I wanted to share some important updates about the ATO's redesigned Division 293 notice. This new design aims to make it easier for individuals to understand how their tax has been calculated and to identify any errors due to incorrect reporting. Here’s a detailed breakdown:
Division 293 Tax Overview
Income Threshold
From 1 July 2017, the income threshold above which individuals pay an additional 15% tax on certain superannuation contributions was reduced from $300,000 to $250,000.
Division 293 Income
Division 293 income includes:
Taxable income
Reportable fringe benefits
Total net investment losses
Ad-hoc Income
Even if you’re not generally a high-income earner, you might still be liable for Division 293 tax if you receive certain one-off payments during a year. These include:
Eligible termination payments
The taxable component of a superannuation death benefit
Capital gains
However, the taxable component of a super lump sum benefit (other than a death benefit) is not included where:
It is received by individuals from preservation age to age 59
It is up to the current low rate cap of $205,000
Division 293 Contributions
Division 293 contributions include:
Employer contributions
Personal deductible contributions
Contributions for a defined benefit interest (valued by an actuary)
Employer contributions (including salary sacrifice) to a constitutionally protected fund
The additional tax does not apply to:
Excess concessional contributions
Non-concessional contributions
Contributions to certain Government funds for senior personnel, unless they are salary sacrifice contributions
Contributions for certain Judges to defined benefit funds
Calculation of Division 293 Tax
Division 293 tax is 15% of the lesser of:
The amount of the Division 293 contributions
The amount of Division 293 income and Division 293 contributions above the $250,000 threshold
Case Study
David's Details:
Division 293 income: $240,000
Division 293 contributions: $20,000
Total: $260,000
Calculation:
Division 293 tax is payable on $10,000, being the lesser of:
$20,000
$260,000 – $250,000 = $10,000
The Division 293 tax amount is 15% x $10,000 = $1,500
Division 293 Notice
The ATO issues an Additional tax on concessional contributions (Division 293) notice to individuals, specifying the additional amount of tax that is payable and the due date for payment. The redesigned notice includes:
The full assessment calculation
Information on how to avoid interest charges
Instructions on viewing statements of accounts online
The process for disagreeing with the assessment
Choices for Payment
When you receive a Division 293 assessment, you can choose to:
Pay the tax from your personal resources
Elect to have the amount released from your super fund to pay the tax
The election can be made via MyGov or by completing a Division 293 tax due and payable form. The ATO will then send a release authority to the super fund, which must make the payment within 10 business days from the date the release authority is issued.
Instructions to complete your election form:
You can complete an election form online using ATO online services. Select Super, then Manage, then Division 293 election.
If you don't have a myGov account, create one and link it to the ATO. You can also ask your tax agent to do it for you using ATO online services for agents.
Conclusion
Understanding the choices available and the process involved in paying Division 293 tax can assist in ensuring that any tax payable is completed in a manner most appropriate to your circumstances.
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