed.
Does Division 293 tax apply to defined benefit fund members?
Yes, but the tax is assessed and then deferred to a debt account rather than paid immediately, generally becoming payable when a benefit is eventually paid out. Unpaid deferred amounts can attract interest if not settled by 30 June each year.
How does Baron Tax & Accounting help with a Division 293 notice?
We review the notice against your actual income and contribution data, confirm the ATO's figures are correct, and manage the election and any ATO correspondence on your behalf, whether you decide to pay personally or release the amount from your super.
Related Reading
Contact Baron Tax & Accounting
If you have questions about a Division 293 notice or anything else to do with your tax return, our team is here to help.
Address: 758 Underwood Road, Rochedale South QLD 4123
Phone: +61 7 3706 3147 or 1300 087 213
Email: info@baronaccounting.com
Hours: Monday-Friday 09:30-17:00
This article provides general information only and does not constitute personal tax or financial advice. It does not take into account your objectives, financial situation or needs. Tax rules change and apply differently to each person's circumstances. Before acting, please seek advice from a registered tax agent. Baron Tax & Accounting accepts no liability for any loss arising from reliance on this article. Source references: ATO (ato.gov.au) and other Australian government agencies, current as at the date of publication.
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