A new super tax

Many of our clients have received ATO correspondence this week regarding Division 293.  Yes, that’s really what they are calling it.  I guess the ATO don’t have a marketing team to come up with trendy names for new taxes.

Who does this effect?

Division 293 applies to those with adjusted taxable incomes that are $300,000 or more and contribute taxable contributions to superannuation in the same year.

What does this mean

If this situation applies to you, you will receive a letter from the ATO outlining the Division 293 tax liability.  The tax is calculated at 15% of either your taxable super contributions or your adjusted income above $300,000 – whichever is the lesser.  The taxable contributions to superannuation are generally the compulsory super that your employer pays.

You will have the option to pay this tax yourself or have the tax paid by your superfund.  If you choose to have the amount paid by your superfund, there is a form to complete and send away to notify the superfund to release the funds.  Please keep an eye on the timing of the ATO due date.  In some instances, we are finding that it is necessary for you to pay the ATO directly and then have the superfund release the funds to you as reimbursement.  Also, you must provide the form to the superfund within 120 days.

Please don’t disregard correspondence regarding this issue as penalties may be applied.

Any exceptions?

Unfortunately there is no way to avoid this tax as the current letters are being received for the 2013 year.  However, if your superfund is a defined benefit superfund the fund will not release amounts until a condition of release is met (usually retirement.)  In this case, the Division 293 amount will be deferred until retirement and a lump sum paid at that time.  I think this one’s a bit of a sleeping dog and easy to forget.

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