Reduced super concessions under Division 293 tax

March 5, 2014

Individuals with high incomes may soon be faced with reduced concessions on their superannuation contributions as a result of Division 293 tax from 2014.
 

Division 293 tax was introduced to reduce the concession on superannuation contributions for individuals with an income greater than $300,000 per annum.
 

Under Division 293 of the Income Tax Assessment Act 1997 tax will be payable on certain contributions made from 1 July 2012.
 

If an individual’s income for surcharge purposes, plus their low-tax contributions are greater than $300,000, they may be liable to pay an extra 15 per cent tax on their taxable contributions.
 

For individuals who are members of a defined benefit fund Division 293 tax may be calculated on notional contributions, which are not capped. There are also modifications to the contribution calculation for constitutionally protected state higher level office holders or Commonwealth justice.
 

To calculate whether an individual has income and low-tax contributions greater than $300,000 the ATO will be looking at:
• income reported on the individual’s income tax return, including:
– taxable income
– total reportable fringe benefit amounts
– net financial investment loss
– net rental property loss
– amounts on which family trust distribution tax has been paid
– super lump sum taxed elements with a zero tax rate.
• contributions reported in their member contribution statement
• self managed super fund annual return
 

The ATO will begin issuing Division 293 tax notices of assessment for the 2012- 13 financial year to affected individuals from early February 2014.
 

The Division 293 notice of assessment will state:
• the total earnings for tax purposes
• taxable contributions
• the amount of Division 293 tax (15 per cent of taxable contributions) that is due and payable by a set date
 

Individuals are responsible for paying their Division 293 tax by the due date, which is generally 21 days after the Commissioner gives notice of assessment.

 

If you wish to discuss the reduced super concessions with one of our expert advisors, please do not hesitate to contact our office.

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