Division 293: the extra 15% super tax for high earners — and why super is still worth it

For most Australians, superannuation contributions are taxed at 15% inside the fund — well below the marginal tax rates that apply to employment and investment income. For high-income earners, Division 293 of the Income Tax Assessment Act 1997 imposes an additional 15% tax on concessional super contributions, bringing the effective contributions tax to 30%. This applies when combined income — defined broadly under the legislation — exceeds $250,000 in a financial year.

The $250,000 threshold is a fixed statutory figure, not indexed to inflation, which means it applies to a widening cohort over time as wages rise. And the combined income definition is deliberately broad: it adds back negative gearing losses and reportable items that reduce ordinary taxable income, meaning many standard tax-minimisation strategies have no effect on Division 293 exposure.

How the additional tax is calculated

Division 293 applies to the lesser of two amounts: the excess of combined income above $250,000, or the total concessional contributions for the year. This means that a member whose combined income is only slightly above the threshold pays Division 293 on only the excess — not on all their contributions.

An example: a senior professional with $230,000 taxable income who also makes $32,500 in reportable salary sacrifice contributions (the full FY2026-27 concessional cap) has a combined income of $262,500 — $12,500 above the threshold. Division 293 applies to the lesser of $12,500 (the excess) and $32,500 (the total contributions), so it applies to $12,500. The additional tax is $12,500 × 15% = $1,875.

For a member whose combined income is well above the threshold — say, $350,000 in taxable income plus $32,500 in reportable contributions, for a combined income of $382,500 — the excess ($132,500) far exceeds the contributions ($32,500), so Division 293 applies to the full $32,500 in contributions. The additional tax is $32,500 × 15% = $4,875.

Why combined income is broader than taxable income

Combined income for Division 293 includes taxable income (after deductions), reportable fringe benefits, reportable employer super contributions (salary sacrifice), and the total net investment loss — which is the net loss from negatively geared investments including investment property. This last element surprises many high earners who assume that negatively geared property losses, which reduce taxable income, will also reduce Division 293 exposure. They do not. The losses are added back into combined income specifically to prevent this.

The practical effect is that a high-income professional with $230,000 in employment income, $32,500 in salary sacrifice, and $40,000 in negatively geared property losses has a taxable income of only $157,500 — below the Division 293 threshold. But their combined income for Division 293 purposes is $230,000 + $32,500 + $40,000 = $302,500, well above the threshold. The Division 293 tax applies, and the negative gearing is irrelevant to the calculation.

How the tax is collected

After the tax return is lodged, the ATO calculates any Division 293 liability and issues a Division 293 assessment. Members can elect to pay from personal funds or to have the amount released from their super fund. Most members elect the release from super option, which preserves personal cash flow and effectively means the Division 293 cost comes out of what would otherwise be the super balance.

Why super remains tax-effective

Division 293 reduces but does not eliminate the tax benefit of concessional super contributions. Without the super contribution, a dollar of employment income for a member on the top marginal rate of 47% produces 53 cents in personal cash flow after tax. Inside super with Division 293, the same dollar contributes 70 cents to retirement savings (100 cents less 30% combined contributions tax). The effective concession drops from 32% (47% minus 15%) to 17% (47% minus 30%) — smaller, but still real.

Over decades, with earnings inside super also taxed at 0% in pension phase, the compounding advantage of the super environment relative to investing outside super remains meaningful even for Division 293-affected members. The strategy for high earners is not to avoid Division 293 (largely impossible through routine planning) but to understand it accurately and ensure contribution decisions are made with the correct effective tax rate in mind.

Couple and spouse strategy

For couples where one partner is above the $250,000 threshold and the other is below it, the spouse's super contributions are taxed at 15% only. Channelling additional concessional contributions through the lower-income spouse — or splitting the higher earner's contributions to the lower-income spouse's fund — produces a better blended outcome. The contribution-splitting mechanism allows up to 85% of concessional contributions to be transferred to the spouse's fund each year; for Division 293-affected members, this is one of the few levers that genuinely reduces the family's total tax burden on super accumulation.

Year-by-year variation

Division 293 applies on a year-by-year basis. A member whose income is typically below $250,000 but receives a substantial bonus in one year may be Division 293-affected that year alone. Business owners and self-employed individuals with variable income should model each year's Division 293 exposure as part of their contribution planning, rather than assuming a uniform treatment across years.

Sources

• Division 293 tax on concessional contributions by high-income earners (ATO)
• Division 293 tax — key super rates and thresholds ($250,000) (ATO)
• Concessional contributions cap — $32,500 for 2026-27 (ATO)
• Superannuation contributions splitting — 85% rule (ATO)
• Release authorities — paying tax from super (ATO)