Understanding the Recent Changes to Division 293 Tax
Division 293 tax is an additional tax on high-income earners designed to reduce the tax concessions
on superannuation contributions. Recent changes introduced in 2024 have altered the way this tax is
applied, impacting many Australians. In this blog, we’ll break down these changes and what they
mean for those affected.
1. What is Division 293 Tax?
Division 293 tax was introduced to reduce the superannuation tax concessions available to
individuals with higher incomes. It applies to individuals whose income and super contributions
exceed a certain threshold, effectively reducing the tax benefits they receive on super contributions.
Previously, the Division 293 tax was set at an additional 15% on concessional contributions for
individuals with incomes above $250,000. This meant that these individuals paid a total of 30% tax
on their concessional super contributions, compared to the standard 15%.
2. 2024 Changes to the Division 293 Threshold
The 2024 changes have lowered the income threshold at which Division 293 tax applies from
$250,000 to $220,000. This means that more individuals will now be subject to this additional tax.
For those with income and concessional contributions exceeding $220,000, the additional 15% tax
will now apply, increasing the total tax on their super contributions to 30%.
3. Who Will Be Affected?
The lowering of the Division 293 threshold means that many more Australians will be affected by
this tax. High-income earners, particularly those in the $220,000 to $250,000 income range, who
were previously exempt from this tax, will now need to account for it in their financial planning.
Individuals in this income range should review their superannuation contributions and overall
financial strategy to understand how the changes will impact their tax liabilities.
4. Strategies to Minimize Division 293 Tax Impact
There are several strategies that high-income earners can consider to minimize the impact of
Division 293 tax:
- Review Salary Sacrificing Arrangements: Consider adjusting your salary sacrificing
arrangements to reduce your taxable income and potentially stay below the Division 293
threshold. - Maximize Non-Concessional Contributions: Instead of making additional concessional
contributions, which attract Division 293 tax, you may opt to make non-concessional
contributions that are not subject to this tax. - Seek Professional Advice: Consulting with a tax professional or financial advisor can help
you develop a tailored strategy to manage your tax liabilities effectively.
5. Impact on Retirement Planning
The changes to Division 293 tax will affect retirement planning for high-income earners. With the
increased tax burden on concessional contributions, individuals may need to reassess their retirement savings strategy to ensure they are maximizing their superannuation balance while managing tax implications.
This may involve a combination of concessional and non-concessional contributions, as well as
exploring other investment options outside of superannuation.
Conclusion
The 2024 changes to Division 293 tax represent a significant shift in how high-income earners are
taxed on their superannuation contributions. For those affected, understanding these changes and
adjusting your financial strategy is crucial to managing your tax liabilities and ensuring your
retirement savings remain on track.
If you’re unsure how these changes impact you or need assistance in developing a strategy to
minimize the impact of Division 293 tax, our team of tax and superannuation experts is here to help.
Contact us today for personalized advice and support.
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