Q: I got my super fund annual statement in the mail the other day. It told me I would be liable for extra tax on my contributions. Where did that come from?
A: Since 2012, anyone earning more than $300,000 a year has had to pay an additional 15 per cent tax on their concessional contributions, taking their total contribution tax to 30 per cent. The Australian Taxation Office refers to this as Division 293 tax.
In last year’s Budget, the Government said it would lower the earnings threshold to $250,000. That change took effect on July 1.
The Government estimates that it will raise $2.5 billion over four years through this measure.
For people with incomes below $250,000, a flat tax of 15 per cent is charged on all concessional contributions, such as compulsory employer contributions and salary sacrifice contributions.
The surcharge takes the contribution tax up to 30 per cent for anyone earnings more than $250,000.
The $250,000 is calculated as “income for surcharge purposes”, which includes taxable income, reportable fringe benefit amounts, family trust distributions and concessional super contributions.
The tax is applied to the lesser of the excess income amount or the concessional contributions amount.
The ATO provides the following examples of how Division 293 works:
- Tara has income of $260,000 and makes concessional contributions of $5000.
- The sum of Tara’s income and concessional contributions is $265,000.
- Tara will be assessed on the lesser of the amount of $250,000 ($15,000) and her concessional contributions ($5000).
- Tara will receive an assessment for 15 per cent tax on $5000.
In another example:
- James has income of $240,000 and makes concessional contributions of $25,000.
- The sum of James’ income and concessional contributions for the income year is $265,000.
- James will be assessed on the lesser of the amount over $250,000 ($15,000) and his concessional contributions ($25,000).
- James will receive an assessment for 15 per cent tax n $15,000.
