Crunch numbers correctly for Div 293

Division 293 concessional contributions

The prospect of paying excess tax on concessional contributions due to Division 293 means advisers should consider all factors that shape a client’s taxable income.

SMSF advisers and accountants have been urged to double check the income of high-earning clients to ensure they are not caught out by the Division 293 tax on concessional contributions at the end of the financial year.

DBA Lawyers principal Dan Butler said while the threshold at which the 15 per cent tax on concessional contributions under Division 293 was applied was $250,000, it was not limited solely to employment-related income in the hands of a superannuation fund member.

“This is not a straight threshold because when people say it is set at $250,000 of income, it includes the member’s taxable income plus concessional contributions,” Butler said during a recent end-of-financial-year briefing.

He noted that while excess concessional contributions were excluded, anything that had an impact on the level of taxable income would also be considered when assessing whether a fund member passed the threshold.

“This will include reportable fringe benefits like a motor vehicle and we should also add back any total net investment losses, like negatively geared property, to work out if they are above the $250,000 threshold,” he said.

“There is a need to think about the threshold and go back and adjust it to make sure you get to the right level because your clients won’t be happy if they get hit with a 15 per cent extra tax without knowing about it.

“This is a personal tax liability as well so it hits their pocket unless they get a release authority and is similar to the excess contribution tax, which also hits their pocket unless they get a release authority.”

He added there are strategies to minimise the impact of Division 293 taxes, such as salary packaging and trust planning, but expert tax advice should be sought as what will work will depend on each client’s circumstances.

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