The Division 293 Tax is not widely discussed. In fact, most taxpayers do not even realise it exists.
The tax only affects high income earners with an adjusted taxable income of $300,000 or more, and who have taxable contributions made to their superfunds (e.g. employer superannuation guarantee contributions, salary sacrificing into superannuation etc).
This flowchart explains how the ATO calculates your income and tax liability for the purpose of Division 293 tax. The following short video also gives a brief overview of what this is all about.
Some of our clients have started receiving Notice of Assessments for Division 293 tax. The NOA includes a cover letter from ATO and an authority to release funds from the taxpayer's superfund, for the purpose of paying the Div 293 tax.
You have a choice of whether to pay the tax yourself directly to ATO and then be reimbursed from your fund, or have the fund pay directly to ATO on your behalf.
Since you usually only have 21 days to pay the tax from the date that the NOA is issued, and the superfund can take up to 30 days to release the funds, you should consider paying the tax yourself and then seeking a reimbursement from the superfund.
If you choose this option, you will have to nominate for the funds to be released to you in the authority to release form. Otherwise, you can nominate for the funds to be paid directly to ATO, but you then risk late payment penalties.
For more information about this tax, please visit the ATO website.