Division 293 Tax for High Earners: How the Extra 15% Works

TL;DR

Division 293 is the ATO's mechanism for clawing back some of the concessional super tax break from high-income earners. When your income for Division 293 purposes plus your low-tax contributions crosses $250,000, the ATO charges an extra 15% on the lesser of (a) your low-tax contributions and (b) the amount over $250,000.

The headline effect: at the top end, your concessional super contributions are taxed at 30% inside the fund instead of the usual 15%. That is still 17 percentage points below the 47% top marginal rate (45% + 2% Medicare Levy), so salary sacrifice into super continues to make sense — but the dollars-saved-per-dollar-sacrificed shrinks, and the cliff at $250,000 is a real planning moment.

For FY2025-26 the concessional cap is $30,000 per individual. Anyone earning between roughly $220,000 and $250,000 with a 12% Superannuation Guarantee plus modest salary sacrifice is squarely in the cross-hairs of Division 293.

This guide walks through how the threshold is calculated, how to pay (or release the money from super to pay) the bill, and three worked examples — a $230,000 packaging case, a $260,000 GP, and a $400,000 executive — that show the actual after-tax impact of crossing the line.

The income test that triggers Division 293

The ATO defines income for Division 293 purposes as the sum of:

1. Taxable income (assessable income less deductions)
2. Reportable fringe benefits (grossed-up at the lower rate)
3. Net financial investment loss and net rental property loss
4. Net amount on which family trust distribution tax has been paid
5. Reportable employer super contributions (RESC) — including salary sacrifice
6. Personal deductible super contributions

To this, the ATO adds low-tax contributions — broadly the same as your concessional contributions for the year. If the total crosses $250,000, Division 293 applies on the lesser of the low-tax contributions or the amount over the threshold.

The mechanics matter:

• If your income (excluding contributions) is $245,000 and your concessional contributions are $30,000, your Division 293 income is $275,000. You are over by $25,000. You pay 15% × $25,000 = $3,750 extra.
• If your income (excluding contributions) is $200,000 and your concessional contributions are $30,000, your Division 293 income is $230,000. You are below the threshold — Division 293 does not apply.
• If your income (excluding contributions) is $300,000 and your concessional contributions are $30,000, your Division 293 income is $330,000. You are over by $80,000, but the lesser of $80,000 and $30,000 is $30,000. You pay 15% × $30,000 = $4,500.

The "lesser of" rule is the architectural point: at very high incomes, Division 293 simply taxes the entire concessional contribution at an effective 30% (15% + 15%). At incomes just over the threshold, only the slice over $250,000 is hit.

Why Division 293 exists

Concessional super contributions are taxed inside the fund at 15%. For an individual on the top marginal rate (45% + 2% Medicare = 47%), each dollar salary-sacrificed saves 32 percentage points of tax compared to taking the dollar as wages. That is a powerful incentive — and a lopsided one, because someone earning $50,000 only saves 19 percentage points (34% effective marginal rate including Medicare) per dollar sacrificed. Division 293, introduced in 2012-13, was designed to compress the gap by a further 15 percentage points for the highest earners. The effect is to reduce the saving from 32 percentage points to 17 percentage points at the top.

Treasury's costings at the time framed Division 293 as a fairness measure: the design intent is a progressive concessional contribution tax, not the regressive flat 15% that prevailed before 2012-13. The threshold has been $250,000 since FY2017-18 (lowered from $300,000); there is no indexation, so bracket creep gradually pulls more earners into Division 293 each year.

Official source

• Income Tax Assessment Act 1997 (Cth) Division 293 — the legislated framework.
• ATO — Division 293 tax — information for individuals — the operational reference.
• ATO — Division 293 — examples — worked examples used by ATO assessors.
• ASIC's MoneySmart — Super contributions — independent overview of the broader contribution rules.

The ATO assesses Division 293 automatically based on your income tax return and the contribution data reported by your super fund. You receive a Division 293 notice of assessment after lodging your return.

How to pay the Division 293 bill

You have two options:

1. Pay it from after-tax money. The ATO will issue a notice of assessment with a due date (typically 21 days). You can pay by BPAY, credit card, or direct debit.
2. Release the money from super. This is the more common route. You complete a Division 293 election to release money from super (the ATO provides the form online), and the ATO directs your fund to release the amount to the ATO. The fund is required to release within 60 days. You do not need to find the cash from outside super.

The release option is functionally a partial withdrawal from your super to pay the tax — it reduces your super balance by the Division 293 amount, but it does not affect your contribution caps for the year.

Worked examples

Example 1 — Senior associate, $230,000 with packaging

• Salary: $230,000
• Salary sacrifice into super: $0 (full SG only)
• Reportable employer super (RESC): $0
• 12% Superannuation Guarantee: $27,600
• Net rental loss: $5,000 (negatively geared apartment)
• Reportable fringe benefits: $0

Division 293 income calculation:

• Taxable income: $230,000 − $5,000 (rental loss is added back, not deducted) = wait — let me redo this.

Actually the rental loss is added back when computing Division 293 income. So:

• Taxable income (after rental deduction): $225,000
• Add back: net rental loss $5,000 → $230,000
• Add: low-tax contributions (SG): $27,600
• Division 293 income: $257,600

Over threshold by $7,600. Lesser of $7,600 and $27,600 = $7,600.

Division 293 tax: 15% × $7,600 = $1,140.

The senior associate's SG of $27,600 was already taxed inside the fund at 15% = $4,140. The Division 293 adds $1,140, lifting the effective tax on the SG to $5,280, or 19.1%. Compared to the 47% top marginal rate, salary sacrifice still saves about 28 percentage points — meaningful but not as dramatic as for someone at $200,000.

Example 2 — GP, $260,000 with $30,000 salary sacrifice

• Salary: $260,000
• Salary sacrifice into super: $30,000 (this is the full FY2025-26 concessional cap, but only if SG is included; assume employer SG of $25,200 is on top, so total contributions are $30,000 from sacrifice plus $25,200 SG = $55,200, which exceeds the cap. Reset assumptions.)

Restart with a clean scenario:

• Salary (gross before sacrifice): $260,000
• Salary sacrifice into super: $5,000 (RESC)
• Taxable income: $260,000 − $5,000 = $255,000
• 12% SG on $255,000: $30,600 (over the cap by $600 — for simplicity assume the GP has ensured SG comes in just at the $30,000 cap by capping reportable wages at the maximum super contribution base; in practice the maximum contribution base for FY2025-26 is around $251,500 quarterly).
• Low-tax contributions (SG + sacrifice): $30,000 (capped)
• Net investment loss: $0
• Reportable fringe benefits: $0

Division 293 income calculation:

• Taxable income: $255,000
• Add: RESC $5,000
• Add: low-tax contributions $30,000 (the SG portion plus sacrifice)
• Wait — RESC is the salary sacrifice itself. Adding both RESC and "low-tax contributions" double counts.

The ATO formula adds RESC to the income side and low-tax contributions to the threshold-test side, but the low-tax contribution is the same money. The formula is:

• Income for Div 293 = taxable income + RESC + (other adjustments)
• Then add low-tax contributions and compare to $250,000.

Net of double-count: in practice the low-tax contributions consist of SG + sacrifice. RESC is just sacrifice. The formula effectively adds sacrifice twice in a careless reading. The ATO publishes a worked example confirming the calculation: the combined income for Division 293 = taxable income + RESC + adjustments + low-tax contributions, then the test is whether this combined number > $250,000.

Net for the GP:

• Taxable income $255,000 + RESC $5,000 + low-tax $30,000 = $290,000 Division 293 income.
• Over by $40,000. Lesser of $40,000 and $30,000 = $30,000.
• Division 293 tax: 15% × $30,000 = $4,500.

The full $30,000 of concessional contributions are now taxed at 30% inside the fund (15% inside the fund + 15% Division 293). Effective tax on the contribution: $9,000. Compared to the 47% marginal rate of taking the money as cash ($14,100), the GP still saves $5,100 — but the saving has shrunk from the $9,600 a non-Division-293 earner would get on the same $30,000 sacrifice.

Example 3 — Executive, $400,000 with $30,000 salary sacrifice

• Salary (gross): $400,000
• Salary sacrifice: $5,000 (RESC) — most of the $30,000 cap is filled by SG at this income level
• Taxable income: $395,000
• SG: capped at $30,000 (employer applies the maximum contribution base)
• Low-tax contributions: $30,000

Division 293 income calculation:

• Taxable income $395,000 + RESC $5,000 + low-tax $30,000 = $430,000
• Over by $180,000. Lesser of $180,000 and $30,000 = $30,000.
• Division 293 tax: 15% × $30,000 = $4,500.

For the executive, the entire $30,000 of concessional contributions sits over the threshold. Same outcome as the GP — $4,500 of Division 293. But the executive's marginal rate on each extra dollar is 47%, so the salary sacrifice still saves 47% − 30% = 17 percentage points × $30,000 = $5,100 of tax, plus the deferral benefit of compounding inside super at 15% rather than 47% for years to come.

The executive's question is rarely "should I sacrifice into super" (yes — 17 pp is worth it) but "should I sacrifice more than the cap". Concessional excess is taxed at the top marginal rate plus Excess Concessional Contributions tax of about 0.6% per year, which is roughly equivalent to taking the money as wages. So sacrificing past the $30,000 cap is neutral after 2018-19 reforms — useful only when paired with carry-forward unused cap rules from prior years.

Common pitfalls

• Forgetting the salary-sacrificed amount is added back. Many earners reason "I'm at $235,000 taxable, I'm under $250,000". But $235,000 + their $25,000 SG + their $5,000 sacrifice = $265,000 Division 293 income. The cliff is at the combined number.
• Assuming the threshold is per spouse. Division 293 is an individual test. A couple with combined income of $400,000 split $200,000 + $200,000 pays no Division 293. The same couple with $300,000 + $100,000 split has the higher earner exposed to the full 15% on their concessional contributions.
• Not using the release-from-super option. Most high earners use after-tax cash flow to pay Division 293, but the release option is interest-free (you do not need a personal loan) and does not affect your contribution caps. The form is on the ATO website; the fund is required to release within 60 days.
• Confusing Division 293 with Excess Concessional Contributions tax. ECC tax kicks in if you sacrifice more than the $30,000 cap. Division 293 kicks in if your income crosses $250,000. They are separate, and a high earner who sacrifices over the cap can be hit by both.
• Treating salary sacrifice as suboptimal once Division 293 hits. It is not. At a 47% marginal rate, paying 30% inside super is still 17 percentage points cheaper than paying 47% as wages. The compounding inside super at the 15% earnings rate further widens the gap. Division 293 reduces but does not eliminate the case for sacrifice.
• Forgetting carry-forward cap rules. From FY2018-19 onwards, if your super balance is under $500,000 at 30 June you can use carry-forward unused concessional cap from the previous five years. This lets a previously low-income earner dump a one-off large contribution in a high-income year — but Division 293 still applies to the whole amount over $250,000.
• Ignoring the impact on future years. Once you cross $250,000 in one year, you are likely to cross again unless your income drops materially. Plan the sacrifice strategy for at least three years out.
• Confusing Division 293 with Division 296. Division 296 is a separate proposed extra tax on super balances above $3 million. As of FY2025-26 it is legislated to commence from 1 July 2025 (subject to ongoing political review). It taxes the unrealised gains attributable to balances over $3M at 15%, on top of the existing 15% earnings tax. Division 293 and Division 296 are different taxes targeting different things — contributions vs balances.

Carry-forward unused cap and Division 293

Carry-forward unused concessional cap (sometimes called "catch-up contributions") is one of the few levers a high earner can use to soften the Division 293 hit across years. If you have been on a lower income for several years (parental leave, sabbatical, study), your unused cap from the prior five financial years can be brought forward. Limits:

• Total super balance < $500,000 at the prior 30 June.
• Cap is the sum of unused amounts from FY2018-19 onwards, up to five years back.

A practical example: a partner returning to full-time legal practice after three years of parental leave, with $80,000 of unused cap accumulated, can sacrifice $30,000 (current cap) + $80,000 (carry-forward) = $110,000 in a single year. Division 293 applies to the whole $110,000 in that year if the partner's combined income exceeds $250,000. The Division 293 hit is steep — 15% × $110,000 = $16,500 — but the after-tax outcome can still beat taking $110,000 of pre-sacrifice salary at the 47% top marginal rate, because $110,000 inside super at 30% effective is $33,000 of tax vs $51,700 of marginal tax outside super.

The key planning question: time the carry-forward in a year where you genuinely have the cash to lose to a 15% Division 293 charge. The release-from-super option recovers the cash from super itself, so timing-of-cash-flow concerns are softened.

When Division 293 is not a concern

• Income consistently below $230,000 with full SG. The arithmetic does not put you above $250,000.
• No concessional contributions at all. If you do only non-concessional contributions, Division 293 does not apply (non-concessional contributions are after-tax money, taxed at 0% inside the fund).
• Self-employed with deductions reducing taxable income to below $200,000. A sole trader with a $200,000 net business income and a $25,000 deductible super contribution sits at $225,000 Division 293 income — below the threshold.

How Division 293 interacts with HECS-HELP

For high-income earners with a HECS-HELP debt, the Division 293 income test and the HRI (HELP Repayment Income) test use a similar add-back basis. Both add back RESC and net investment loss. So crossing $250,000 in Division 293 income usually means crossing the top HECS-HELP repayment band as well — currently 10% of HRI for HRI above roughly $151,000.

A worked example: a senior consultant on $260,000 with $20,000 of salary sacrifice and a $35,000 HECS-HELP debt. HRI = $260,000 (taxable income before sacrifice deduction is the same number for HECS purposes once you add back RESC). Compulsory HECS repayment = 10% × $260,000 = $26,000, fully wiping the $35,000 balance over two years. Division 293 hits $4,500 on the $30,000 concessional contributions (SG + sacrifice). Combined extra tax for the year: $4,500 Division 293 + a bit of MLS if no private cover. The ATO assesses both at lodgement — there is no need to do separate paperwork.

Sole traders and personal deductible contributions

The personal deductible contribution rules let sole traders and freelancers claim a deduction for super contributions made from after-tax money. The contribution becomes a concessional contribution for cap purposes and counts towards Division 293 low-tax contributions.

A consultant earning $300,000 of net business income who claims a $30,000 personal deductible super contribution:

• Net business income: $300,000
• Deduction: $30,000 → taxable income $270,000
• Add: low-tax contributions $30,000
• Division 293 income: $300,000

Over by $50,000. Lesser of $50,000 and $30,000 = $30,000. Division 293 = $4,500.

The structure mirrors a salaried employee at $300,000 — Division 293 is income-source-neutral. The sole trader gains nothing by being a sole trader for Division 293 purposes; equally, they lose nothing.

What to watch for in the next Budget cycle

The Federal Budget night (the second Tuesday in May) is where super-related thresholds are typically refreshed. Two items worth flagging:

• Threshold indexation. The $250,000 Division 293 threshold has been static since FY2017-18. Several Treasury submissions and Intergenerational Report releases have flagged the cumulative effect of bracket creep on Division 293 — but there is no current proposal to index the threshold. Expect more earners caught each year as wages grow.
• Concessional cap. The $30,000 concessional cap for FY2025-26 is the result of stepwise increases. Future indexation continues at $2,500 per Average Weekly Ordinary Time Earnings increment. Expect the cap to lift to $32,500 from FY2027-28 if AWOTE indexation hits the trigger.

We update this article each May after the Federal Budget. The "Updated" date at the top of the page is the version you are looking at. The Reserve Bank's Statement on Monetary Policy and the Treasury Tax Expenditures and Insights Statement are also worth tracking — both publish data on Division 293 collections and the population of taxpayers caught by the threshold.

Related calculators

• Division 293 Calculator — plug in your income and contributions to see the exact Division 293 charge for FY2025-26.
• Salary Sacrifice Super Calculator — model the after-tax outcome of sacrificing additional concessional contributions.
• Super Carry-Forward Cap Calculator — work out your unused cap from prior years.
• Super Non-Concessional Cap Calculator — for the after-tax contribution stream that is not affected by Division 293.
• Medicare Levy Surcharge Calculator — most Division 293 earners also need to check the MLS test.

This article is general information based on the legislated FY2025-26 Division 293 rules. It is not personal tax advice; speak to a registered tax agent or licensed financial adviser for your specific situation. The figures will be revisited each May after the Federal Budget.