Generally, concessional super contributions are subject to 15% contribution tax, but since July 2012 an additional 15% contribution tax (the Division 293 tax) has applied to high income earners. This means high income earners are now liable to pay a 30% concessional contribution tax.
How much tax will I have to pay?
Anyone with annual combined income and concessional super contributions greater than $250,000 may be subject to the higher contribution tax. For this purpose, income is not simply your employment income but includes the following:
- Taxable income
- Lump sum payouts of employee entitlements
- Concessional super contributions
- Adjusted fringe benefits
- Total net investment losses
- Foreign income
- Tax-free Government pensions and benefits
- Investment income
- Proceeds from capital gains
- LESS child support
However, it excludes any reportable super contributions you claim a tax deduction for.
How do I know if that applies to me?
Every year, the Australian Taxation Office (ATO) will assess your Division 293 liability for the previous financial year and tell you if a payment is required. The assessment will be made using information from your income tax return and from member contribution statements submitted by superannuation funds. However, it does not apply to former temporary residents.
For defined benefit members, the ATO will base their calculation on the notional employer contribution added to your super account each year. If the ATO tells us you may be liable for this tax rate, we will send them an annual report outlining your notional employer contribution.
Note the ATO will not tell us of your income nor the total amount of any tax debt or tax paid.
When and how will I pay the extra tax?
The process is a little different, depending on the type of account you have.
If you are affected, the ATO will send you a notice of assessment to tell you how much tax is payable. You will be able to pay the amount directly to the ATO or complete a release authority (provided by the ATO) to enable us to pay it for you from your accumulation account.
Defined benefit members
If you have an accumulation account, your tax debt will be managed via that account.
If you only have a defined benefit, you will be liable to pay the additional tax when you withdraw money from your defined benefit (such as if you close the account or transfer it into an income stream). The ATO will tell you how much is payable and we will deduct it from your balance as we transfer the money to you or your new income stream.
Need help understanding how this tax change could affect your super?
Our Member Advice Consultants offer personalised advice, including assistance in deciding on contribution strategies.
Call 1300 128 75 for your appointment.
Email: email@example.com | Local call: 1300 128 751 | Phone: 02 6109 6888 | www.avsuper.com.au
This information is of a general nature only and does not take into account your personal objectives, situation or needs. Before making a decision about AvSuper, you should consider your own requirements and the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD). For a copy call us or visit the AvSuper website, www.avsuper.com.au. AvSuper Pty Ltd (ABN 46 050 431 797, AFSL 239078) is the Trustee of the AvSuper Fund (ABN 84 421 446 069). FS3000.5 02.2021