Unpacking Div 293 Tax: The Essential Guide for Aussie Business Owners?

If terms like Div 293 Tax and concessional super contributions make your head spin, don’t worry—we’re here to break it down for you.

So, What Exactly Is Div 293 Tax?

“How does Division 293 tax work?” you may ask.

Div 293 tax is an additional tax on superannuation contributions for individuals whose combined income and concessional super contributions exceed a specific threshold. Designed to equalize the tax advantages of super contributions, this tax means that higher-income earners pay 30% tax on concessional super contributions instead of the usual 15%.

What Are Concessional Super Contributions?:
These are pre-tax contributions to your superannuation fund, often coming directly from your employer but can also include personal contributions for which you claim a tax deduction.

How Div 293 Tax Works for Business Owners?

What is the Division 293 Threshold for 2023?

For the 2023 financial year, the Division 293 threshold is set at $250,000.

For Sole Traders:

As a Sole Trader, your income is generally the net profit of your business. If your business profit plus any concessional super contributions crosses the $250,000 threshold, your concessional super contributions could attract Div 293 tax.

For Company Owners and Trading Trusts:

If the sum of your total personal income and concessional super contributions exceeds the Div 293 threshold, you’ll be subject to this additional tax. This would include wages, dividends and distributions that are paid out to you personally.

What This Means:

Understanding these thresholds can significantly influence your business and personal tax planning, especially when considering how much to contribute to superannuation without triggering Div 293 tax.

Navigating Div 293 Tax: Your Next Steps?

Paying Your Division 293 Tax

If Div 293 tax applies to you, you have two primary options for paying the amount:

  1. With Your Own Money:This is the most straightforward option. Simply pay the amount using your funds. To find out the exact payment methods available, check out the “How to Pay” section once you receive the Div 293 assessment or consult your accountant.
  2. By Releasing Money from Your Superannuation Fund:Known as ‘making an election to release money from super,’ this option allows you to use your super funds to pay off the Div 293 tax. However, be cautious when choosing this route. Most defined benefit funds don’t allow for the release of amounts, so check with your specific fund before filling out any election forms.
    • Note: If your defined benefit fund doesn’t permit releasing money for Div 293 tax, you might have other super funds that allow this. Always double-check your options.

Considerations When Choosing a Payment Option

  • Fund Restrictions:As mentioned, some super funds may not allow you to release money. Always confirm with your fund before making a decision.
  • Impact on Retirement Savings:Releasing money from your super to pay for Div 293 tax will reduce your retirement savings. Make sure to weigh this against the immediate benefit of clearing your tax liability.
  • Professional Advice is Key:This area of tax law is complex. Consult your accountant to tailor a payment strategy that’s right for you.

By understanding these payment options, you can make an informed decision on how to tackle your Div 293 tax liability, ensuring you’re not caught off guard during tax season

We hope you’re enjoying our blog, just a note though. The information provided here is intended for general informational and educational purposes only. While we aim for accuracy, we can’t guarantee that this content will apply to your specific situation—every business owner’s circumstances are unique.

This blog is not a substitute for personalized advice from a qualified accountant, tax advisor, or any other professional. If you have questions specific to your individual circumstances, we strongly recommend consulting a professional for tailored advice.

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