Division 293 Tax Impact

When Division 293 applies

Division 293 applies when your Division 293 income plus low-tax concessional contributions exceeds $250,000.

The tax only applies to concessional contributions that pushed you over the threshold, or all your concessional contributions if you were already above it.

What counts as Division 293 income

Division 293 income uses the same income test as the Medicare levy surcharge, disregarding any reportable superannuation contributions — they are counted on the contributions side of the test instead, so they are never counted twice. In short: taxable income, plus reportable fringe benefits, plus net financial investment loss, plus net rental property loss, plus family trust distribution tax amounts, less super lump sum zero-rate taxed elements and assessable First Home Super Saver released amounts.

Division 293 tax explained walks through each component and the lesser-of calculation in full. This page assumes you have read it and gets on with the decisions.

Example: Income below vs above the threshold

How Division 293 changes the effective tax benefit

Even with Division 293, salary sacrifice saves tax—just not as much. The $1,700 saving on $10,000 is still meaningful, especially when compounded over time in your super fund.

Near the threshold: what dialling salary sacrifice up or down actually does

The most common near-threshold question is whether cutting salary sacrifice keeps you under $250,000. It does not, and the arithmetic shows why: sacrificing a dollar takes it out of your taxable income and puts it into your concessional contributions. Division 293 tests the sum of the two, so the sum does not move.

These figures are for the 2025–26 year, for salary income only, with no carry-forward contributions and no other Division 293 income. Employer SG is 12%, capped by the maximum super contribution base of $62,500 a quarter ($250,000 a year), and the general concessional cap is $30,000.

Two things fall out of that table that are worth more than the individual numbers.

Above $250,000 of salary, your Division 293 tax stops growing. SG is capped by the maximum super contribution base at $30,000, which is exactly the concessional cap, so the taxable-contributions leg of the lesser-of test is pinned at $30,000 no matter how far your income runs ahead of it. Someone on $300,000 pays the same $4,500 as someone on $250,000. The bill is capped, not proportional.

A salary earner at or above $250,000 has no salary-sacrifice room at all. Employer SG alone fills the entire $30,000 cap, so anything sacrificed on top is an excess concessional contribution and is handled under different rules. The dial the question assumes exists is not there.

And when the surcharge does bite, sacrificing is still worth doing. A sacrificed dollar is taxed 15% going into the fund plus 15% Division 293 — 30% against a 47% marginal rate, so you keep 17c in the dollar. Halved, not eliminated.

The lever that does move the bill: carry-forward contributions

Catch-up contributions made under the carry-forward rules are the one common case where a decision genuinely changes what you pay. The ATO counts every contribution inside your increased cap for Division 293 purposes, so a catch-up year lifts the contributions leg above $30,000 and the lesser-of test follows it up.

On a $260,000 salary in 2025–26:

The catch-up is taxed at 30% rather than 15% — still below a 47% marginal rate, so it is usually worth doing, but the decision is now whether to use the carry-forward room in this year or a year when your income is under the threshold. Timing it into a lower-income year gets the same contribution in at 15%. That is a real choice with a $7,500 price tag on it, and it is the one to spend your attention on.

Bonus and one-off income years

The ATO notes that Division 293 can apply for a single year because of a one-off event — an employment termination payment, a back payment of salary or wages, a capital gain, or any other jump in income. If you sit in the low $200,000s normally, a bonus is the thing most likely to pull you over.

On a $220,000 base salary in 2025–26:

Note where the cost actually lands. The first $20,000 of bonus costs $2,820 in Division 293 tax; the next $40,000 costs only $1,680 more, because the bill hits its $4,500 ceiling once the excess passes $30,000. Crossing the threshold is the expensive part — going a long way past it is not. If you are choosing whether to defer a bonus into the next financial year, deferring is worth most when it takes you from just over the threshold to under it, and worth very little once you are well clear of it either way.

Because a one-off year is unpredictable, the practical move is to expect the assessment rather than to avoid the tax. Division 293 arrives as a separate ATO assessment after your return, so budget for up to $4,500 in a bonus year, or plan to release it from super. The Division 293 planning deep dive covers the multi-year timing arguments in full.

How and when you pay

1. You lodge your tax return
2. Your super fund reports contributions to the ATO
3. The ATO calculates if Division 293 applies
4. You receive a Division 293 assessment (separate from your income tax assessment)
5. You choose to pay from personal funds or release from super

Two things people still get wrong

The other recurring misconceptions — that the surcharge makes salary sacrifice pointless, and that only salary counts toward the threshold — are covered in Division 293 tax explained.

Frequently asked questions