An SMSF member using carry-forward contributions or a reserving strategy cannot avoid paying the Division 293 tax on super contributions as there is no way to push that liability into a future year, a technical expert has noted.
Institute of Financial Professionals Australia (IFPA) senior technical services specialist Stuart Sheary said the imposition of the Division 293 tax was based on the income of a fund member and the year a contribution was made, and other strategies did not alter that fact.
Speaking recently at The Super Playbook 2025 event, co-hosted by IFPA and The Auditors Institute in Sydney, Sheary illustrated his point with a case study of Angela, who earns an assessable income of $350,000.
In the current financial year, she uses a carry-forward concessional contribution to make a $110,000 personal deductible super contribution as part of a contribution reserving strategy.
“Will she be up for Division 293 tax? When people have higher incomes and make any concessional contributions into super where their income is above $250,000, they are going to be up for Division 293 tax, which is an extra 15 per cent on the concessional contribution that’s gone in,” Sheary explained.
“So yes, absolutely, Angela is going to be up for Division 293 tax if she were to make that $110,000 contribution this year.
“However, if she submits a notice of intent to claim a tax deduction in this current financial year and everything is reported for the current year, but we allocate that contribution into the new financial year, will she still be up for Division 293 tax?
“The answer is yes as the strategy doesn’t make any difference. It’s simply allocating that contribution for contribution cap purposes into the new financial year.
“Think of contribution reserving as everything remaining the same with the exception that we’re allocating it towards the next year’s contribution cap.
“In Angela’s case she is still claiming a tax deduction in the current year. The SMSF is still reporting that contribution in the current year. All that’s changing is we are allocating it into the new financial year.”
