Division 293 Tax: The Bill That Arrives After You've Paid

The most common reaction to a Division 293 notice is that it must be a mistake. You lodged your return. You were assessed. You paid. Then weeks later a separate letter turns up with a number on it nobody warned you about. It is not a mistake, and it is not rare any more.

At Aevum Accounting we see this most often with people who do not think of themselves as high earners at all. The threshold that triggers it has not moved since 2017. Wages have. The gap between those two facts is doing all the work. Here is what Division 293 is, what it really costs, and the traps that turn a manageable bill into an expensive one.

Prefer to listen? We covered this in Division 293: The Tax Bill That Arrives After You've Already Paid Your Tax, episode 55 of the Aevum Accounting Podcast.

What Division 293 tax actually is

Concessional contributions, the before-tax money going into your super, are normally taxed at 15% inside your fund. Division 293 adds another 15% on top for higher income earners, so the portion that gets caught is effectively taxed at 30% rather than 15%.

It is triggered by your income in a single year, not by how much you have in super. That is the difference between this and Division 296, the $3 million super tax, which is about your balance and taxes earnings rather than contributions. The two are completely separate, and you can be assessed for both in the same year.

The $250,000 line is not your salary

Division 293 does not test your salary, and it does not test your taxable income either. It uses a deliberately broader measure. Start with your taxable income, then add back:

Your total reportable fringe benefits. The grossed-up figure. If you salary package through a hospital or a charity, the discount that reduces your reportable amount for things like family assistance does not apply here. The full amount counts.

Any net rental property loss. This is the counterintuitive one. A negatively geared property reduces your taxable income and increases your Division 293 income at the same time.

Any net financial investment loss, and any amount you have paid family trust distribution tax on.

Super lump sums taxed at a zero rate and any First Home Super Saver amount released to you then come off. That total is your Division 293 income, your concessional contributions get added on top, and the combined figure is what gets compared to $250,000. Which is how someone on a $230,000 salary who assumes they are comfortably under ends up over the line once employer contributions are counted.

You are not taxed on everything

This is the part worth understanding properly, because almost everyone overestimates the bill.

The extra 15% applies to the lesser of two numbers: the amount you went over $250,000 by, or your concessional contributions for the year. Cross the line by a little and you pay on a little.

The ATO's own example makes it clear. Someone with Division 293 income of $240,000 and $15,000 of contributions is at $255,000, so $5,000 over. Against $15,000 of contributions, the lesser figure is $5,000. The tax is 15% of $5,000, or $750. Not 15% of the full $15,000, which would have been $2,250.

What the bill caps out at

Once you are well clear of $250,000 your contributions become the smaller number, and that becomes your ceiling.

The concessional cap rose on 1 July 2026 from $30,000 to $32,500. Nobody announced it, because nobody has to: it is automatic indexation to average weekly earnings, rounded down to the nearest $2,500. You can contribute more, and the maximum Division 293 bill went up with it, from $4,500 to $4,875.

Two things to know about that ceiling. You only reach $4,875 once income and contributions together clear $282,500, so most people caught by this pay considerably less. And if you are using catch-up contributions from unused cap in earlier years, every dollar inside that larger cap counts, so a big catch-up contribution can produce a bill several times $4,875. Model it before you contribute, not after.

The 60 day trap

You can pay a Division 293 assessment with your own money, or elect to have it released from your super fund. Most people choose super, because the money that triggered it is sitting there anyway. You have 60 days from the issue date on the assessment to make that election, through ATO online services or your tax agent.

The election cannot be reversed, so decide properly the first time. And those 60 days do not extend your payment due date. This is where it costs people money. The due date printed on the assessment is the due date. The 60 days is only your window to choose where the money comes from. Work carefully through them while the due date passes and general interest charge starts running.

The SMSF trap

This one is more serious. If you have a self-managed fund and you elect to pay from super, no money may leave the fund until the ATO issues the official release authority.

Release it early and it is not a Division 293 payment at all. It is a contravention, treated as illegal early access to super: the amount goes into the member's assessable income, penalties and interest follow, the money cannot be put back, and trustees can be disqualified publicly. The frustrating part is that it catches the organised trustee, the one trying to get ahead of it. Wait for the release authority every time.

Defined benefit members pay later, with interest

If your Division 293 tax relates to a defined benefit interest, you generally do not pay it now. The ATO holds it in a debt account in your name automatically, and it is settled when your benefit is eventually paid out.

Interest applies, but not daily like an ordinary tax debt. If the account is still in debit at 30 June, the ATO adds interest for that year at the average 10 year Treasury bond rate, 4.6148% for 2025-26. Pay it down voluntarily before 30 June and you avoid that year's interest entirely. The ATO sends a statement of account whenever the balance changes, so the information is there. It just arrives years before it matters.

The one-off year: redundancy, bonus or a property sale

There is no averaging and no discretion in Division 293. A single unusual year can produce an assessment you never see again.

Redundancy is the one people get wrong. The tax-free part of a genuine redundancy is not assessable income, so it never enters the Division 293 test. For 2026-27 that limit is $13,598 plus $6,801 for each completed year of service, so on a $60,000 payout after five years only about $12,400 counts. Someone on $200,000 lands near $212,000 and stays under the line. What usually tips people over is what comes with it: the taxable part of the payment above that limit, plus unused annual and long service leave.

A bonus or a capital gain is more dangerous, because there is no tax-free slice to absorb it. Someone on $200,000 with a $60,000 capital gain on a rental is at $260,000. Add $32,500 of contributions and they are $42,500 over the line. Contributions are the lesser figure, so the bill is 15% of $32,500, or $4,875, in a year they were not expecting one.

Should you stop salary sacrificing? Almost certainly not

This is the decision that actually costs money, and the headline pushes people the wrong way.

If you are over the Division 293 threshold your marginal rate is very likely 45% plus the 2% Medicare levy, which is 47%. That is the alternative to contributing. Take the full $32,500 cap as salary at 47% and you keep $17,225. Contribute it, pay 30% all up, and $22,750 lands in the fund. You are $5,525 better off on one year's contributions.

The comparison shifts at the edges. If your Division 293 income is inflated by reportable fringe benefits or a rental loss, your taxable income can sit in the 37% bracket and the gap narrows. If you do not hold private hospital cover you are also paying Medicare levy surcharge, so the comparison is 48.5% and the saving is larger. Either way, Division 293 makes super a smaller discount. It does not make it a bad deal.

If you think this might be coming for you, or a notice has already arrived and you are not sure what to do with it, book a consultation with our team and we can work it out from your payslip. Our tax accountants in Perth do this every week, and if you are a trustee weighing up the release authority question, our SMSF accountants can walk you through it before anything leaves the fund.

The information in this article is general in nature and does not take into account your personal circumstances. It does not constitute specific tax or financial advice. Everyone's situation is different, so we recommend speaking with a qualified professional at Aevum Accounting before acting on anything you have read here.