📩 The "Surprise" Letter from the ATO
You filed your tax return and assumed you were settled. Months later, a letter arrives from the ATO: "Notice of Assessment - Division 293 Tax." It demands an extra $3,000 or $5,000 payment. You didn't make a mistake. You simply earned "too much." Welcome to the club of High Income Earners.
 |
| Earn Over $250k? |
Typically, concessional contributions into Super are taxed at a flat 15%. This represents a significant discount compared to the top marginal tax rate of 47% (including the Medicare Levy).
However, the government deems this tax break "too generous" for high earners. Consequently, if your combined income (Income + Super Contributions) exceeds $250,000, an extra 15% tax is applied to your Super contributions, bringing the total effective tax on that money to 30%.
15% vs. 30%
Division 293 doubles the tax on your contributions, but crucially, it is still far cheaper than taking that money as salary.
Even with the penalty tax, investing in Super saves you 17 cents on every dollar compared to taking it as cash. The strategy remains sound.
How to Pay the Bill (Cash vs. Super)
When the bill arrives, you have two distinct payment options. The "best" choice depends on your goal.
💳 Payment Options:
- Option 1: Pay with Personal Cash (Wealth Maximization): You pay the bill via BPAY from your bank account.
Why? This leaves your Super balance intact to grow in a low-tax environment (15% tax on earnings vs 47% outside). - Option 2: Release from Super (Cash Flow Management): You submit an election form to the ATO to deduct the tax directly from your Super fund.
Why? This protects your personal cash flow today, at the expense of your future retirement balance.
Chief Editor’s Verdict
View Division 293 not as a penalty, but as a "Success Tax." It confirms you are in the top tier of earners. While it stings, Super remains the most tax-effective vehicle for wealth accumulation in Australia.
Do not ignore the letter. Log in to MyGov, choose your payment method (Release or Cash), and settle it promptly to avoid interest charges.
The information provided in this article is general in nature and does not constitute financial or tax advice. The $250,000 threshold includes your taxable income plus reportable super contributions. Tax rates (including the 45% top marginal rate and 2% Medicare Levy) are current as of the 2026 tax year projections. Please consult with a qualified accountant or financial adviser to determine the best payment strategy for your personal circumstances.
0 Comments