What is Division 293 tax?
The Division 293 tax is imposed at 15% of your taxable superannuation contributions where your ‘income’ is over $250,000. The definition of ‘income’ for the purpose of this measure includes taxable income, reportable fringe benefits, reportable superannuation contributions and total net investment loss for the income year.
What has changed?
Late last year, the Australian Tax Office (ATO) changed their processes around the assessment and payment of Division 293 tax.
Now, the ATO issues a Division 293 tax notice of assessment stating how much tax the member needs to pay.
This can be paid personally or from the member’s Super Fund.
Regardless of the method chosen, the member has 21 days from the date of the assessment to pay the tax, before the ATO starts chasing the amount owing.
If the member wishes to release the amount due from super, they have 60 days to complete the generic “Division 293 tax due and payable election form” and send it to the ATO for processing.
Alternatively, the member can log into their MyGov account and complete the Division 293 election form online.
The ATO will then issue a notice to the Super Fund asking the Fund to pay the tax directly.
As the debt is due and payable after 21 days regardless of the payment method, in practical terms, the member will need to pay the debt personally first, as it will likely take longer than 21 days for the form to be received by the ATO, for the ATO to issue a notice to the Super Fund, and for the Super Fund to pay the debt on your behalf.
There is no ability for the Super Fund to reimburse the member directly. This happens via the normal excessive tax payment channels at the ATO. In other words, once the member pays and lodges a release election form, and after the ATO has received the payment from the Fund, the ATO will then issue a credit on the member’s personal tax account. This will then be refunded back to the member.
For SMSF’s, it is CRITICAL that the member does NOT pay the ATO from the Super Fund’s bank account on the issuing of the original notice of assessment. The release election form must be submitted to the ATO, who will then issue an assessment to the Super Fund. Otherwise it is an “early release from super” breach.
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