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By William Truong, Technical Services Manager
High income earners are subject to an additional 15% tax, known as Division 293 tax, on certain concessional super contributions. There can be some confusion as to how and when to pay this tax.
This article briefly summarises the process of paying Division 293 tax for super fund members. Please note special rules apply to members of defined benefit schemes which is not covered in this article.
For information on how Division 293 is calculated as well as special rules relating to defined benefit scheme members, please see our Strategy Guide 59 ‘Contributions’.
High income earners, classified as those with income greater than $250,000, are subject to an additional 15% tax (Division 293 tax) on certain concessional super contributions. For the purposes Division 293 ‘income’ is calculated as:
When this occurs, the ATO will issue a Division 293 tax notice of assessment stating how much tax the client needs to pay. This can be paid:
Regardless of the method chosen, the client has 21 days from the date of the assessment to pay the tax, before the ATO starts chasing the amount owing.
If the client wishes to release the amount due from super, they have 60 days to complete the generic ‘Division 293 tax due and payable election form’ (election from) and send it to the ATO for processing.
Alternatively, the client can log into their MyGov account and complete the Division 293 election form online.
The ATO will then issue a notice to the Super Fund asking the Super Fund to pay the tax directly to the ATO.
The debt is due and payable after 21 days from the assessment date, regardless of the payment method. So in practical terms, the client will need to pay the debt personally, as it will usually take longer than 21 days for the ATO to receive and on-send your client’s election form to their Super Fund, and then for the Super Fund to pay the debt on your client’s behalf. There is NO ability for the Super Fund to reimburse the client directly.
However, an indirect reimbursement can happen via the normal ATO payment channels. That is, once your client has paid the tax personally, and provided they lodged a release election form on time, and after the ATO has received the payment from the Super Fund, the ATO can issue a credit on the client’s personal tax account. This will then be refunded back to the client after offsetting any other outstanding liabilities to the ATO. If the election form is not lodged in time and your client miss the 60 days election period, there is no other recourse to getting reimbursed.
For SMSFs, it is important that the client does NOT pay the ATO from the Super Fund’s bank account on the issuing of the original notice of assessment. The release election form must be submitted to the ATO, who will then issue an assessment back to the Super Fund. Otherwise, it is an ‘early release from super’ breach.
If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.
The information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.