The ATO will start issuing Division 293 tax notices of assessment for the 2012-13 financial year to affected individuals from early February 2014.
Division 293 tax is for very high income earners, whereby Division 293 tax will be charged at 15% if an individual’s taxable concessional contributions is above the $300,000 threshold (which are capped for 2012-13 at $25,000).
The Division 293 tax reduced the superannuation tax concession received. This tax was announced in the Federal budget in 2013 and is more formally known as the Reduction of high tax concession for contributions of very high income earners measure.
To calculate your Division 293 tax, you use the following: taxable income (assessable income less deductions), total reportable fringe benefits amounts, net financial investment loss, net renal property loss, amounts on which family trust distribution tax has been paid and super lump sum taxed elements with a zero tax rate. These elements are summed to give the income amount.
Low tax contributions also come into play, these are contributions made in a financial year to a complying super fund in respect of the member which are included in the assessable income of the superannuation fund. These include: employer contributed amounts, other family and friend contributions, assessable foreign fund amounts, assessable amounts transferred from reserves and notional employer contributions.
On average, an income earner’s highest marginal income tax rate is 32.5%. Any super contributions made for the benefit of the individual are taxed at 15% when in the fund, effectively giving them a 17.5% concession on their super contributions.
Individuals with high incomes pay 45% income tax on annual income over $180,000. This was also the case for average income earners, super contributions made for the benefit of the individual that are taxable to the fund are taxed at 15%, ultimately giving them a 30% super concession.
Division 293 tax is applied to certain super contributions that effectively attract the 30% super concession, reducing it down to 15%. However, the tax rates mentioned above exclude the Medicare levy.
Payment of the Division 293 Tax is generally due 21 days after the Commissioner gives the notice of assessment. Individuals can choose to use the release authority to have their fund pay the Division 293 tax or they can pay it out of their own pocket. The tax notice of assessment may also state that an amount of Division 293 tax is deferred. Taxable Division 293 contributions attributed to defined benefit superannuation interests are eligible for a deferred payment.
For more information about the Division 293 tax or if you have received your notice, please feel free to get in touch with the team here at Fortis Accounting Partners. You can reach us on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
