Superannuation, Tax

Indexation measure a Div 293 issue

indexation division 293

Indexation of the quarterly maximum super contribution base might trigger a Division 293 tax issue for employees on high salaries.

The indexation measure to be applied to the quarterly maximum super contribution base could mean individuals will be inadvertently captured by the Division 293 tax rules, a sector specialist has warned.

The quarterly maximum superannuation contribution base determines the salary level of an employee whereby an employer no longer needs to make compulsory super guarantee (SG) levy payments and is set to increase from its current level of $60,220 to $62,270 for the 2024 income year.

Further, the SG is also increasing on 1 July 2023 from 10.5 per cent to 11 per cent and the combination of these two events could create unwanted issues for both superannuants and the retirement savings system itself, Smarter SMSF technical and education manager Tim Miller noted during the latest SuperGuardian practitioner webinar.

“What it means [is with the maximum super contribution base being] $62,270 moving into the new [financial] year [and] the SG rate, so the compulsory [retirement savings] requirement on the employer, [increasing to] 11 per cent will give us a quarterly contribution of $6850,” Miller told session attendees.

“Multiply that by four and it takes you to $27,400. That is $100 shy of the [concessional contributions] cap.

“The other thing is if you multiply $62,270 by four, you get $249,080.

“These two numbers concern me … because $249,080 is just shy of the Division 293 [tax] threshold of $250,000. So one more year of maximum [super] contribution base indexation and all of a sudden the annual income puts us above $250,000 and even with it at $249,080 means that our income plus our compulsory super is going to put us over the Division 293 threshold.”

According to Miller, the situation raises the question as to whether the indexation measures might be changed or whether the government will be satisfied with collecting more revenue through the additional 15 per cent tax.

“So we will soon be in a situation where the [maximum super contribution base] alone will be above the Division 293, so will we see [future] indexation removed or maybe fixed at $250,000.

“Or will we see indexation [applied to] the Division 293 tax threshold. I wouldn’t have thought that’s coming.”

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